CIT Vs Siemens Mobile Communication SPA (Delhi High Court)
The appeal was filed by the Revenue before the Delhi High Court challenging the order dated 30 September 2019 passed by the Income Tax Appellate Tribunal. The Revenue raised multiple questions of law concerning the existence of a business connection and permanent establishment (PE) in India, taxability of software licensing fees as royalty under both the Income-tax Act, 1961 and the applicable Double Taxation Avoidance Agreement (DTAA), and the levy of interest under Section 234B.
Read SC Judgment: No Permanent Establishment Found, Revenue Appeal Dismissed by SC
On the issue of permanent establishment, the Tribunal had examined the factual matrix and recorded that almost all contracts were executed between 26 February 1997 and 15 January 1998. Given the timing of these contracts, there was no occasion for employees of the assessee to visit India thereafter. The Tribunal further found that the role of the assessee was confined to the supply of hardware components directly from Italy, with sales being concluded, title transferred, and consideration received outside India. Any obligation relating to repair or replacement during the warranty period required the defective equipment to be sent to facilities in Italy. Importantly, the Tribunal noted that income arising from onshore services such as installation, testing, maintenance, and marketing activities carried out by the Indian subsidiary had already been voluntarily offered to tax in India.
