High pitched assessments: 100% demand stay must be Granted

CA Suraj R. Agrawal

Brief of the Case:-

The Tribunal granted 100 percent stay of demand because (a) the assessed income was more than 10 times the returned income. (Instruction 96 of 1969 was relied upon) & (b) The stand taken by the AO was at variance with the stand taken by TPO.

Case Summary:-

Facts of the case:

• The petitioner is engaged in the business of profit management support services to group entities in Asia Pacific Region.
• During Assessment Year 2011-12 the Petitioner has rendered management support services to its 100 percent Indian subsidiary, DDIL and has received a management fee of INR 225,691,365/- pursuant to the Agreement for provision of Management, General Support and Administrative services entered into between the said parties.
• In the return of income filed for the year under consideration, DD Asia claimed the said receipt as nontaxable in India, not being in the nature of Fees for Technical Services under Article 12(4) of the India-Singapore Double Tax Avoidance Agreement (DTAA) as it had not made available to DDIL, any technical knowledge, experience, skill know-how or processes which enabled DDIL to apply the technology contained therein. Accordingly, refund was claimed for the taxes withheld on the management fees.
• While completing the assessment order u/s. 143(3) r.w. Section 144C (1) of the Income Tax Act, 1961(Act) held that DD Asia has a Permanent Establishment (PE) in India and attributed the entire management fees to the alleged PE. Further, the learned AO allowed only 10% as expenses and held balance 90% as business income of the alleged PE.
• It is asserted by the assessee that the presence of the employees for a period of 9 days was less than the threshold prescribed in Article 5(6) of the India-Singapore DTAA and therefore could not constitute a PE with regard to the services rendered pursuant to the management fee received by the Petitioner. 89 days were not required to be recorded for the expenses of PE in India as no profits resulted from the said activity as the main objective of determining the existence of a PE was to attribute and tax resultant profits.
• The appeal was filed before the learned CIT(A) who dismissed the appeal therefore the appellant has filed the present appeal before Hon’ble Income Tax Appellate Tribunal.

Contentions of Assessee: