インドに子会社を設立したという事実だけでは、インドに恒久的施設を有していることにはならない

Held By Hon’ble Income Tax Appellate Tribunal

In the matter of Mosdorfer GMBH Vs. ACIT, International Tax (ITA: 286/Del/2023)

The Assessee is a company based out in Austria. The Assessee is having a Subsidiary Company in India. The Appellant has received software-related services income during the year. Apart, The Company also received reimbursement of expenses from Indian Subsidiary. However, the Company claimed the same as exempted Income as expenses are recovered on cost to cost basis without any markup. Further, the Company also supplied goods to Indian Entities on a principal to principal basis. The Ld. AO Charged Income tax on reimbursement of expense claiming that such income pertains to technical income provided to Indian subsidiary. Further, AO assumed that entire sales in India are made through Indian Subsidiaries. The Asseesee has a fixed place of business in India in the form of Indian Subsidiary. The 'core business' of the assessee is conducted through Mosdofer India Private Limited. Therefore, profit attributable to such PE is taxable in India.

The Hon’ble Tribunal held that The assessee has made sale directly to the Indian customer. Consignees were situated outside India and the payments were also received outside India.  The Tribunal concluded that the non-resident taxpayer did not have a PE in India; accordingly, profit attribution to the taxpayer on this account is liable to be deleted. Further, mere reimbursement of expenses, being lab-testing charges, cannot be considered as fees for technical services (FTS) in the hands of the taxpayer receiving such reimbursement from its Indian subsidiary.  

1. Brief Facts of the Cases

1. M/s Mosdorfer GMBH (“The Appellant) is a Company based out in Austria. The Company is engaged in development and the industrial production of overhead accessories and damping systems from steel and metal.
2. The Company is having an Indian Subsidiary named Mosdorfer India Private Limited.
3. During the year under Assessment, the Appellant disclosed various Incomes in Income Tax return such as software related services, Interest Received, Reimbursement of expenses received from Indian Subsidiary etc. The Appellant claimed reimbursement of expenses as exempted Income
4. The Appellant also received an amount on account of supply  of goods and other tangible assets.
5. The Assessing Officer levied tax on Reimbursement of expenses holding that the Appellant has failed to submit any documentary evidence to substantiate that such expenses are paid by Indian Subsidiary on pure cost to cost basis. Such reimbursement income pertains to the technical services provided by the Appellant during the year. Therefore, the nature of the receipts also comes under the ambit of FTS under the provisions of the Act as well as DTAA.
6. During the year, The Appellant executed the sale of exported goods and other tangible assets in India. 

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1. The Assessing Officer held that the Appellant is having a fixed place in India in the form of M/s Mosdofer India Private Limited. Further, the 'core business' of the assessee is conducted through M/s Mosdofer India Private Limited. 
2. Therefore, the assessee has a permanent establishment in India through Masdofer India Private Limited. Accordingly, a reasonable profit from the business income is liable to be attributed to the assessee's PE in India.
3. The AO invoked Rule 10 of the Income Tax Rules by considering 10% profit on a presumptive basis and considering the activities of assessee, 35% of the such profit is liable to tax in India as business income. 
4. Accordingly, on account of sale of exported goods in India of INR 47,47,71.267/-, The Assessing officer determine dRs. 1,66,16,994/-(Rs. 47,47,71,267/- x 10% x 35%) as income attributable towards PE of assessee in India.
5. The Dispute Resolution Panel also upheld the decision of the Assessing officer and held that:
   1.  the Assessee is liable to pay tax on reimbursement of expense in India and
   2. The assessee has a fixed place permanent establishment in India and its business is being conducted through its subsidiary namely M/s. Mosdorfer India Pvt. Ltd. .

2. Contention of the Appellant

The Appellant contended that:

a. With respect to reimbursement of expenses:

• The Appellant contented that there is no formal agreement with the Indian entity. However, receipt during the year is back to back reimbursement crossed charged to India entities without any markup. Therefore, the same is not considered as taxable income.

b. With respect to export of goods to Indian Customers:

• the Appellant has exported goods and other tangible assets to various Indian customers on a principal-to-principal basis. 
• As per CBDT circular no. 23 [F. No. 7A/38/69-IT (A-II)] dated July 23,1969, the non resident selling good or tangible assets from abroad to Indian Importer on a principle-to-principal basis will not be considered as income/ receipt accrued or deemed to accrue or arise in India.
• As such sales are made directly on a principle-to-Principal basis and therefore, such receipts or income will not be considered as income for the year.
• Further, The Appellant does not have any fixed place of business in India through Branch office, Project offices, Liaison office, Godown, Warehouses and construction or other business sites. 
• Also, The Appellant had no employee working in India. 
• Therefore, The Appellant does not have any business connection or a permanent establishment in India.

3. Contention of the Respondent

The Income Tax Authority contended that:

a. With respect to reimbursement of expenses:

• the assessee has not provided any documentary evidence to support his claim that reimbursement is claimed on a purely cost to cost basis.
• Therefore, in absence of any documentary evidence, such an amount can’t be held as reimbursement of expenses.
• Further, the assessee has provided consultancy & professional services and supervision & repair to its Indian subsidiary. Therefore, it is clear that the income received by the assessee on account of reimbursement income pertains to the technical services provided by the assessee during the year.

b. With respect to export of goods to Indian customers:

• AO mentioned that The Appellant has not only supplied goods to its Indian subsidiary but also supervised it and provided repair service for it. Therefore, The Assessee has deputed its expatriate personnel to supervise and to provide repair services to Indian Subsidiary.
• Therefore, The Asseesee is a having fixed place of business in India in the form of Indian Subsidiary. The 'core business' of the assessee is conducted through Mosdofer India Private Limited. 
• Therefore, a reasonable profit from the business income is liable to be attributed to the assessee's PE in India.

4. Analysis by Hon’ble Income Tax Appellate Tribunal

The Hon’ble Income Tax Appellate Tribunal made following analysis:

a. Reimbursement of Expenses:

• 税務当局は、申告者が提出した関連証拠を考慮に入れていません。
• 紛争解決パネル（DRP）は、当該証拠をインドの関連会社に対するコンサルティングおよび専門サービスであると誤認しました。
• 納税者は、検査報告書にいかなる付加価値も加えていません。納税者は、信頼性の高い検査機関から報告書を取得するための仲介役を務めたに過ぎません。これは、技術サービス料（FTS）の性質を全く帯びるものではありません。

b. インドの顧客への輸出販売：

本人対本人の取引

• 税務当局は、納税者がインドの子会社を利用してインドでの事業を調達し、必要なサービスや監督を提供しているとの主張に基づき、恒久的施設（PE）が存在すると認定しました。
• このような結論は、何ら証拠書類に基づかないものです。
• 納税者はインドの顧客に対して直接販売を行っており、インドの子会社は当該販売に関して何らサービスを提供していません。
• 書類によれば、荷受人はインド国外に所在し、支払いもインド国外で受領されています。
• インドの子会社は、ソフトウェアおよびコンサルティング料、FCCD（外貨建て転換社債）の利息、工具の設計料、コンサルティング料、検査費用の精算などを支払っており、これらの所得は申告書において課税対象とされています。
• 税務当局は、納税者がインドに子会社を有しているという単なる推測に基づき、インドの事業体に対する輸出販売はすべてインドの子会社の関与によるものと決めつけ、インドの子会社が他社による購入にどのように関与していたかを立証することなく、PEの存在を認定するという誤りを犯しました。
• 税務当局は、インドの取引先への輸出が本人対本人の取引であったという事実を認識していません。
• 納税者である会社は、インド国内に支店、プロジェクトオフィス、連絡事務所、その他の事業拠点といった恒久的施設を有しているとは主張されていません。
• 納税者の従業員がインドで勤務している事実は確認されていません。
• したがって、インドに子会社が存在するという理由だけでPEを認定することは認められません。

5. Decision

所得税控訴審判所は次のように判示しました：

1. 費用の精算は技術サービス料（FTS）の性質を帯びるものではない。したがって、本件は納税者に有利に決定される。
2. 申告者はインドにPEを有しておらず、それに伴う利益の帰属には根拠がない。