Facts of the Case

The appeals were filed by the Revenue (Commissioner of Income Tax – International Taxation) challenging orders passed by the Income Tax Appellate Tribunal for Assessment Years 2017–18, 2018–19, and 2019–20.

The Tribunal had examined whether the respondent, A B Sciex Pte. Ltd., had a Permanent Establishment (PE) in India and whether profits could be attributed to such presence.

The Tribunal concluded that the assessee did not have either a fixed place PE or a dependent agent PE in India, and therefore treated the issue of profit attribution as academic without adjudicating it.

Issues Involved

  1. Whether the assessee had a Permanent Establishment (PE) in India.
  2. Whether the international transactions were conducted at Arm’s Length Price (ALP).
  3. If ALP was satisfied, whether any profits could still be attributed to India. 

Petitioner’s Arguments (Revenue)

  • The Revenue challenged the Tribunal’s findings regarding absence of PE.
  • It contended that the Tribunal erred in not fully examining the profit attribution issue, despite it being a substantial question.
  • The Revenue sought adjudication on both PE and transfer pricing issues. 

Respondent’s Arguments (Assessee)

  • The assessee supported the Tribunal’s conclusion that it had no PE in India.
  • It argued that once PE is negated, the issue of profit attribution becomes irrelevant.
  • However, it had also raised an alternative plea before the Tribunal on transfer pricing/ALP.

Court’s Findings / Order

  • The Tribunal had only adjudicated the first issue (PE) and left the second issue unexamined.
  • Since the assessee had raised an alternative plea, the Tribunal ought to have adjudicated the second issue as well.
  • To ensure judicial efficiency and avoid multiplicity of proceedings, the Court remitted the matter back to the Tribunal for deciding the second issue.

Final Directions

  • The impugned orders were not disturbed.
  • The matter was remanded to the Tribunal for adjudication on:
    • Arm’s Length Price
    • Profit attribution
  • Liberty was granted to both parties to file appeals after the Tribunal’s fresh decision.
  • Limitation period was protected for the duration of proceedings.

Important Clarification

  • Even if PE is not established, issues relating to transfer pricing and profit attribution may still require adjudication if raised alternatively.
  • The Court emphasized comprehensive adjudication by the Tribunal to avoid repetitive litigation.
  • The Tribunal was directed to dispose of the matter within 3 months.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60821122023ITA8002023_180609.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.