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02-09-2019, LG Electronics, Section 147, 234B, 234C, 234D, Tribunal Delhi

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1 week 4 days ago #10685 by amit
Section - 147, 234B, 234C, 234D, 271(1)(c)
Order Date - 02-09-2019
Favouring - Assessee allowed for statistical purposes
Court - Tribunal Delhi
Appellant - LG Electronics Inc.
Respondent - DCIT
Justice - DIVA SINGH JM & PRASHANT MAHARISHI AM
Citation - 919Taxpundit15
Appeal No. - ITA No. 5022/Del/2018
Asstt. Year - 2014-15

Order

PER : DIVA SINGH

1. These are 9 appeals of the assessee namely L G Electronics Inc., Korea, (The Appellant or The Assessee) involving similar issues for AY 2004-05 to AY 2014-15 except AY 2011-12 and 2012-13. The counsel for the parties also argued them together and therefore same is disposed of by this common order. While the Assessment order for AY 2004-05 to 2010-11 arise out of reassessment proceedings, the orders for AY 2013-14 & 2014-15 are assessment orders pursuant to assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).Grounds of appeal of various years are reproduced hereunder to appreciate that the issues are common.

2. The assessee has raised the following grounds of appeal in ITA No. 4559/Del/2018 for the Assessment Year 2004-05:-

“1. That on the facts and in the circumstances of the case and in law, the orders passed by the Assessing Officer (AO)/Dispute Resolution Panel (DRP) to the extent prejudicial to the interest of the appellant, are bad in law and void ab- initio.

2. That the AO/DRP erred in upholding the validity of the reassessment proceedings under Section 147 of the Act when initiation of proceedings did not satisfy necessary requisites contained in Section 147 of the Act and there being no reason to believe that any income chargeable to tax had escaped assessment.

2.1 That the AO/DRP erred in upholding the validity of the reassessment proceedings under Section 147 of the Act even though all the transaction between LGIL and Assessee were held to be at arm’s length by the Ld. Transfer Pricing Officer (‘TPO’) and thus there could not be any ‘escapement of income’

2.2 That the AO/DRP has erred in initiating reassessment proceedings against the Appellant solely on the basis of statements of expatriate employees of LGIL recorded at the time of survey which were not even relevant for the assessment year under consideration.

2.3 That the AO/DRP has erred in sustaining the initiation of reassessment proceedings under section 147 of the Act in the absence of any live link or nexus between the ‘information’ and the formation of the belief that income chargeable to tax had escaped assessment.

Without prejudice

3. That the AO/DRP erred in concluding that the Appellant had a Permanent Establishment (“PE”) under Article 5 of the India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were absent in the present case.

3.1 That the AO/DRP erred in making assessment on the assumption that their existed a PE of the Appellant in India solely relying on the statements of expatriate employees of LG Electronics India Private Ltd. (hereinafter referred to as “LGIL”) which were inadmissible evidence in terms of the judgment of the Hon’ble Supreme Court in S. Qadar Khan & Sons (254 CTR 228)

3.3 That the AO/DRP erred in not appreciating the fact that the expatriate employees of LGIL were working for and furthering the business of LGIL and not that of the Appellant.

3.4 That the AO/DRP completely failed to appreciate that in terms of Article 5(7) of the Double Tax Avoidance Agreement between India and Korea(‘DTAA’) control of holding company over subsidiary does not in itself create a Permanent Establishment of the non-resident.

3.4. That the AO/DRP erred in law in selectively relying on the statement of expatriate employees and failed to appreciate the true intention of the statements which evidenced that the expatriates were working only for LGIL in India.

4. That the AO/ DRP has erred in not appreciating the fact that in terms of Article 10 of the DTAA, shifting of any profits arising to a non-resident is prohibited if the transactions between the two enterprises have met the arm’s length test. In the present case all the transactions between the Appellant and LGIL have been subjected to transfer pricing proceedings and have been found to be at arm’s length.

5. That without prejudice the AO / DRP also miserably failed to appreciate that the function to have been allegedly performed by the expatriates in the PE was the import of raw material/ finished goods and parts which function was already captured in the Transfer Pricing Assessment of the Indian subsidiary and
hence there arose no occasion to allocate any further profits to such PE.

6. Without prejudice to the above grounds, n absence of a PE of the Appellant in India, or any activity carried out in India the AO/DRP grossly erred in attributing profits to India.

7. That on the facts and in the circumstances of the case, the orders passed by the Assessing Officer (AO) /Dispute Resolution Panel (DRP) are perverse and is based on surmises and conjectures.

8. That the AO/DRP has grossly erred in law and facts in directing the levy of interest under sections 234B and 234C of the Act without appreciating that the Appellant is a non-resident and tax is deductible from the income of the Appellant.

9. That the AO/DRP has grossly erred in law and facts in levying interest under section 234A of the Act.

10. That the AO/DRP has grossly erred in law and facts in directing the levy of interest under section 234D of the Act without appreciating that no refund was granted to the Appellant.

11. That the AO/DRP has grossly erred in law and facts in initiating the penalty under section 271 (1) (c) of the Act and alleging that the Appellant hasconcealed

3. The assessee has raised the following grounds of appeal in ITA No. 4560/Del/2018 for the Assessment Year 2005-06:-

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