CASE LAWS

2016-TII-101-HC-DEL-TP

PR CIT Vs BABA GLOBAL LTD: DELHI HIGH COURT (Dated: December 23, 2016)

Income tax - ALP - AE - absence of incriminating material - interest free loan - search proceedings

During the A.Y 2008-09, consequent to the conclusion of scrutiny proceedings, a search & seizure proceedings took place in the assessee’s premises. Though no new incriminating materials were unearthed during the same, the AO referred the matter to the TPO u/s 92C on the basis of an opinion that one of the transactions, i.e., advance to the AE on interest-free basis ought to have attracted an addition. The TPO, after conducting appropriate analysis, indicated his findings which resulted in an approved assessment order on the basis of findings in ALP determination. On appeal, the DRP reduced the rate of interest. On further appeal, the ITAT quashed the assessment principally on the ground that in the absence of seizure of any incriminating material, the proceedings u/s 153A becomes invalid.

On appeal, the HC held that,

Whether ITAT can be faulted for invalidating the proceedings u/s 153A principally on the ground that no incriminating material was discovered/seized during search - NO: HC

+ It is quite evident that the scrutiny assessments concluded earlier were based upon queries. The assessee had disclosed all the materials which came to be reviewed subsequently in Section 153A proceedings. Thus, having regard to the decision in Kabul Chawla case, the ITAT in this Court’s opinion, did not fall into error in quashing the proceedings.

Revenue's appeal dismissed

2016-TII-70-HC-DEL-INTL

PR CIT Vs TRAVELPORT L P USA: DELHI HIGH COURT (Dated: December 20, 2016)

Income tax - attribution of income - PE - non resident assessee

The assessee, engaged in providing online airline booking services, is a USA based limited partnership concern. Upon analysing the revenue generated by assessee in India, the AO determined the net taxable income to be USD 73,376/- upon which, after conversion, the taxable income was determined at Rs.13,24,707/- in ITA No.604/2016 and the net taxable income determined to be USD 7,14,039/- upon which, after conversion, the taxable income was determined at Rs. 3,28,45,794/- in ITA No.603/2016. On appeal, the CIT(A) rejected the plea of the assessee to carry out on an upward refund based upon additional material furnished by it under Rule 46A. On further appeal, the ITAT held that the assessee had a PE within the meaning of Article 5 of the DTAA between India and USA, and attributed 15% income to the assessee’s India operations.

On appeal, the HC held that,

Whether when the AO has determined the attribution of income by PE of a foreign entity, on the basis of figures furnished by the said entity, it is not open to the ITAT to disturb the said order without rendering any finding - YES: HC

+ The Revenue’s limited and specific case in this appeal is that the exact particulars with respect to the Revenue’s operations from India were available; attribution of 15% was not warranted. The counsel for ssessee however resisted the appeal and submitted that the ITAT was correct in following the decision of Galileo International Inc’s case in the circumstances. It is apparent from the above discussion that the specific and limited challenge by the Revenue in this appeal is to the ITAT’s order, rather mechanical adherence to the Galileo International Inc’s case attribution, principally to the extent it followed the 15% ratio. In the present case, the AO had based his conclusions and determined the income based upon figures furnished by the assessee, as is apparent from a plain reading of the order. In the circumstances, the ITAT, in our opinion, ought not to have disturbed that order, without a finding. This Court has also in its earlier order recorded a similar conclusion in ITA No.827/2016 between the same parties. Accordingly, the present appeal is disposed off with a direction to the ITAT to render specific findings on the questions urged after hearing both the parties.

Case disposed of