ALCATEL- LUCENT PORTUGAL SA,PORTUGAL vs. DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAX, CIRCLE 1(1)(1), DELHI, DELHI

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ITA 2002/DEL/2025Status: DisposedITAT Delhi19 August 2026AY 2003-046 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal accepted the assessee's submission to offer profit attribution at 2.5% to avoid further litigation. This was considered a reasonable compromise by the Tribunal. Other grounds of appeal were deemed consequential.

What were the facts?

The assessee, Alcatel Lucent Portugal SA, appealed against the assessment order for AY 2002-03 and 2003-04. The primary dispute concerned the rate of profit attribution to its Indian Permanent Establishment (Project Office). The Assessing Officer (AO) attributed profit at 3.75%, while the assessee argued for 2.5%, citing consistency with other group companies.

What were the issues?

The key issue was whether the AO erred in attributing profits to the Indian PE at a higher rate (3.75%) without cogent basis, and if the assessee's proposed rate (2.5%) should be accepted to resolve the dispute.

Which sections of the Income-tax Act were involved?

Section 254,Section 143(3),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SH. VIKAS AWASTHY & SH. KRINWANT SAHAY

For Appellant: Ms. Ananya
For Respondent: Ms. Shalini Verma, CIT
Hearing: 04.06.2026Pronounced: 19.08.2026

PER KRINWANT SAHAY AM

Both these appeals have been filed by the assessee against the order dated 25.01.2025 passed by the DCIT, International Taxation Circle 1(1)(1), Delhi u/s. 254/143(3) of the Act for the A.Y. 2002-03 and 2003-04.

2.

Since, common issues are involved in both these appeals, therefore, they are heard and disposed of together for the sake of convenience and brevity.

3.

The common grounds of appeal raised by the assessee are as under but the figures may differ :-

“1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant at INR 2,08,09,081 as against the returned income of INR 48,63,108 and accordingly, the impugned order passed by the Ld. AO is bad in law and void ab initio. 2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in making additions in the impugned order based on mere conjectures and surmises, ignoring the factual matrix of the Appellant. 3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in attributing the profits to the Permanent Establishment in India (i.e. Project Office of the Appellant) at higher rate of 3.75% instead of 2.5% of the offshore supply of equipment (as has been applied in the case of other group companies) without having any cogent basis. 2 | P a g e

4.

That on the facts and circumstances of the case and in law, the Ld. AO has erred in not appreciating that the income earned by Project Office has already been offered to tax in its Return of Income for the subject year. 5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying the interest under section 234B of the Act in gross violation to the law settled by the Hon'ble Supreme Court in case of DIT vs. Mitsubishi Corporation (438 ITR 174). 6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying the interest under section 234C of the Act. 7. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act.”

4.

The only issue involved in this case is related to attribution of profit. The Ld. Counsel of the assessee argued that the Ld. AO has erred in attributing the profit to the Permanent Establishment in India (i.e. Project office of the appellant) at higher rate of 3.75% instead of 2.5% of the offshore supply of equipment (as has been applied in the case of other group companies) without having any cogent basis for that.

5.

The ld. DR relied on the order of the AO and brought on record the finding given by the Ld. AO in the assessment order which is reproduced as under :-

“13. The Assessee is not contesting the existence of Permanent Establishment in India. However, the Assessee

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in its submissions has not justified why the attribution should be reduced to 2.5% from 3.75%. It is worth mentioning that reliance on the decision of another Assessee, even if the latter belongs to the same business group, cannot be construed to be a basis for accepting the same rate of attribution as the other assessee. In the earlier order, it was clearly mentioned that in case of the assessee, there was a Project Office as well as a Dependent Agent Permanent Establishment in the form of Alcatel Lucent India Limited ('ALIL'). The assessee has failed to dispute this fact and accordingly, therefore we find no requirement to modify the earlier rate of attribution.”

6.

On the other hand the Ld. Counsel brought it on record that the assessment order for Asst. Year 2002-03 shows that the assessing officer while making profit attribution to PE of assessee in India, reference was made for independent finding in the case of the assessee so as to arrive at and to find in the case of Alcatel-Lucent France. There is no conclusion that the assessee earned any profit from the supplies made directly to the Indian customers by Alcatel- Lucent Portugal S.A. He submits that all the findings relied on by the assessing officer are from France entity and related to assessee PE in India. The Ld. Counsel for the assessee therefore submitted that

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since there is no independent finding of fact in assessee's case and all the findings relied on are from France entity.

7.

We have considered the assessment order passed by the AO and we have also considered the arguments of both the parties i.e. Ld. Counsel of the assessee as well as that of the Ld. DR. We find that the AO has broadly relied upon the finding given in the case of Alcatel Lucent France.

8.

During proceedings before us the ld. Counsel of the assessee also submitted that the similar view may be taken and in order to avoid any further litigation the assessee is agreeable to the attribution profit @ 2.5%. We have considered all the arguments and facts available on record and submissions made by the Ld. DR as well as Ld. Counsel of the assessee. In our considered view the submission of the Ld. Counsel of the assessee that in order to avoid further litigation, the assessee company is ready to offer attribution profit @ 2.5% is quite reasonable and hence it should be accepted by both the parties. Accordingly, the attribution of profit is accepted @ 2.5% instead of 3.75% made by the AO in the assessment order.

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Accordingly, the appeals filed by the assessee are partly allowed. Other grounds of appeals are consequential in nature.

9.

In the result, the appeals filed by the assessee are partly allowed.

Order pronounced in the Court on 19.08.2026.

Sd/- Sd/- Sd .

(VIKAS AWASTHY) (KRINWANT SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 19/08/2026 *Neha Sr. PS* Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI

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