Contract by Exclusive Dealer of Bentley Cars with Indian Customers for Extended Warranty does not create a PE: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that, a contract for extending the warranty of Bentley Cars, entered into by the exclusive dealer with the customers in India does not constitute a Permanent Establishment in India and deleted the disallowances of payments of purchases for the extended warranty.

The Assessee-respondent M/s. Exclusive Motors Pvt. Ltd., is a resident corporate entity. Being selected for complete scrutiny, for examination of foreign remittances, it was found by the Assessing Officer (AO) that, in addition to the payment made against purchases from Bentley, UK, the assessee has remitted an amount of Rs.3,75,68,310 towards extended warranty payment to an overseas entity, namely, Car Care Private Ltd. (CCPL) a unit of Bentley Pre-Administrative Services.

The AO, not being convinced by the assessee’s explanation to the Show Cause Notice issued against the assessee in this matter, concluded that the assessee is a dependent agent of CCPL, insofar as it relates to extended warranty contract and disallowed the amount of Rs. 3,75,68,310/-.

Being convinced with the submission of the assessee, learned Commissioner (Appeals)[CIT(A)} held that the assessee is having its own independent status and is not a dependent agent of CCPL and deleted the disallowances made.

It was observed by the Tribunal comprising Judicial Member Saktijit Dey and Accountant Member BRR Kumar that, “It is also a fact on record that the sales invoices raised by assessee to the Indian customers towards extended warranty are in its own name and does not mention the name of CCPL. Therefore, the privity of contract is between the assessee and Indian customers, wherein, CCPL has no role to play” and the order of CIT(A) was upheld in favour of the assessee and the appeal by the revenue was consequently dismissed.

To Read the full text of the Order CLICK HERE

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