仅在印度设立子公司并不等同于在印度拥有常设机构

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. 费用报销：

• 税务机关未考虑上诉人提交的相关证据。
• 争议解决小组（DRP）错误地将此认定为向印度关联方提供的咨询和专业服务。
• 纳税人并未对实验室报告增加任何价值。纳税人仅作为中介，从信誉度更高的实验室获取报告，并未发挥其他作用。这绝不属于技术服务费（FTS）的范畴。

b. 对印度客户的出口销售：

委托人对委托人（独立交易）

• 税务机关认定存在固定场所常设机构（PE），理由是纳税人通过印度子公司开展印度业务，并为其提供必要的服务和监督。
• 这一结论缺乏任何书面证据支持。
• 纳税人直接向印度客户进行销售，印度子公司并未就此类销售提供任何服务。
• 根据文件显示，收货人位于印度境外，款项也在印度境外收取。
• 印度子公司支付了软件和咨询费、可转换外币债券（FCCD）利息、工具设计费、咨询费以及测试费用报销等款项，且这些收入已在纳税申报中计入应纳税额。
• 税务机关仅凭纳税人在印度设有子公司这一假设，就认定存在常设机构，并推断其对印度实体的所有出口销售均有印度子公司的参与，却未能证实印度子公司如何参与了其他实体的采购，这种认定是错误的。
• 税务官员未能认识到，对印度同行的出口是基于委托人对委托人的原则进行的。
• 并未有证据表明纳税人在印度设有分支机构、项目办公室、联络处或其他任何形式的固定营业场所。
• 未发现纳税人有任何员工在印度工作。
• 因此，仅以纳税人在印度设有子公司为由认定存在常设机构是站不住脚的。

5. 裁决

尊敬的所得税上诉法庭裁定：

1. 费用报销不属于技术服务费（FTS）的范畴。因此，该事项裁定纳税人胜诉。
2. 上诉人在印度并无常设机构，因此随之而来的利润归属也缺乏依据。