Income Tax Appellate Tribunal - Delhi
Fcc Co. Ltd., Japan vs Acit, Int. Tax. Circle-1(3)(1), New ... on 31 January, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES 'Friday', NEW DELHI
Before Ms. Sushma Chowla, Vice President
Dr. B. R. R. Kumar, Accountant Member
SA No. 63/Del/2020
(in ITA No. 54/Del/2019 : Asstt. Year : 2014-15)
&
SA No. 64/Del/2020
(in ITA No. 8960/Del/2019 : Asstt. Year : 2015-16)
FCC Co. Ltd., Vs DCIT(International
7000-36, Nakagawa Hosoe - Cho, Taxation), Circle-1(3)(1),
Kita - Ku, Hamamatsu - Shi, New Delhi-110002
Shizuoka - Pref 431-1394, Japan
(APPELLANT) (RESPONDENT)
PAN No. AABCF5381M
Assessee by : Sh. K. M. Gupta, Adv.
Revenue by : Sh. Rajat Kumar Kurel, Addl. CIT
Date of Hearing: 31.01.2020 Date of Pronouncement: 31.01.2020
ORDER
Per Dr. B.R.R. Kumar, Accountant Member:
Brief facts of the case are that the assessment u/s 143(3) of the Income Tax Act, 1961 has been framed at an inco me of Rs.45,45,53,182/- by making addition on acco unt of royalty income fees for technical services and interest on loan.
The total demand raised - Rs.3,35,05,860/- Total taxes paid post assessme nt - Rs.67,01,170/- Net demand outstanding - Rs.2,68,04,688/-
2. During the hearing, the ld. AR argued that the assessee is a manufacture r and supplier of motorcycle and automotive clutches, operating an integrated production system that 2 SA Nos. 63 & 64/Del/2020 FCC Co. Ltd.
covers every stage of the clutch manufacturing process, from rese arch and development of friction materials to clutch assembly. The assessee was incorpo rated in 1939 under the laws of Japan and is a tax reside nt of Japan under Article 4 of the Double Taxation Avoidance Agreements between India an d Japan. In India, the assessee entered into a Joint Venture with Rico Auto Industries Ltd. with 50:50 share equity and fo rme d a JV namely FCC Rico Ltd.
3. During the hearing before us, on the merits of the case, the ld. AR submitted that the Assessing Officer after enquiring regarding the offshore supplies of raw material, components and capital goods by the assessee to the AE in India to the JV. The Assessing Officer held that the assessee has business connection in India u/s 9(1)(i) o f the Act and has PE in the nature of the Fixed Place PE owing to the supplies and supervisory PE owing to the visit of the technical support team. The ld. AR argued that the supply of raw material cannot give raise to a PE as only 15.6% of the total tangible capital goods procured by the JV is from the assessee company. The JV has not undertaken any business activity on behalf of the assessee are negotiated any contracts in India on behalf of the appellant. He argued that at no stretch or imagination, the assessee is said to have a PE based on the offshore supplies. He further argued that attributio n of 50% of pro fits on adhoc basis to the taxable income of the assessee is not legally tenable .
4. The ld. DR argued that the asse ssee may be asked to pay at least 50% o f the tax dues keeping in vie w the national 3 SA Nos. 63 & 64/Del/2020 FCC Co. Ltd.
interest. He argued that a strong prima facie case and balance of convenience is in the favour of revenue.
5. We have gone through the facts before us. Out of the total demand of Rs.3.35 crores, the assessee has paid Rs.67 lacs. Keeping in view the me rits of the case, the financial constraints of the assessed and in the interest of justice, we hereby direct to assessee to pay in total an amount of Rs.40 lacs in two installme nts viz. an amount of Rs.20 lacs by 15.02.2020 and another amount of Rs.20 lacs by 15.03.2020 and hereby grant stay on the outstanding demand for a perio d of 180 days from the date of the order or till the disposal of the appeal whichever is earlier. The hearing in this case is fixed on 09.04.2020.
6. In the result, the Stay Applications of the assessee are allowed.
Order Pronounced in the Open Court on 31 /01/2020.
Sd/- Sd/-
(Sushma Chowla) (Dr. B.R.R. Kumar)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 31/01/2020
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
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