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Tax Publishers
DCIT v. Convergys Customer Management Group Inc.
[ITA Nos. 3529 & 3530/Del/2015, dt. 13-10-2020] : 2020 TaxPub(DT) 4242
(Del.-Trib.)
Levy of penalty under section 271AA for non-maintenance of
TP documentation on non-resident
Facts:
Assessee was in receipt of income from his Indian
subsidiary which was offered to tax. Revenue made additions alleging existence
of a PE and subjected certain additions which were partly allowed by
Commissioner (Appeals). On higher appeal the ITAT confirmed existence of a
place PE and sustained additions attributing income in India besides certain
passive incomes as well. Nonetheless assessee has gone in higher appeal to high
court; pendency of which the assessing officer gave effect to the order of the
ITAT and proposed levy of penalty under section 271AA which was allowed by
Commissioner (Appeals). Aggrieved revenue went in higher appeal -
Held (against the assessee) in favour of the revenue
reversing the order of Commissioner (Appeals) that they cannot simply hinge on
the TP submissions of their Indian subsidiary alleging that there were no
international transactions hence no separate TP documentation was maintained.
Penalty was leviable under section 271AA.
Editorial Note: The
decision casts even more onerous responsibility on non-resident entities who
even passive incomes from India need to maintain TP documentation. Bereft the
documentation as per TP regulations levy of penalty becomes a new normal by
revenue. Most times the issue of whether they had an international transaction
or otherwise especially in cases of PE existence in question itself is subject
to debate. To expect maintenance of documentation on ifs and buts alone is not
a correct proposition. But TP regulations appear to grant no respite on this.
Is better if CBDT comes out with some clarifications on this aspect.
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