Qliktech International AB Vs DCIT (ITAT Bangalore)
No DAPE Where Indian AE is at Arm’s Length: Bangalore ITAT Deletes PE-Based Business Income Addition
The Bangalore ITAT held that where the Indian Associated Enterprise (AE) has been remunerated at arm’s length and the Transfer Pricing Officer (TPO) has accepted the transfer pricing analysis without any adjustment, the AE cannot be treated as a Dependent Agent Permanent Establishment (DAPE) of the foreign enterprise merely because it carries out distribution and support functions. Consequently, the business income of the foreign company cannot be attributed to India by treating the Indian subsidiary as its DAPE. The Tribunal followed its own earlier order in the assessee’s case for AY 2021-22, the subsequent Miscellaneous Application order, and the AO’s order giving effect, noting that the Department had already accepted the position.
On the issue of interest on income-tax refund, the Tribunal observed that the Assessing Officer had not proposed this addition in the show-cause notice but introduced it only in the draft assessment order, giving rise to a violation of the principles of natural justice. Further, as the assessee contended that no refund interest had actually been received during the year, the Tribunal restored the matter to the AO for de novo verification, directing that if the interest was not received during the relevant previous year, it should not be taxed in that year. The assessee was also permitted to rely on the relevant Bombay High Court decision before the AO. Accordingly, the appeal was partly allowed for statistical purposes.
Cases Discussed
