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Tax Publishers 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.

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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.