American Express Travel Related Services Company
v. Asstt. DIT [ITA No. 5941/Del/2010, dt. 28-5-2020] : 2020 TaxPub(DT) 2298
(Del.-Trib.)
Non-resident entity -- Reassessment alleging Place and
Agency PE (Permanent Establishment) of its BPO Indian entity bereft those
points raised and dealt in scrutiny assessment.
Facts:
Assessee a non-resident entity based out of USA had an
Indian entity which was offering BPO/Call centre services. Post a scrutiny
assessment the case was reopened for reassessment alleging --
(a) The royalty income due to
the assessee from the BPO/Call centre entity was not offered to tax by the
assessee.
(b) The call center service
provided by the Indian BPO triggered a place PE.
(c) By enabling customer focused
sales calls the BPO -- call center enabled contract conclusion thus creating an
agency PE as well. Employees of assessee were seconded to the call centre/BPO
whose cost was reimbursed by the Indian BPO/call centre also created an agency
PE by virtue of control of the Indian entity.
(d) Attribution of
profits/income was not done arising out of the place/agency PE.
(e) That software of the
assessee used by the call center/BPO was not offered as income.
Thus a reassessment was made with an addition of Rs. 21
crores. DRP upheld the reassessment of the assessing officer. On further appeal
by assessee to the ITAT.
Held in favour of the assessee by the ITAT holding --
(a) The alleged royalty income
and income which arose out of the software of the assessee both was factually
offered by the Call centre/BPO in the return filed in representative capacity
of the assessee. Arising out of the reassessment assessee/representative
assessee also filed a rectification claim of lost/short credit of TDS which was
granted to their favour on this point.
(b) The entire nature of
customer focused sales of the Call centre services and the nature of the
BPO/call centre services was discussed and manifested by the assessee with no
place and agency PE arising at scrutiny assessment level itself.
(c) The seconded employees of
the assessee were under control and management of the Indian BPO/call centre
thus no agency PE arose from the same.
The entire reopening was thus held be a mere change of
opinion with no tangible material or reasoning by the assessing officer which
is not permitted as cited in --
-- CIT v. Kelvinator of India
Ltd. (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC)
-- Le Passage To India Tours
& Travels (Pvt.) Ltd. v. Addl. Commissioner of Income Tax (2015) 58
Taxmann.com 144 (Delhi) : 2015 TaxPub(DT) 0433 (Del-HC)
Editorial Note:
Reference to the AAR Ruling (1999) 238 ITR 296 (AAR) : 1999 TaxPub(DT) 1288
(AAR) in this decision is the case of assessee where right to use these
software were held as taxable royalty incomes under Indo-US DTAA -- Article 12.
Noteworthy piece is the rectification arising out of the reassessment on TDS
credits especially when it arose from the reassessment and then when the
reassessment itself was held infructuous there was no question on the validity
of the rectification petition which any case as per section 154 appears to be
correct as they were separate proceedings. Assessee also not pressing this
point before ITAT later on after filing appeal is also to be noted. The
allegations made by the assessing officer and then its discussion on the PE
make it a flash worthy case.