UAE Company is an Independent Entity: Indian Company can’t be Taxed for Its’ Profit, rules ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has ruled that a UAE Company is an independent entity and the profit earned by such a Company cannot be added in the hands of an Indian Company for the purpose of the Income Tax Act, 1961, unless there is proof that the Company is a paper entity used as a tool for tax evasion.

The income tax department alleged that the UAE entity was a sham arrangement to divert profits of the Indian entity and thereby evade tax.

The Two-Member bench of the Tribunal comprising ITAT President Mr. G S Pannu and the Judicial Member Mr. Amit Shukala dismissed the department’s plea by observing that the Company incorporated in the UAE is an independent entity.

“First of all, Chadha Projects JLT, Dubai is an independent entity incorporated under the laws of UAE and was carrying out various activities helping, assisting and getting contracts and procurements of orders for assessee firm and has also disclosed profits in its balance sheet of AED 7,92,674 including mark-up. If the non-resident entity has shown profit, then same cannot be added in the hands of the assessee company as income in India. Firstly, there is no evidence to prove that this was some kind of sham arrangement of profits along with markup and secondly, catena of documents and evidences were filed that the said entity is working there and for which mark-up of 10% of management fees is given, therefore, it cannot be held that all those documents are bogus or sham without any material information on record,” the bench concluded.

To Read the full text of the Order CLICK HERE

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