Honda Trading Asia Company Ltd. Vs DCIT (ITAT Delhi)
Delhi ITAT: No Permanent Establishment in India for Honda Trading Asia; TP Adjustments Collapse as Offshore Supplies Escape Indian Tax
The Delhi ITAT allowed the appeals of Honda Trading Asia Company Ltd., Thailand, holding that the assessee did not have a Permanent Establishment (PE) in India under the India–Thailand DTAA. The Revenue had sought to tax the assessee by alleging that expatriate employees working with Honda Cars India Ltd. (HCIL) were effectively carrying on the assessee’s business in India, thereby constituting a fixed place PE. The Tribunal found that this conclusion rested largely on presumptions arising from survey proceedings and not on any cogent evidence.
The Tribunal observed that the assessee merely supplied raw materials, capital goods and rendered services from Thailand on an offshore basis. The Revenue failed to establish that any employee of the assessee was deputed to India or that any expatriate working in HCIL rendered services on behalf of the assessee. There was also no evidence that the assessee had any fixed place of business or premises at its disposal in India. Mere group affiliation with Honda Motor Company, Japan, or the presence of expatriates in HCIL, could not by itself create a PE.
The Tribunal placed reliance on its own decisions in the assessee’s earlier assessment years, the AAR ruling in Honda Motor Company Ltd., and the Delhi High Court decision in Honda Cars India Ltd., all of which supported the proposition that no PE existed merely because of the presence of group entities or expatriate employees. Respectfully following the earlier orders, the Tribunal held that Honda Trading Asia had no PE in India.
Having held that no PE existed, the Tribunal ruled that the transfer pricing adjustments and profit attribution made by the TPO had no surviving basis. Consequently, the TP grounds were rendered infructuous and were not adjudicated. The appeals for AYs 2016-17 to 2019-20 were accordingly partly allowed, with consequential grounds relating to interest and penalty left for statistical purposes.
Cases Discussed
- Honda Cars India Ltd. (Delhi HC), ITA 481/2017 order dated 20.05.2024
- DCIT v. Michelin ROH Co. Ltd. (Delhi ITAT), [2022] 138 com497
- Director of Income-tax, New Delhi vs. Mitsubishi Corporation (SC), [2021] 130 com276
- Honda Motor Company Limited, Japan and Ors. vs. ADIT, 301 CTR 601
- E-Funds IT Solution Inc. (SC), (2017) 86 Taxmann.com 240
- Honda Cars India Ltd., order dated 29.06.2016
- Honda Motor Company Limited, In re (AAR), 124 com225
- Bangkok Glass Industry Co. Ltd. v. ACIT (Madras HC), [2013] (34 com77)
- CIT vs. S. Khader Khan Son (SC), 254 CTR 228
- CIT vs. S. Khader Khan and Sons (Madras HC), (2008) 300 ITR 157
- B. Mauritius, AAIR No.1128 of 2011
- ADIT vs. E-Funds IT Solution Inc., 251 TaxmanZdf
- Ishikawajma Harima Heavy Industries Ltd. v. Director of Income-tax, Mumbai (SC), 288 ITR 408
- Annamalais Timber Trust (Madras HC), 41 ITR 781
- Morgan Stanley’s case
- Tekniskil (Sendirian) Berhard v. CIT (AAR), [1996] 222 ITR 551
- ACIT v Paradigm Geophysical Pty Ltd (Delhi ITAT), [2008] (25 SOT 94)
FULL TEXT OF THE ORDER OF ITAT DELHI
