By TIOL News Service

NEW DELHI, MAR 08, 2018: THE issue is - Whether when the issue of PE itself is in dispute and the Tribunal had ruled in favour of the assessee in the past cases, there is any justification in the Revenue's instruction to deposit 20% of Rs 75 Cr demand before the case is heard. NO is the verdict.

Facts of the case

The Assessee is a part of Mitsui group, which is one of the largest trading and investment companies in Japan. The assessee opted for the writ route to seek stay on recovery of demands by coercive measures, relating to assessment orders for the A.Ys 2009-10, 2013-14 and 2014-15 respectively, in respect of attribution of income from PE. The Assessee had pleaded that direction to deposit 20% of the disputed demand which came to Rs 15 Crores, was non-reasoned and non-speaking order.

The HC held that,

+ the issue whether Mitsui & Co.Ltd., Japan, had a PE in India was specifically examined in the assessments made u/s 143(3), and it was held that the assessee had NIL taxable income for A.Ys 2009-10 and 2014-15 from the PE stream. It was pointed out that though Mitsui had paid tax on income from PE for A.Y 2013-14, however, when the ITAT was approached, it was held that Mitsui & Co. had no PE in India for A.Y 2005-06;

+ the assessee's claim regarding the absence of the PE was based on the premises that the assessee carried out its business by effecting high sea sales. It was also argued by the Assessee that the AO had wrongly invoked Section 40(a)(i) r/w/s 195 and claimed that disallowance u/s 40(a)(i) had to be restricted only to the profit element and not the entire expenditure in terms of CBDT Circular No. 3/15;

+ it is further pleaded that appeals for A.Ys 2009-10 & 2013-14, filed in January, 2017 are pending disposal before the CIT(A) despite repeated requests for early disposal. Therefore, the Assessee is granted interim stay from recovery, subject to deposit Rs.5 Crores within seven days. It is also clarified that that pendency of the present writ petition will not prohibit the CIT(A) from deciding pending appeals.

(See 2018-TIOL-400-HC-DEL-IT)