The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that Mitsui India Pvt. Ltd. (MIPL) is not a Dependent Agency Permanent Establishment (DAPE) of Mitsui & Co. so no further profit could be attributed.
The assessee, Mitsui & Co. Ltd. is a company incorporated in Japan and is one of biggest trading houses of the world. The assessee is involved in trading from needle to airplane engines. Assessee also undertakes several projects in connection with big industrial installations power projects.
The AO computed the taxable profits attributable to Indian operation at 50% and made an addition of Rs. 1,86,548,468 to the total income of the assessee.
The submission of the assessee that even if it is construed that MIPL constitutes Dependent Agency Permanent Establishment (DAPE) of the assessee in India, the transactions between them being at arms length no further profit is attributable, which was rejected by the AO.
In appeal, CIT(A) upheld the view of the AO that M/s. Mitsui & CO. Ltd. has been constituted as a DAPE of the assessee company in India. He however restricted the profit attributable to the Indian operation to 20% as against 50% attributed by the AO. He also allowed the commission to the extent of Rs. 43,04,46,449 as claimed by the assessee and thereby reverting the order of the AO in restricting such commission to Rs. 20,13,71,858.
The issue raised in this case was whether the CIT(A) has erred, both on facts and in law, in upholding the view of the AO that Mitsui India Pvt. Ltd. has been constituted as a Dependent Agency Permanent Establishment of the assessee company in India.
The other issue raised was whether the CIT(A) has erred in not accepting the fact that the transaction between the assessee and Mitsui India Pvt. Ltd. being at arm’s length only, no further profit could be attributable to the assessee.
The two-judge bench of Accountant Member, R.K. Panda and Judicial Member Suchitra Kamble following the consistent decisions of the Tribunal in assessee’s own case in the preceding assessment years and in absence of any contrary material against the decision of the Tribunal, held that MIPL is not a Dependent Agency Permanent Establishment of the assessee.
“We hold that no further profit could be attributed since assessee is not a Dependent Agency Permanent Establishment,” the ITAT said.
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