Hyosung Corporation Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi Bench in its order dated April 23, 2025, delivered an important ruling in Hyosung Corporation vs. ACIT. The case involves a Korean company with a Permanent Establishment (PE) in India, challenging the disallowance of setting off business losses against Fee for Technical Services (FTS) income. The tribunal permitted the set-off under Section 71 of the Income Tax Act, 1961, despite the absence of a corresponding provision in the India-Korea Double Taxation Avoidance Agreement (DTAA).
Background of the Case
The assessee is corporation established under the laws of the Republic of Korea, carrying out industrial and technological activities, with its Indian operations focused on the power sector through a Permanent Establishment (PE). For the Assessment Year 2021-22, the assessee submitted its return of income on March 15, 2022, reporting nil taxable income and seeking a refund of Tax Deducted at Source (TDS) amounting to Rs. 63,41,430. The case was flagged for scrutiny and led to issuance of notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961.
The assessment revealed that the assessee had incurred business losses of Rs. 4,81,02,640 under the head ‘Profit and Gains from Business or Profession’ (PGBP) due to PE operations, which included no offshore supply during the year. Simultaneously, the assessee earned income from other sources, comprising FTS income of Rs. 60,19,976 and interest on income-tax refunds totalling Rs. 1,82,89,580.
