DCIT Vs Western Union Financial Services Inc. (ITAT Delhi)
Conclusion: In present facts of the case, the Hon’ble Tribunal relied upon the previous Judgments passed in the assesse own case and have observed that agents of the assessee did not have the necessary authority to conclude the contracts of the assessee and, on that premise, it was held that there is no agency PE of assessee in India and therefore Assessee was not taxable in India.
Facts: The brief facts of the case are that the assessee is a non-resident company registered in USA. It is engaged in the business of rendering money transfer services. The business of the assessee includes transfer of monies across international borders. For the purpose of carrying out its business in India, the assessee had entered into agreements appointing agents in India. There are four types of agents (i) Department of Posts (ii) commercial banks (iii) non-banking financial companies and (iv) tour operators.
The return of income for the year under consideration was filed declaring total income at Rs.1,34,90,540/-. During the course of assessment proceedings, the Assessing Officer reached a conclusion that the assessee company had a Permanent Establishment (PE) in India under Article 5 of India US-Double Taxation Avoidance Agreement (DTAA) in the form of fixed placed PE due to usage of software developed and owned by the assessee in India. The Assessing Officer also noted that there was existence of agency PE on account of agents working in India. Accordingly, the Assessing Officer held that commission income earned by the assessee from its operations in India was taxable in India. The Assessing Officer went on to attribute 50% of the profits earned by the assessee on funds remitted to India.
Aggrieved, the assessee approached the Ld. First Appellate Authority, who was pleased to allow the appeal of the assessee by following the order passed by the Co-ordinate Bench of this Tribunal in assessee’s own case for Assessment Years 2001-02 to 2009-10, wherein it was held that assessee did not have any Permanent Establishment in India in terms of Article 5 of India US-DTAA.
Aggrieved by the said Order, the Department has now approached this Tribunal challenging the order of the Ld. CIT(A). Before the Hon’ble Tribunal the Department relied upon the Assessment Order and the Assessee placed reliance on the orders of the Tribunal in assessee’s own case for Assessment Year 2001-02 to 2010-11.
The Hon’ble Tribunal considered the facts of the case in light of the orders of the Co-ordinate Benches of this Tribunal for Assessment Years 2001-02 to 2010-11 and dismissed the appeal of Department. In ITA No.4889/Del/2004, for Assessment Year 2001-02, wherein the Co-ordinate Bench of this Tribunal had considered this issue at length and had reached the conclusion that though the assessee had a business connection in India, it had neither fixed placed PE nor agency PE in India and in absence of any PE in India the profits, if any, attributable to India operations could not be assessed as business profits under Article 7 of the India-US DTAA. It was also held that the agents engaged by the assessee were independent agents under Article-5(4) of the India US-DTAA and they did not have the necessary authority to conclude the contracts of the assessee and, on that premise, it was held that there is no agency PE of the assessee in India. Under similar circumstances, the Co-ordinate Bench of the Tribunal held that though the assessee had business connection, it did not have any fixed placed PE nor agency placed PE in India, and, in the absence of any such PE in India, the profits, if any, attributable to India operations could not be assessed as business profits under Article-7 of the India US DTAA. The relevant observations of the orders of the Co-ordinate Benches are extracted as under:
“(c) Is the software “VOYAGER” the PE of the assessee?
26. ……………………….Therefore, even if the software is to be considered as an installation, since it is not used for exploration or exploitation of natural resources it cannot per se be treated as a PE.
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