Mitsubishi Corporation India vs DCIT, Circle- 16(2), New Delhi

( ITAT New Delhi) (22 September, 2017)

The taxpayer is a part of Sogo Sosha group which play an important role in linking buyers and sellers for products ranging from bulk commodities to specialized equipments. Mitsubishi Corporation India Private Limited (MCIPL) is a wholly owned subsidiary of Mitsubishi Corporation (MC) and was incorporated in 1996. The company is a part of Sogo Shosha function performed by MC as a whole. Its equity share capital is held by MC and Mitsubishi Australia Limited.

Accordingly, MC Group entitles constituted MCIPL’s AEs by virtue of common control and capital. Major business groups that MCIPL deals in are Chemical, Energy, Metal Machinery Living Essentials and Industrial Finance, Logistics & Development Group.

Within these groups, Mitsubishi India deals in various commodities. However, majority of operations of the company are from “Chemicals” group.

Assessing Officer noticed from the financials of the assessee that the assessee has made purchases from AEs without deducting tax at source in compliance to the provisions contained u/s 195 of the Act.

The Assessing Officer observed that the assessee paid/credited the accounts of its AE suppliers without deduction of tax at source in terms of section 195 of the Act. On being show-caused as to why disallowance be not made under section 40(a)(i) of the Act towards such purchases made from non- resident group companies, the assessee stated that the Tribunal has deleted such disallowance for the assessment year 2006-07 by observing that in some cases, the group entities did not have a permanent establishment in India, while in others, the assessee was entitled to the benefit of non-discrimination clause in the Double Taxation Avoidance Agreement between India and Japan (DTAA).

The ITAT New Delhi Tribunal followed the decision rendered by coordinate Bench of the Tribunal in assessee’s own case in AY 2010-11 and the decision rendered by Hon’ble High Court in CIT vs. Herbalife International India (P.) Ltd., wherein the assessee was an intervener, we are of the considered view that AO/DRP have erred in disallowing of Rs.30,41,71,07,047 regarding purchases made by the assessee from its AEs u/s 40A(i) as section 40A(i) is not applicable to the assessee due to non-discrimination clause under DTAA and due to the fact that AEs do not have a permanent PE in India. So, the issue is determined in favour of the assessee.

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