Addition of Offshore Supply Income to PE in India on account of loss Unjustified

Hitachi Ltd Vs ACIT (ITAT Delhi)

ITAT Delhi held that addition on account of attributing income from offshore supplies to permanent establishment in India unjustified in case of loss.

Facts- The assessee filed its return of income for the assessment year under appeal declaring total income of Rs. 45,27,08,220/-. The case was selected for complete scrutiny. In response to the statutory notices issued by the Assessing Officer (AO), the assessee filed the reply regarding details of off-shore supply made by the assessee during the year under consideration. After considering the submissions of the assessee the AO passed a draft assessment order, whereby he proposed addition of Rs. 50,42,987/- to the returned income. Aggrieved against this the assessee preferred its objections before the learned Dispute Resolution Panel (“DRP” in short), who after considering the objections of the assessee, issued certain directions. However, the proposal regarding profit attributable to the India PE @ 35% as computed at Rs. 50,42,987/-was confirmed by the learned DRP. Thereafter the AO passed the impugned assessment order.

Conclusion- Held that following the binding judgment of the Hon’ble Jurisdictional Delhi High Court rendered in the case of CIT (International Taxation) Vs. Nokia Solutions and Net Works OY, we are of the considered view that the authorities below were not justified in attributing the profit to the assessee when there was loss. We, therefore, direct the Assessing Officer to delete the impugned addition. Grounds raised by the assessee are allowed. The appeal of the assessee is allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

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