Income Tax Appellate Tribunal - Mumbai
Dailmer Ag ( Formelry Known As Daimler ... vs Assessee on 11 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "L", MUMBAI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
AND SHRI VIVEK VARMA, JUDICIAL MEMBER
ITA No. 8770/Mum/2010
(Assessment year: 2002-03)
ITA No. 8771/Mum/2010
(Assessment year: 2003-04)
ITA No. 8799/Mum/2010
(Assessment year: 2007-08)
Daimler AG(formerly known as Vs The Assistant Director of
Diamler Chrysler AG), Income-tax (International
M/s S.R. Batliboi & Co., Taxation)1(2),
Chartered Accountants, Scindia House, 1st Floor,
14th Floor, The Ruby,
29, Senapati Bapat Marg, Dadar
Ballard Pier,
(West) Mumbai -400 038
Mumbai -400 028
PAN: AABCD 2354 C
(Appellant) (Respondent)
Appellant by : Shri Rajan Vora
Respondent by : Shri Narender Kumar
Date of Hearing : 11-02-2013
Date of Pronouncement : 27-02-2013
ORDER
PER VIVEK VARMA, JM:
The assessee has filed appeals for assessment years 2002-03, 2003-04 and 2007-08, arising out of the orders of the DRP, all dated 16.02.2010. As the grounds and issues involved in the three appeals are identical, we are disposing the three appeals vide this common order for the sake of brevity and convenience.
ITA no. 8770/Mum/2010:
2. The original grounds filed with the Memorandum of Appeal in Form No.36B has been revised. We are, therefore, perusing the revised grounds, as filed.
2 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010
3. Daimler AG (DAG), assessee before us, is a multinational automobile manufacturer. It holds controlling shares in Daimler Chrysler India Pvt. Ltd. (DC India) which is now Mercedes Benz India Pvt. Ltd. (MBIPL). The assessee supplies to its India AE completely built up (CBU) and completely knockdown (CKD) units, for sale of its cars in India.
4. The year under consideration was made the subject matter of reopening of proceedings u/s 147. In the reassessment proceedings, the assessee offered to tax an income of Rs. 154,335,362, as under:
Royalty income & FTS 117,611,274
FTS (now offered) 4,907,893
Income from capital gains 31,816,695
154,335,862
5. As per the AR, in the current proceedings, the dispute pertained to Rs. 4,907,893, i.e. Euro 114,724, along with minor sums, which are as follows:
Particulars Amount in
(Euros)
Training/Seminar charges charged by DAG 114,724 Reselling charges 5,512 Reimbursement of expenses from DAG 1,893 Sale of materials/goods to MB India 57,343 Other Misc. recoveries 1,438 Other debits by DAG 6,399 187,309
6. As admitted by the assessee that Euros 187,309 was initially offered as training/seminar charges, which in the current proceedings have been shown as Euros 114,724 along with other expenses as shown are Third Party Accounts (TPA), which have been debited with various expenses incurred by DAG for the benefit of MBIPL (earlier DC India). These charges were basically in the nature of reimbursement of expenses of DAG.
3 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010
7. This reply was not accepted by the AO, as the AO was of the view that reimbursement of expenses from DAG, other miscellaneous recoveries and other debits by DAG, were payments made by DAG on behalf of MB India. The AO further observed that the contention that the assessee does not have PE in India was unacceptable.
8. The AO, therefore, went on to compute the income, wherein, the following had been disputed by the assessee before the DRP, which has since been sustained (as per final computation by the AO):
Reimbursement of expenses:(9,730X42.17) (Euros: 1893 + 1438 + 6399) 4,10,314 Income from business 1,277,603 Additional income from business (2.75% of 26,50,595 and 30% thereof i.e. 30% of 72,891) 21,867
9. At the time of hearing before us, the AR pointed out that in so far as Income from business is concerned at Rs. 1,277,603, this has been deleted by the AO, in the appeal giving effect order (copy of order placed before us). Ground no. 1 therefore, is allowed, which now leaves the dispute, restricted to Rs. 410,314 and Rs. 21,867.
10. In so far as addition of Rs. 21,867, i.e. additional income from business, the AR pointed out that the AO has made addition on the presumption that the assessee has a PE in India. This observation has since been overturned by the coordinate Bench in the assessee's own case(s). In ITA no. 9211/Mum/2004, in para 16 & 17 "16. In our opinion mere existence of subsidiary does not by itself constitute the subsidiary company a PE of the parent. The main condition for constitution of PE is carrying on of business in India, and as regards sale of parts/CKD no operations in respect of the manufacture and sale of parts is carried out by the assessee in India. Further the assessee does not have a right to use of DCILs premises. Further DCIL does not constitute a place of management of the assessee in India as the management of the assessee's business is by the Board of Directors at Germany. The MD and ED actually become on deputation as employee's of DCIL and work under the directions and control of the Board of DCIL.
17. As regards sale of parts/CKD such sales are made by the assessee to DCKIL on principal to principal basis and on sale such 4 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010 parts/CKD become the property of DCIL. Hence DCIL does not constitute sales outlet/warehouse of the assessee. Hence we are of the opinion that the assessee does not carry out any operations in India in respect of sale of parts/CKD to DCIL and therefore cannot qualify to have a PE in this respect under Article 5(1) and 5(2) of the Treaty. Therefore we confirm the order of Ld. CIT(A) and dismiss ground No. (i) & (ii) raised by the Revenue".
11. Respectfully following the same, we hold that Rs. 21,867, being added by the AO, is deleted.
12. Ground no. 2 therefore, is allowed.
13. Ground no. 3 pertains to TPA towards reimbursement of expenses, i.e. Euros 1,893; 1438 & 6399.
14. At the time of hearing, the AR produced us copy of reimbursement made by DAG to MBIPL (in German langauge). The AR prayed that complete details can be furnished by the assessee, if given an opportunity to do so, before the AO, with regard to Euros 9,730.
15. The DR, accepted the proposal of the AR.
16. Since, both the parties have accepted to the proposal for restoring the issue to the file of the AO, we, in our considered opinion, direct the AO to examine the issue of reimbursement of Euros 9,730 (Euros 1893, 1438 and 6399) and give a fresh finding on the facts. The ground, is, therefore, allowed for statistical purposes.
17. Ground no. 4 is with regard to the levy of interest u/s. 234B at Rs. 11,75,830. This issue, as pointed out by the AR stands covered by the order of the coordinate Bench in the assessee's own case in ITA no. 6073/Mum/2010 wherein it was held, "19. It is not in dispute before us that identical issue was considered by the Tribunal in assessee's own case for A.Y. 1997-98 in ITA no. 3727/M/09 and this Tribunal held as follows:
5 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010 "4. We have heard the parties. The Ld. Counsel for the assessee submitted that now the issue stands covered in favour of the assessee b the decision of the Hon'ble High Court of Bombay in the case of DIT (IT) vs. NGC Network Asia LLC, 222 ITR 86 (Bom.). In this case, it is not disputed that the assessee is a non-resident and payments made to the assessee company are subjected to TDS u/sec. 195(1) of the Act. This fact has not been controverted by the Revenue. In this case, merely because there is failure on the part of the person who made payments to the assessee to deduct tax at source to which the provisions of Section 195(1) are attracted, to the extent of the Income/payments which are in the mischief of TDS provision no liability to pay advance tax is put of the recipient. Once the income is subjected to TDS provision, then that is outside the provisions of the advance tax as per the mandate of Section 209 of the Act and this view has been fortified by the decision of the Hon'ble High Court of Bombay in the case of NGC Network Asia LLC (supra). We do not find any reason to interfere with the order of the CIT(A) as the principles laid down in the case of NGC Network Asia LLC (supra) squarely applicable to the facts of the case, we accordingly confirm the order of the CIT(A)".
18. Respectfully following the decision on the issue, we direct the AO to delete the interest, as levied u/s 234B.
19. Ground no. 4 is allowed.
20. Ground no. 5 pertains to AO not giving credit for TDS at Rs.
6,59,890.
21. The AR has placed copy of Form 16A, which is a proof of tax paid at source.
22. We, therefore, direct the AO to give appropriate allowance with regard to TDS, as per the certificate produced before us.
23. Ground no. 5 is allowed.
24. Ground no. 6 is dismissed, being premature.
6 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010
25. In the result, the appeal is partly allowed.
ITA No. 8771/Mum/2010:26. Ground no. 1 herein is identical to ground no. 1 in ITA no. 8770/Mum/2010, wherein there is a complete discussion & adjudication. The ground is allowed.
27. Ground no. 2 herein is identical to ground no. 3 in ITA no. 8770/Mum/2010, wherein we have restored the issue, as raised, to the file of the AO for fresh adjudication.
28. Ground, therefore, allowed for statistical purposes.
29. Ground no. 3 is identical to ground no. 4 in ITA no. 8770/Mum/2010, wherein we have directed the AO to delete the levy of interest u/s 234B.
30. Ground is allowed.
31. Ground no. 4 is identical to ground no. 5 in ITA no. 8770/Mum/2010, wherein we have directed the AO to give appropriate allowance of TDS.
32. Ground is allowed.
33. Ground no. 5 is identical to ground no. 6, which we have held to be premature and have rejected. We, therefore, reject the ground.
34. In the result, the appeal is partly allowed.
7 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010 ITA No. 8799/Mum/2010:
40. Ground no. 1, 2 & 3 have been discussed and adjudicated in ground no. 1 & 2 in ITA no. 8770/Mum/2010. Since the issue is identical, we follow our own order here also and delete the addition made.
41. Grounds are allowed.
42. Ground no. 4 is identical to ground no. 4 in ITA no. 8770/Mum/2010, wherein we have directed the AO to delete the levy of interest u/s 234B.
43. Ground no. 4 is allowed.
44. Ground no. 5, being premature, we reject the same, as we have done in ITA no. 8770/Mum/2010.
45. In the result, the appeal is partly allowed.
46. To sum up the results:
All the three appeals filed by the assessee are partly allowed.
Order pronounced in the open Court on 27th February, 2013.
Sd/- Sd/-
(R.S. SYAL) (VIVEK VARMA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai: 27th February, 2013
Copy to:
1) The Appellant
2) The Respondent
3) The CIT (A)-Concerned___ / Member(DRP)__, Mumbai.
4) The CIT -Concerned___/Member (DRP)___, Mumbai.
8 Daimler AG ITA No. 8770, 8771 & 8799/Mum/2010
5) The DR, "L" Bench Mumbai.
6) Copy to Guard File By Order / / True Copy / / Asst. Registrar, ITAT, Mumbai *Chavan