The Delhi bench of the Income Tax Appellate Tribunal (ITAT), recently granted tax relief to Samsung Electronics Company Limited.
The assessee in the instant case Samsung Electronics Company Ltd engaged in manufacturing and sales of various categories of televisions, home appliances, telecommunication terminals etc. it has two wholly owned subsidiaries in India such as Samsung India Electronics Private Limited (‘SIEL’) and Samsung India Software Operations Private Limited.
During the relevant assessment year, the Assessing Officer (AO) has passed a draft assessment order by holding that the seconded expatriate employees are rendering services to SIEL on behalf of the assessee and, therefore, created a PE of SEC in India under Articles 5 of the India-Korea DTAA. He also held that expatriates employees create a PE of the assessee in India by rendering services to SIEL through its employees basis, and added an estimated income of 10% on the remuneration paid to such expatriate employees during the years under consideration to determine the profits attributable to tax in India by applying Clause (iii) of Rule 10 of the Income Tax Rules, 1962.
The AO further observed that Korean expatriates who work in India are working and under the complete guidance, control and supervision under the Korean buses and, therefore, they have a lion in their employment with the parent company. Accordingly, he treated SIEL in its entirety as permanent establishment of the assessee, also agency PE, as a place of management for Southeast operations, and also service PE.
The AO also noted that a sum of Rs. 18,15,99,203 withheld by the SIEL and it is lying to their credit, hence he allowed credit of taxes only to the extent of Rs. 17, 79, 07, 391.
Assessee raised objections against the order passed by the AO and also challenged the additions made by him. Therefore the Assessee approached the tribunal by appeal.
After considering the above narrated issues and circumstances the Tribunal bench comprising of President G.D. Agarwal and judicial Member K. Narasimha Cahri observed that In the absence of proof as to any management activity of the assessee being conducted in India it is difficult to agree with the authorities below that through the expatriate employees the assessee has been conducting the business of assessee in India. The bench noted that there is neither any business conducted by the assessee in India through the expatriated employees nor any income is derived by them through the activities of the employees.
The division bench further held that there is the business activity that is conducted by the assessee through the expatriate employees; the question of estimated income does not arise and consequently, the liability of the assessee to deduct TDS or interest liability under section 234A and B does not arise.
Regarding the issue of short credit, the Tribunal bench held that credit of TDS is allowable since the Assessee fulfilled the requisite conditions of possessing a valid certificate as per the Act. Therefore the bench directed the AO to grant the credit of the TDS to the Assessee.
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