UPS Asia Group Pte. Ltd. Vs ACIT (ITAT Mumbai)
Mumbai ITAT Reiterates: No Further Profit Attribution to Foreign Enterprise Once Indian AE Is Remunerated at Arm’s Length
The Mumbai ITAT held that no further profits can be attributed to a foreign enterprise’s alleged Permanent Establishment (PE) or business connection in India where its Indian Associated Enterprise (AE)/Dependent Agent PE has already been remunerated at an arm’s length price. Following its own decisions in the assessee’s earlier years, the Tribunal observed that once the Indian AE has been compensated on an arm’s length basis and no transfer pricing adjustment has been made, no additional income can be attributed to the foreign enterprise under section 9(1)(i) or the India–Singapore DTAA. Consequently, the questions regarding the existence of a business connection or Permanent Establishment were rendered merely academic, and the additions of ₹4.13 crore towards attributed profits were deleted.
The Tribunal also held that interest on income-tax refund received by the Singapore company was not effectively connected with the alleged PE in India and, therefore, was taxable under Article 11(2) of the India–Singapore DTAA, and not under the normal provisions of the Income-tax Act. Relying on the Special Bench decision in Clough Engineering Ltd. and the Mumbai Tribunal decision in Marubeni Corporation, it held that such interest is taxable at the treaty rate. Although an additional legal ground challenging the assessment as time-barred was admitted, the Tribunal declined to adjudicate it since the appeal had already been allowed on merits. Accordingly, the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal emanating from the appellate order dated 28.11.2024 is preferred by the assessee out of final assessment order passed by ACIT 4(2)(1), Mumbai and the Hon’ble Dispute Resolution Panel-2, Mumbai („DRP’)pertaining to the assessment order passed u/s. 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2022-23.
