Case Number: ITA 5063/DEL/2019
Appellant: DCIT, Circle-1(1)(2), International Taxation, New Delhi
Respondent: Bently Nevada LLC, Gurgaon
Assessment Year: 2006-07
Result: Final Tribunal Order
Case Filed On: 2019-05-31
Date of Order: 2023-02-17
Pronounced On: 2023-02-17
The appeal was filed by the Deputy Commissioner of Income Tax (DCIT), Circle-1(1)(2), International Taxation, New Delhi, against Bently Nevada LLC, Gurgaon, for the assessment year 2006-07. The case was filed on 31st May 2019 and the final tribunal order was pronounced on 17th February 2023.
The assessee, Bently Nevada LLC, is a non-resident entity incorporated in the United States of America (USA) and is a tax resident of the USA. The assessee is engaged in the business of offshore supply/sale of equipment to Indian customers. During the assessment proceedings, the assessee claimed that the sales/supplies of equipment to Indian customers were made outside the territory of India, and therefore, the income generated from such sales was not taxable in India. However, the Assessing Officer did not accept this claim, holding that the assessee had a fixed place Permanent Establishment (PE) as well as an agency PE in India, and attributed 2.62% of the sales towards the profit of the PE.
While deciding the objections raised by the assessee, the learned Dispute Resolution Panel (DRP) upheld the decision of the Assessing Officer. The assessee filed an appeal before the Tribunal, which upheld the existence of the PE in India but restricted the attribution of profit to 2.6% on sales. The assessee then appealed to the Hon’ble Jurisdictional High Court.
Based on the additions made on account of the attribution of profit to the PE, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, alleging concealment of income or furnishing inaccurate particulars of income. The Assessing Officer imposed a penalty of Rs. 52,43,531/-. The assessee challenged the penalty before the learned Commissioner of Income Tax (Appeals), who deleted the penalty on the grounds that the issue of whether the assessee had a PE in India was debatable and under identical circumstances, the Tribunal had deleted penalties imposed on a group entity based on a decision of the Hon’ble Jurisdictional High Court.
The Tribunal, comprising Shri G.S. Pannu, Hon’ble President, and Shri Saktijit Dey, Judicial Member, reviewed the submissions and materials on record. The Tribunal noted that the addition leading to the penalty was due to profit/income from offshore sales/supply of equipment to Indian customers. The Tribunal found that the Assessing Officer’s addition was based on the existence of a fixed place PE and agency PE in India, which was accepted up to the Tribunal level, though the quantum was reduced.
The Tribunal agreed with the learned counsel for the assessee that the issue of the existence of the PE was debatable, as evidenced by the substantial question of law framed by the Hon’ble Jurisdictional High Court in the appeal. The Tribunal relied on the decision of the Hon’ble Delhi High Court in PCIT vs. Harsh International Pvt. Ltd. [2021] 431 ITR 118, which stated that if the quantum order is debatable, penalty proceedings cannot survive.
Based on the above observations, the Tribunal upheld the decision of the learned Commissioner (Appeals) and dismissed the grounds raised by the Revenue. Consequently, the penalty imposed under section 271(1)(c) was deleted, and the appeal was dismissed.
The order was pronounced in the open court on 17th February 2023 by Shri G.S. Pannu, Hon’ble President, and Shri Saktijit Dey, Judicial Member.
DCIT vs. Bently Nevada LLC: Penalty Appeal Dismissed Due to Debatable Issue for AY 2006-07
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform