GEMOLOGICAL INSTITUTE OF AMERICA, INC,MUMBAI vs. DCIT (IT) RG 2(3)(2), MUMBAI

ITA Nos. 386/Mum/2016, 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Gemological Institute of America Inc. ……………….………Appellant 10th floor, Trade Centre, Bandra Kurla Complex Bandra (E), Mumbai 400 051 [PAN: AADCG7962K] Vs. Additional Commissioner of Income Tax International Tax Circle 2(3), Mumbai ……………………Respondent Appearances by J D Mistry, Senior Advocate, along-with Neeraj Sheth and K K Ved for the appellant Sanjay Singh, Commissioner (DR) for the respondent Date of concluding the hearing: : February 3, 2021 Date of pronouncement of the order : April 30, 2021 O R D E R Per Pramod Kumar, VP:

1. 1. These six appeals pertain to the same assessee, involve some common issues, and were heard together. Therefore, all six appeals are being disposed of by a consolidated order as a matter of convenience.

2. While almost all the issues in these appeals are stated to be fully covered by a decision of the coordinate bench, in the assessee’s own case for the assessment year 2010-11 [reported as Gemological Institute of America Inc Vs. ACIT [(2019) 178 ITD 620 (Mum)], there is one issue that is required to be decided by us on the first principles, and that is concerning the impact of Advance Pricing Agreement being signed by the assessee’s Indian associated enterprises, namely GIA India Laboratory Pvt Ltd, with the Central Board of Direct Taxes, in terms of which a part of the royalty received by the assessee company from its Indian AE had to refund to the Indian AE. As learned representatives fairly agree, the short question requiring our adjudication, on this point, is whether the amount so refunded by the assessee company to its Indian AE, in terms of the APA terms, can still be taxed in the hands of the assessee company as its income. As learned representatives fairly agree, that is 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 2 of 51 the core issue requiring our adjudication, even though learned CIT(DR) puts it rather differently as whether, given the framework of law on transfer pricing, any such adjustment in royalty income can be allowed to the assessee as a result of an APA to which the assessee is not even a party. Whichever way one looks at it, the core issue really is whether or not the quantification of royalty income in the hands of the assessee will stand reduced by the refund granted by the assessee tin terms of the APA that the assessee’s AE has entered into with the CBDT. Revenue is fiercely resisting this claim, for the reduction in the taxable income of the assessee, on technicalities as also on merits. We will take up this issue first. While related ground of appeal for all the assessment years before us are materially similar even if not rather satisfactorily worded, except for the changes in figures, we are reproducing below the related ground of appeal for the assessment year 2011-12 for ready reference:

8:0 Re: Taxation of royalty income at Rs. 49.08,99,451 8:1 The Appellant submits that the amount taxable in terms of Article 12(2) of the India-USA Double Taxation Avoidance Agreement [DTAA] should be restricted to Rs.49,08,99,45l/ which is in accordance with the Advanced Pricing Agreement [“APA”] dated 07 May 2018 entered into by GIA India Laboratory Private Limited. 8:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands in its hands for the year under consideration should be restricted to Rs. 49,08,99,451/- in accordance with the APA. 8:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income worked out in terms or the APA and to re-compute its total income and tax thereon accordingly.

ALP of the royalty as Royalty actually paid Amount to be recovered by Assessment concluded in Indian by the Indian AE ( In the Indian AE, from the year AE's APA with the INR) assessee, under the APA CBDT 2011-12 68,53,46,239 49,08,99,451 19,44,46,788 2012-13 79,48,51,211 56,48,03,982 23,00,47,229 2013-14 141,39,35,180 94,26,19,067 47,13,16,113 2014-15 157,13,38,680 106,93,35,468 50,20,03,212 2015-16 288,71,40,778 184,23,68,046 104,47,72,732 2016-17 261,86,26,595 168,83,59,419 93,02,67,176 2017-18 597,75,36,448 348,35,96,482 249,39,39,966 Total refund by the assessee to Indian AE, 586,67,93,216 under the APA

Discussions and Directions of the DRP: We have examined the claim of the assessee that the royalty received should be computed at Rs.106.93 Crs. as per APA dated 07.05.2018 in the case of GIA India Lab instead of at Rs.157.13 Cr. as per the return of income. It is noted that as per section 92(3) of the Act, if any adjustment has the effect of reducing 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 10 of 51 the income chargeable to tax or increasing the loss with respect to any international transaction or specified domestic transactions, the provisions of section 92 shall not apply. It is further noted that the APA in the case of GIA India Lab does not have a binding force on computation of Royalty in the hands of the assessee since the APA proceedings in the case if GIA India Lab are entirely independent and cannot be imported into the computation of taxable Royalty in the hands of the assessee. In view of this discussion it is held that the amount of royalty received cannot be decreased in the hands of the assessee on the basis of APA in the case of GIA India Lab. and the additional ground of objection raised by the assessee is rejected

10. It is in this backdrop that the assessee is now before us seeking modification in quantum of royalty, received from the Indian AE, being taxed in the hands of the assessee. The claim of the assessee, in substance, is that the amount which has been refunded by the assessee to its AE cannot be treated as income in the hands of the assessee, and must, therefore, be reduced from its taxable income as ‘royalties’.

11. Learned senior counsel submits this issue, along-with another ground of appeal

dealing with a connected facet of taxability of the royalty income, which has been rendered infructuous in the present context in the light of the coordinate bench decision holding that the assessee company did not have a permanent establishment (PE) in India, has been taken up by way of an additional ground in the first three assessment years, i.e. 2011-12, 2012-13 and 2013-14. This appeal as also the other six appeals of the assessee, which have been taken up for hearing today, are the appeals in which hearing was concluded earlier and these appeals have now been refixed for hearing de novo. It was further pointed out that these additional grounds of appeal was admitted earlier and argued at length, and there is no reason not to admit the same for these proceedings now. Learned Departmental Representative does not dispute this submission, but vehemently opposes the admission of this additional ground nevertheless. Learned senior counsel for the assessee once again prays, on merits, for admission of this ground of appeal. He submits that this additional grounds of appeal has arisen because of subsequent developments and could not have been, therefore, raised earlier, that it involves a substantial legal issue which goes to the foundational aspect of quantification of income, and that it deserves to be admitted by us, in the light of the well settled legal position- particularly as laid down by Hon’ble Supreme Court in the case of NTPC Vs CIT (229 ITR 383). It is submitted that the additional ground in question is raised bonafide. Learned CIT(DR) seriously oppose the admission of additional ground, and submits that quantification of the royalty income is as per the voluntary information furnished by the assessee in the return of income, and it cannot be revisited at this stage. It is also submitted that the relevant facts are not on record. He also submits that the case of the assessee prima facie lacks any merits. Learned CIT(DR), however, does submit that in the event of admitting additional grounds of appeal, he should ideally remit the matter to the file of the Assessing Officer for necessary verification of facts. As regards second additional ground of appeal, learned CIT(DR) fairly accepts that given the findings of the coordinate bench about non-existence of assessee’s PE in India, this ground is wholly academic and it may not even need any adjudication on merits. He does not oppose the admission of the second additional ground, Learned senior counsel submits that , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016

17. Page 11 of 51 no useful purpose will be served by remitting the matter to the file of the Assessing Officer as all the related facts are on record, and as, in the assessment years 2013-14, 2014-15, 2015-16 and 2016-17, this issue has been considered on merits by the authorities below and decided on merits. All those assessment years are also before us today. We are urged to take a call on merits. On a careful consideration of rival contentions, as also material on record, we are inclined to admit both the additional grounds of appeal and proceed to deal with the same. The second additional ground of appeal will be taken up later along-with other issues raised in appeal. Coming to the first additional ground of appeal in the assessment years 2011-12, 2012-13 and 2013-14, which is core issue in all these appeals, the learned senior counsel then begins, on merits, by submitting that the income on account of royalty which can be taxed in the hands of the assessee is the net amount, as finally received by the assessee after the adjustments made pursuant to the APA settlement of the Indian AE, and not the amount as initially billed and received by the assessee. The subsequent event of refunding the amount of royalty, as a result of the Indian AE entering into APA with the Indian tax authorities, is not a standalone event, and it has to be essentially considered in conjunction with the original payment of royalties by the Indian AE to the assessee company. He submits that for example, in the assessment year 2011-12, the initial amount billed and received by the assessee, on account of royalty by the Indian AE i.e., GIA-India, was Rs 68,53,46,239, but then, after giving a refund of Rs 19,44,46,788, in terms of the requirements of the Indian AE’s APA, the net royalty income of the assessee was only Rs 49,08,99,451. The fact that the refund was made in a subsequent year does not really matter as it is admittedly on account of the royalty income booked in the assessment year 2011-12, and, therefore, it has to relate back to that assessment year. The royalty income for the assessment year 2011-12, which can be taxed in the hands of the assessee, is only Rs 49,08,99,451. It was contended that by virtue of the APA, the fundamentals of the transactions between GIA India Lab and the assessee had undergone a change with the approval of the CBDT and the royalty which is payable by GIA India Lab and the only amounts which are receivable by the assessee are Rs. 49,08,99,451. It was contended that income can be said to accrue to the assessee only when the assessee has an indefeasible right to receive the same, and that in view the APA between GIA India Lab and CBDT, the appellant has a right to receive only Rs. 49,08,99,451 and not Rs. 68,53,46,239. It is contended that what can be brought to tax is the real income of an assessee and not hypothetical and notional income. Reliance was placed on the decision of the Hon’ble Supreme Court in CIT vs. Bokaro Steel Ltd. (236 ITR 315) which refer to the decision in the case of Godhra Electricity Co. Ltd. vs. CIT (225 ITR 746). Reliance was also placed on the decision of the Bombay High Court in the case of H.M. Kashiparekh & Co. Ltd. Vs CIT (39 ITR 706) which has held that “the principle of real income is not to be so subordinated as to amount virtually to negation of it when a surrender or concession or rebate in respect of managing agency commission is made agreed to or given on grounds of commercial expediency simply because it takes place sometime after the close of an accounting year. In examining any transaction and situation of this nature the Court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it.” It was thus contended that the amount actually refunded by the assessee to the Indian AE cannot be treated as income in the hands of the assessee. Learned counsel then submits that second proviso to section 92C(4) of the Act does prohibit an AE from getting a corresponding benefit of an , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016

17. Page 12 of 51 arm’s length adjustment being made in the case of an enterprise but this prohibition applies only where the total income of an enterprise is computed under sub- section (4) of section 92C on determination of the arm’s length price paid to another associated enterprise. It is pointed out that sub-section (4) applies where an ALP is determined by AO under sub-section (3) of section 92C. It is then pointed out that, in contrast, no corresponding prohibition provided in section 92CC to 92CE, which are the provisions governing the APA scheme, nor is there any such prohibition in rule 10F to 10T, rules 44GA, rule 10MA and 10RA, which are the relevant rules for the APA scheme. It is therefore submitted that where a suo motu adjustment to the transfer price is made by an enterprise pursuant to an APA, a corresponding effect thereof must be allowed to the AE. It stands to reason that a prohibition should exist in section 92C and not in section 92CC. Section 92C deals with a situation where an assessee declares a price to be ALP which is found not to be correct on scrutiny by Transfer Pricing Officer. Therefore, when an adjustment is made to ALP under section 92C, it is provided that the corresponding benefit is not to be given to the AE. However, in contrast, the APA under section 92CC is a voluntary agreement between an assessee and the Department and is not a determination by the AO/TPO where the ALP declared by an assessee is found to be incorrect. Besides, the APA, as in the present case, has the effect of varying and altering the transaction and not varying the ALP of the transaction. Therefore, it is submitted that the corresponding benefit of an agreed amount ought to be given to the AE in case of APA. Our attention is invited to the decision of the Bangalore Bench of ITAT in the case of ACIT vs. EYGBS India Pvt. Ltd. [ITA No 2984/Bang/2018], a copy of which was placed before us, in which an APA was entered into whereby an upward ALP adjustment of Rs. 8,66,80,000 was made to the income received by the assessee, and it was held that the prohibition contained in the first proviso to section 92C(4) would have no application to a case of APA. Similarly, it is submitted that the prohibition contained in the second proviso would also not have any application in the case of APA. On the strength of these submissions, learned counsel submits that only the net amount, i.e. originally billed royalty amount- as reduced by the refunds in terms of the APA arrangement, should be brought to tax in the hands of the assessee. In other words, the amounts refunded by the assessee, as mandated by the terms of the APA with assessee’s AE, should be excluded from the income taxable in the hands of the assessee.

12. Learned CIT (DR) vehemently opposed the claim made by the assessee. The elaborate submissions made by the leaned Commissioner (DR) have been adequately summed up in his written note as follows:

by the assessee in seeking modification of the order of assessment passed by the ITO. The Court went on to further observe that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reason. The AAC should exercise his discretion in permitting or not permitting the assessee to raise additional ground in accordance with law and reason. The issue was again considered by the Apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 3832 . It was observed that the observations made in Jute Corpn. of India Ltd.'s case (supra) would apply to appeals before the Tribunal also. In addition to what has been stated earlier in Jute Corpn. of India Ltd.'s case (supra), the Apex Court , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016

17. Page 18 of 51 observed that undoubtedly the Tribunal will have the discretion to allow or not to allow a new ground to be raised but where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, there is no reason as to why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

18. We thus reject the contention of the learned Commissioner (DR) that this issue cannot be raised before us at this stage. Coming to the merits of objections raised by the authorities below as also the learned CIT (DR), we find that the basis on which the impugned reduction in taxable royalty is declined by the Dispute Resolution Panel is that, in view of the provisions of Section 92(3), where the computation of income on the basis of arm’s length price results in a reduction of taxable income increase of loss, the provisions of Section 92 will not apply, but that is a wholly irrelevant observation. It is not the question of computation of income on the basis of ALP adjustments in the hands of the assessee, but the issue is whether the royalty actually received post refund is to be taken into account as income of the assessee or whether the original figure of royalty income, despite the refund, could be taxed in the hands of the assessee. The approach of the DRP was thus wholly superficial. As regards the observations by the DRP that the assessee cannot benefit from the APA that GIA India has entered into with the CBDT, and the terms of the APA cannot be imported into the assessment of taxable royalty in the hands of the assessee, once again this observation is also very superficial. It is not the content of the APA, but the impact of the APA, that is relevant for the assessee. In terms of the APA, a recovery of royalty is made from the assessee by the GIA-India. This shows that the recovery is bonafide. What is, however, even more material, from our perspective, is that as a result of this bonafide recovery of the part of royalty received by the assessee and offered to tax as such, income of the assessee stands reduced. The reduction in the quantum of royalty income is on account of this factor of actual reduction in income, and that is a reality- dehors the APA. Whether it happened on account of APA, or it was to happen otherwise, the fact remains that there is a reduction of royalty income in the hands of the assessee. And, if there is a reduction in royalty income, what should be brought to tax is only the actual, i.e., reduced, royalty income. Learned CIT(DR) has contended that since the claim of the assessee is in the nature of secondary adjustment since it pertains to the associated enterprise as a result of the primary adjustment, but proviso to sec. 92C(4) lays down the principle that “that where the total income of an associated enterprise is computed under this sub-section on the determination of the arm’s length price paid to another associated enterprise from which tax has been deducted or was deductible under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm’s length price in the case of first mentioned enterprise.” In other words, according to the learned CIT(DR), merely because arm’s length price of royalty paid to an AE is different than the amount actually paid to the AE, on which tax under section 195 is deducted, the income of the said AE, i.e. the assessee, cannot be recomputed. Once again, there is a clear fallacy in this reasoning. It is not because of determination of ALP of the royalty received by the assessee at a certain figure, other than the figure on which taxes are withheld at source, that the royalty income is being sought to be revised. The modification in quantum of royalty being taxed in the hands of the assessee is sought because of the actual, even if partial, refund of the royalty , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 19 of 51 received by the assessee. As for the reasons of this refund, the relevance of the APA is only in establishing bonafides of the reduction in the quantum of royalty, and nothing more. It is not that the assessee is seeking to invoke any benefit from this APA, but the relevance of the assessee’s referring to the APA is in explaining the circumstances in which a part of the royalty received by the assessee had to be refunded. Whether the assessee had a legal obligation to do so or not is not material, but what is material is whether it was commercially expedient for the assessee to do so. The answer, to our mind, is in the affirmative. It is also important to note that in the assessment year 2018-19, the Assessing Officer himself has reduced the amount refunded, as above, from the royalty income of the assessee. When it was pointed out to the learned Commissioner (DR), he explained that the legal position post 1st April 2018 is materially different. Learned Commissioner (DR) seeks to justify this difference in treatment on the ground that while Section 92CE was in force with effect f the question of making any secondary adjustment could only arise in the hands of GIA India and not in the hands of the assessee from 1st April 2018, which permits secondary amendment, the law did not permit secondary adjustments for a period prior to 1st April 2018 as pertaining to the assessment years before us. It may be recalled that, as noted earlier, stand of the assessee is concerned, so far as secondary adjustments under section 92CE are concerned, these adjustments can only be made in the hands of the assessee and not its AE, and, therefore, “the question of making any secondary adjustment could only arise in the hands of GIA India and not in the hands of the assessee”. It is, therefore, necessary to briefly deal with the scope and impact of Section 92CE so far as the fact situation before us is concerned. Section 92 CE, as introduced by the Finance Act 2017 w.e.f. 1st April 2018, provides 19. that where a primary adjustment to transfer price has been made suo motu by the assessee in his return of income, made by the Assessing Officer has been accepted by the assessee, is determined by an advance pricing agreement entered into by the assessee under section 92CC, on or after the 1st day of April, 2017, is made as per the safe harbour rules framed under section 92CB; or is arising as a result of the resolution of an assessment by way of the mutual agreement procedure under an agreement entered into under section 90 or section 90A for the avoidance of double taxation, the assessee “shall” make a secondary adjustment. This provision, however, does not apply where primary adjustment does not exceed Rs 1,00,00,000 or where primary adjustment is made in respect of an assessment year prior to the assessment year 2016-17. The way in which secondary adjustment works is like this. Where as a result of a primary adjustment to the transfer price, there is an increase in income or reduction in loss, the excess payment (i.e., amount actually paid minus the arm’s length price) will have to be repatriated by the foreign AE, or any other AE, within the time prescribed, and, if no such repatriation takes place, (a) the excess amount not so repatriated will be treated as an advance to the AE bearing such interest as may be prescribed; or (b) the assessee, at his option, pay additional income-tax @ 18% on such excess payment or part thereof. Once the assessee so pays the additional income tax @18%, the assessee is not required to make any secondary adjustment under section 92CE(1), and, in that sense, 18% additional income tax is in lieu of inward remittance on account of secondary adjustment. This option of paying 18% as additional income tax was introduced by subsequent amendment in Section 92CE by the Finance Act 2019. While dealing with the introduction of Section 92CE, the Central Board of Direct Taxes, vide circular no. 2/2018, had observed, inter alia, as follows: , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 20 of 51 45.3 In order to align the transfer pricing provisions in line with OECD transfer pricing guidelines and international best practices, a new section 92CE has been inserted in the Income-tax Act so as to provide that the assessee shall be required to carry out secondary adjustment where the primary adjustment to transfer price, has been made suo motu by the assessee in his return of income; or made by the Assessing Officer has been accepted by the assessee; or is determined by an advance pricing agreement entered into by the assessee under section 92CC of the Income-tax Act; or is made as per the safe harbour rules framed under section 92CB of the Income-tax Act; or is arising as a result of resolution of an assessment by way of the mutual agreement procedure under an agreement entered into under section 90 or 90A of the Income-tax Act. 45.4 It is also provided that where as a result of primary adjustment to the transfer price, there is an increase in the total income or reduction in the loss, as the case may be, of the assessee, the excess money which is available with its associated enterprise, if not repatriated to India within the time as may be prescribed, shall be deemed to be an advance made by the assessee to such associated enterprise and the interest on such advance, shall be computed as the income of the assessee , in the manner as may be prescribed. 45.5 It is also further provided that such secondary adjustment shall not be carried out if, the amount of primary adjustment made in the case of an assessee in any previous year does not exceed one crore rupees or the primary adjustment is made in respect of an assessment year commencing on or before 1st April, 2016. 45.6 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent years. [Emphasis, by underlining, supplied by us] 20. Quite clearly, Section 92CE is in the nature of an additional obligation on the assessee to either repatriate back to India the excess payment made (i.e. actual payment minus the arm’s length price) or to pay additional income tax @ 18% thereon. The secondary adjustment under section 92CE is thus not in a vacuum but in the light of the corresponding obligation to either repatriate back that amount to India or pay additional income tax thereon. While proviso to Section 92CE(1) does clarify that the above provisions do not apply where primary adjustments are less than Rs 1 crore or where primary adjustments are made in respect of an assessment year prior to 2016-17, that exception refers to the scheme of this section as a whole because a secondary adjustment under section 92CE(1) is an obligation on the assessee with certain mandatory consequences under section 92CE(2) as also 92CE(2A to 2D) , rather than a secondary adjustment simplicitor. Learned CIT(DR) proceeds on the basis that Section 92CE gives certain concession or relief when he treats Section 92CE as “permitting” the secondary adjustments, whereas as a matter of fact, Section 92CE “requires” that the assessee “shall” make the secondary adjustment which being coupled with certain further requirements under section 92CE(2) and 92CE(2A to D), operate in favour of the revenue. Given the scheme of Section 92CE, secondary adjustments are not concessions to an , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 21 of 51 assessee but obligations on the assessee. The proviso to Section 92CE(1) cannot, therefore, be interpreted as a bar on any secondary adjustment by the assessee, even dehors the requirements under section 92CE(1). In any case, Section 92CE has nothing to do with the taxability of correct income in the hands of the foreign AE to which payment for the international transaction has been made, inasmuch as, this provision cannot be seen as a bar on repatriating back the excess payment made (i.e. actual payment minus the arm’s length price) even if there was no statutory obligation to do so. In our humble understanding, there was no bar, even in respect of the period prior to insertion of Section 92CE, on any secondary adjustments being made by parties to a transaction. It is also important to note that so far as the APAs are concerned, under rule 10 M (1)(vi) of the Income Tax Rules 1962, an APA may, amongst other things, include “the conditions, if any, other than provided in the Act or these rules” and, therefore, as long as an APA refers to secondary adjustments, whether specifically permissible under the law or not, these secondary adjustments are to be carried out. It is also important to bear in mind the fact that no secondary adjustment can anyway be unilateral in nature. When an assessee is to raise an invoice on its AE abroad, that invoice is to be accounted for by the entity issuing the invoice as also by the entity receiving the invoice. These two facets of the transactions are two sides of the same coin Section 92CE(3)(v) aptly defines, consistent with the first principles as well, ‘secondary adjustment’ means “an adjustment in the books of account of the assessee and its associated enterprise to reflect that the actual allocation of profits between the assessee and its associated enterprise are consistent with the transfer price determined as a result of the primary adjustment, thereby removing the imbalance between a cash account and actual profit of the assessee.” It is, therefore, not correct to say that when an APA requires an assessee to raise debit notes or invoices on its AE abroad, it is open to the AE abroad to ignore those invoices or debit notes and continue with computation of its income dehors these invoices or debit notes, because the said AE is not a party to the APA. The AE may not be party to the APA, yet the impact of the terms of the APA has to be taken note of when these terms affect the AE. That’s a reality and cannot be wished away. We, therefore, reject this objection raised by the learned CIT(DR) as well. As for learned CIT(DR)’s observation that “the second proviso to section 92CE(1) stipulates that no refund of taxes paid could be claimed or allowed”, which suggests that no refund of taxes paid could be claimed or allowed as a result of the secondary adjustment, this observation is wholly misconceived inasmuch as while the second proviso states that “Provided further that no refund of taxes paid, if any, by virtue of provisions of this sub-section as they stood immediately before their amendment by the Finance (No. 2) Act, 2019 shall be claimed and allowed”, this proviso was quite clearly in specific context of insertion of words “on or after the 1st day of April, 2017” in Section 92CE(1)(iii) by the same Finance Act 2019 which had resulted in the exclusion of rigours of Section 92CE in respect of the cases in which the additional obligations were incurred by the assessee in respect of the APAs concluded even prior to 1st April 2017. All that this proviso meant was that even though the assessee may have paid the additional tax, on account of consequences envisaged in Section 92CE(2), with respect to APAs concluded before 1st April 2017, these taxes will not be refunded. In still other words, in our considered view, the practical connotations of the second proviso to Section 92CE(1) was that relief granted by insertion of words “on or after the 1st day of April 2017” in Section 92CE(1)(iii) was with prospective effect. Learned CIT(DR) has been a bit too naïve in ignoring the import of words “if any, by virtue of provisions of this sub-section as they stood immediately before their amendment by the Finance (No. 2) Act, 2019 shall be , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 22 of 51 claimed and allowed” in the proviso, and, therefore, ended up reading a bit too much into this rather innocuous and unidimensional provision. It is thus not correct to say that, in principle, in terms of the provisions of section 92CE, no refund of taxes could be claimed or allowed on account of secondary adjustments- even if, for example, as in this case, such secondary adjustments end up reducing the income of the foreign AE assesses as a result of partial repatriation of income. A lot of emphasis is then placed by the learned CIT(DR) on the claim that the action of the assessee, in partially refunding the royalty amount to the GIA India, i.e., Indian AE, was voluntary inasmuch as the assessee was not a party to the APA. Nothing, however, turns on this plea. Whether the refund was voluntary or under a legal obligation, it does not really make any difference as long as the refund is bonafide and particularly when its commercial expediency is not, and rightly so, even called into question. None of the objections taken by the DRP or raised by the learned CIT(DR), for the detailed reasons, set out above, really impresses us.

23. We, therefore, begin by taking up the i.e. the appeal filed by the assessee for the assessment year 2011-12. By way of this appeal, the assessee appellant has challenged correctness of the order dated 16th December 2015, passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2011-12.

24. Ground no. 1 is general in nature and does not call for any adjudication.

25. In ground nos. 2 and 3, the assessee has raised the following grievances: 2:0 Re: Holding that the Appellant has a ‘Permanent Establishment’ ("PE") in India: 2:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the Appellant has a Permanent Establishment' ("PE) in India. , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 23 of 51 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no PE in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 2:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the Appellant had a PE in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 2:4 The Appellant submits that the Assessing Officer's stand that the Appellant has a PE in India be struck down and he be directed to accept the total income as returned. 3:0 Re.: Holding that the Appellant has a "business connection in India:

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 26. Learned representatives fairly agree that these issues in appeal are squarely covered by a decision of the coordinate bench, in assessee’s own case for the immediately preceding assessment year i.e. 2010-11, wherein the coordinate bench has observed as follows: 9. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around as to whether or not the subsidiary of the assessee company i.e., GIA India Lab can be construed as its PE in India. The income-tax authorities have invoked section 9 of the Act and/or Article 5 of the India-US Treaty in order to say that the assessee company has a PE in India. On the contrary, as per the assessee, the impugned receipts are in the nature of business profits, and in the absence of any PE in India, the same are , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 24 of 51 not taxable in India. Factually speaking, it is evident that the on perusal of the agreements, the transaction of grading services between assessee company and GIA India Lab cannot be considered to be in the nature of a joint venture, since GIA India Lab has its own independent expertise but only due to its technology/capacity constraints, it forwards the stones to the assessee company for grading purposes; it is not an arrangement between two parties where each party contributes its share in order to undertake an economic activity which is subjected to joint control; in fact, the arrangement is akin to assignment or sub-contracting of grading services to the assessee company, wherever GIA India Lab does not have the requisite expertise or technology or capacity for carrying out the grading services; further, the aforesaid arrangement has also been accepted as a mere rendering of grading services by the Transfer Pricing Officer both in the case of GIA India Lab and the assessee company. In this background, we may now proceed to decide as to whether the Indian Subsidiary GIA India Lab can be construed as a PE under any of the aspects contained in Article 5 of India-USA DTAA.

7:0 Re.: Levy of interest u/s 234B of the Income-tax Act, 1961: 7:1 The Assessing Officer has erred in levying interest us. 234B of the Income-tax Act, 1961 on the Appellant. 7:2 The Appellant submits that considering the facts and Circumstances of its case and the law prevailing on the subject no interest u/s. 254B is leviable and the stand taken by the Assessing Officer in this regard is misconceived, incorrect, erroneous and illegal. 7:3 The Appellant submits that the Assessing Officer be directed to delete the interest u/s. 234B so levied on it and to re-compute its tax liability accordingly

, the assessee has raised the following grievance: 8:0 Re: Taxation of royalty income at Rs. 49.08,99,451 8:1 The Appellant submits that the amount taxable in terms of Article 12(2) of the India-USA Double Taxation Avoidance Agreement [DTAA] should be restricted to Rs.49,08,99,45l/ which is in accordance with the Advanced Pricing Agreement [“APA”] dated

07. May 2018 entered into by GIA India Laboratory Private Limited. 8:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands in its hands for the year under consideration should be restricted to Rs. 49,08,99,451/- in accordance with the APA. , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 31 of 51 8:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income worked out in terms or the APA and to re-compute its total income and tax thereon accordingly. 9:0 Re: Restricting the taxation of royalty income aft effectively connected to the PE only to Rs. 49,08,99,451/- 9:1 The Appellant submits that in case it is held that any part of royalty income is effectively connected to the alleged PE or the Appellant then such amount should be restricted to Rs. 49,08,99,451/- which is in accordance with the APA dated

07. May 2018 entered into by GIA India Laboratory Private Limited. 9:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty, if held to be connected to the alleged PE, should be restricted to RS. 49,08,99,451/ in accordance with the APA 9:3 The Appellant submits that the Assessing officer be directed to consider the royalty income, if any, connected to the alleged PE, only at Rs. 49,08,99,451/- and to re- compute its total income and tax thereon accordingly.

40. Ground no. 8 is thus allowed for statistical purposes in the terms indicated above, and ground no. 9 is dismissed as infructuous.

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 45. While dealing with the assessment year 2011-12 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee’s own case for the assessment 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 33 of 51 year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points.

6:0 Re: Taxing the “royalty" received during the year u/s. 44DA of the Income Act, 1961: 6:1 The Assessing Officer the Dispute Resolution Panel has erred in holding that the royalty income is “effectively connected” with the alleged PE of the Appellant in India and is therefore taxable u/s. 44DA of the Income Tax Act, 1961. 6:2 The Appellant submits that considering the facts and circumstances of its case and law prevailing on the subject and in particular the provisions of the India-USA DTAA, the Assessing Officer/ the Dispute Resolution Panel the “royalty” received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 6:3 The Appellant submits that the Assessing Officer be directed to tax the "royalty” income in accordance with the provisions of section 9 (1) (vi) of the Income-tax Act, 1961 read to recompute its total income

, there will be no occasion of royalty being effectively connected with the PE or taxability of royalty under section 44DA. This issue is also, therefore, academic and infructuous in the present context.

52. Ground no. 6 is also thus dismissed.

53. In ground no. 7, the assessee has raised the following grievance: , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 35 of 51 7:0 Re: Credit for tax deducted at source amounting to Rs 21,442 not granted 6:1 The Assessing Officer has erred in not granting the appellant for tax deducted at source of Rs 21,442. 6:2 The Appellant submits that considering the facts and circumstances of its case and law prevailing on the subject it is entitled to full credit of Rs 21,442 being tax deducted at source from its income for the year. 6:3 The Appellant submits that the Assessing Officer be directed to grant the credit of tax deducted at source and re-compute its tax liability accordingly.

, the assessee has raised the following grievance: 8:0 Re: Taxation of royalty income at Rs. 56,48,03,982 8:1 The Appellant submits that the amount taxable in terms of Article 12(2) of the India-USA Double Taxation Avoidance Agreement [DTAA] should be restricted to Rs 56,48,03,982 which is in accordance with the Advanced Pricing Agreement [“APA”] dated

07. May 2018 entered into by GIA India Laboratory Private Limited. 8:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands in its hands for the year under consideration should be restricted to Rs 56,48,03,982 in accordance with the APA. 8:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income worked out in terms or the APA and to re-compute its total income and tax thereon accordingly.

9:0 Re: Restricting the taxation of royalty income aft effectively connected to the PE only to Rs 56,48,03,982 9:1 The Appellant submits that in case it is held that any part of royalty income is effectively connected to the alleged PE or the Appellant then such 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 36 of 51 amount should be restricted to Rs 56,48,03,982 which is in accordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited. 9:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty, if held to be connected to the alleged PE, should be restricted to Rs 56,48,03,982 in accordance with the APA 9:3 The Appellant submits that the Assessing officer be directed to consider the royalty income, if any, connected to the alleged PE, only at Rs 56,48,03,982 and to re- compute its total income and tax thereon accordingly.

58. Ground no. 8 is thus allowed for statistical purposes in the terms indicated above, and ground no. 9 is dismissed as infructuous.

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 63. While dealing with the assessment year 2011-12 and 2012-13 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee’s own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points.

70. Ground no. 6 is also thus dismissed.

, the assessee has raised the following grievance: 8:0 Re: Taxation of royalty income at Rs. 94,26,19,067 8:1 The Appellant submits that the amount taxable in terms of Article 12(2) of the India-USA Double Taxation Avoidance Agreement [DTAA] should be restricted to Rs 94,26,19,067which is in accordance with the Advanced Pricing Agreement [“APA”] dated

07. May 2018 entered into by GIA India Laboratory Private Limited. 8:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands in its hands for the year under consideration should be restricted to Rs 94,26,19,067 in accordance with the APA.

ITA Nos. 386/Mum/2016, 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 40 of 51 8:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income worked out in terms or the APA and to re-compute its total income and tax thereon accordingly. 9:0 Re: R estricting the taxation of royalty income aft effectively connected to the PE only to Rs 94,26,19,067 9:1 The Appellant submits that in case it is held that any part of royalty income is effectively connected to the alleged PE or the Appellant then such amount should be restricted to Rs 94,26,19,067which is in accordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited. 9:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty, if held to be connected to the alleged PE, should be restricted to Rs 94,26,19,067 in accordance with the APA 9:3 The Appellant submits that the Assessing officer be directed to consider the royalty income, if any, connected to the alleged PE, only at Rs 94,26,19,067 and to re- compute its total income and tax thereon accordingly.

are admitted for adjudication on merits, and in the lights of the discussions in paragraph 2-21 earlier in this order, this additional ground of appeal no.7 decided in favour of the assessee, in principle, though the matter will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for second additional ground of appeal, i.e. ground no. 8, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case.

73. Ground no. 7 is thus allowed for statistical purposes in the terms indicated above, and ground no.8 is dismissed as infructuous.

74. In the result, the appeal for the assessment year 2012-13 for the assessment year 2013-14 is partly allowed in the terms indicated above.

75. We now take up the i.e. appeal filed by the assessee for the assessment year 2014-15. By way of this appeal, the assessee appellant has challenged correctness of the order dated 29th October 2018, in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2014-15.

76. Ground no. 1 is general in nature and does not call for any specific adjudication.

77. In ground nos. 2 and 3, the assessee has raised the following grievances: , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 41 of 51 2:0 Re: Holding that the Appellant has a ‘Permanent Establishment’ ("PE") in India: 2:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the Appellant has a Permanent Establishment' ("PE) in India. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no PE in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 2:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the Appellant had a PE in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 2:4 The Appellant submits that the Assessing Officer's stand that the Appellant has a PE in India be struck down and he be directed to accept the total income as returned. 3:0 Re.: Holding that the Appellant has a "business connection in India:

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 78. While dealing with the assessment year 2011-12 2012-13 and 2013-14 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee’s own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 42 of 51 the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points.

, there will be no occasion of royalty being effectively connected with the PE or taxability of royalty under section 44DA. This issue is also, therefore, academic and infructuous in the present context.

85. Ground no. 6 is also thus dismissed.

86. In ground nos. 7 and 8, , the assessee has raised the following grievance: 7:0 Re: Taxation of royalty income at Rs. 1,06,93.35,468/- in terms of the Advanced Pricing Agreement f"APA"1 dated 07 May 2018 entered into by GIA India Laboratory Private Limited: 7:1 The Appellant submits that the amount taxable as royalty should be restricted to Rs. 1,06,93,35,468/- which is in accordance with the APA. 7:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands for the year under consideration should be restricted to Rs 1,06,93,35,468/- in accordance with the APA. 7 :3 The Appellant submits that the Assessing Officer be directed to consider the royalty income worked out in terms of the APA and to re-compute its total income and tax thereon accordingly. Without prejudice to the forgoing 8 :0 Re: Restricting the taxation of royalty income at effectively connected to the PE only to Rs. 1.06.93.35.468/-: 8 :1 The Appellant submits that in case it be held that the royalty income is effectively connected to the alleged PE in India of the Appellant then such amount should be restricted to Rs. ,06,93,35,468/- which is in accordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited. , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 44 of 51 8 :2 The Appellant submits that the Assessing Officer be directed to consider the royalty income, if any, connected to the alleged PE, only at Rs. 1,06,93,35,468/- and to recompute its total income and tax thereon accordingly.

87. In view of the discussions earlier- particularly in paragraph 2-21 earlier in this order, ground of appeal no.7 decided in favour of the assessee, in principle, though the matter will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for ground no. 8, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case.

88. Ground no. 7 is thus allowed for statistical purposes in the terms indicated above, and ground no.8 is dismissed as infructuous.

89. In ground no. 8, the assessee has raised grievance against levy of interest under section 234A on the facts of the case, but no specific arguments have been addressed on this issue. Ground no. 8 is thus treated as not pressed.

90. Ground no. 8 is thus dismissed as not pressed.

91. In the result, the appeal for the assessment year 2014-15 is partly allowed in the terms indicated above.

92. We now take up the i.e. appeal filed by the assessee for the assessment year 2015-16. By way of this appeal, the assessee appellant has challenged correctness of the order dated 18th October 2019, in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2015-16.

93. Ground no. 1 is general in nature and does not call for any specific adjudication. 94. In ground nos. 2 and 3, the assessee has raised the following grievances: 2:0 Re: Holding that the Appellant has a ‘Permanent Establishment’ ("PE") in India: 2:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the Appellant has a Permanent Establishment' ("PE) in India. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no PE in India and the stand ITA Nos. 386/Mum/2016, 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 45 of 51 taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 2:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the Appellant had a PE in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 2:4 The Appellant submits that the Assessing Officer's stand that the Appellant has a PE in India be struck down and he be directed to accept the total income as returned. 3:0 Re.: Holding that the Appellant has a "business connection in India:

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection” in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 95. While dealing with the assessment years 2011-12 2012-13, 2013-14 and 2014-15 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee’s own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points.

ITA Nos. 386/Mum/2016, 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 47 of 51 7:0 Re.: Taxing the "royalty" received during the year u/s. 44DA of the Income- tax Act. 1961: 7:1 The Assessing Officer/ the Dispute Resolution Panel have erred in holding that the royalty income is "effectively connected" with the alleged PE of the Appellant in India and is therefore taxable u/s. 44DA of the Income-tax Act, 1961. 7:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject and in particular the provisions of the India-USA. DTAA, the Assessing Officer / the Dispute Resolution Panel the "royalty" received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 since it does not have any PE in India and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof js incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 7:3 The Appellant further submits that even if it be held that the royalty income is effectively connected to the alleged PE in India of the Appellant then such amount should be restricted to Rs. 1,84,23,68,050/- which is in accordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited.

102. Ground no.6 is thus allowed for statistical purposes in the terms indicated above, and ground no.7 is dismissed as infructuous.

103. In ground no. 8, the assessee has raised grievance against levy of interest under section 234A on the facts of the case, but no specific arguments have been addressed on this issue. Ground no. 8 is thus treated as not pressed.

104. Ground no. 8 is thus dismissed as not pressed.

17. Page 48 of 51

3:0 Re.: Holding that the Appellant has a "business connection in India:

3:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that the Appellant has "business connection” in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no business connection in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016-17 Page 49 of 51 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 109. While dealing with the assessment years 2011-12 2012-13, 2013-14, 2014-15 and 2015-16, earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee’s own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points.

Without prejudice to the foregoing 4:0 Re.: Attribution 4:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that 50% of Receipts are attributable to the alleged PE of the Appellant in India. 4:2 The Appellant submits that considering the facts and circumstances of its case and the1aw prevailing on the subject no part whatsoever of its receipts are attributable to India and the stand taken by the Assessing Officer/ the Dispute Resolution Panel in this regard is incorrect, illegal, arbitrary, baseless, not in accordance with law and hence ought to be struck down. Without prejudice to the foregoing: 5:0 Re.: Estimation of gross profit: 5:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the 20.31% of the receipts attributable to the alleged Indian operations ought to be considered as profits of the PE taxable in India. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, even if it is held that the Appellant has a PE in India no further income can be taxed in India as the alleged PF has been remunerated at an Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down.

6:0 Re: Non-consideration of correct amount of royalty for the year: 6:1 The Assessing Officer / the Dispute Resolution Panel have erred in holding that the Appellant's income by way of royalty for the year is Rs. 261,86,26,600 6:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of royalty taxable in its hands for the year under consideration should be restricted to Rs. 168,83,59,420 being the amount of royalty received for the year. 6:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income on the basis of the actual income earned for the year and to re- compute its total income and tax thereon accordingly. Without prejudice to the foregoing: 7:0 Re.: Taxing the "royalty" received during the year u/s. 44DA of the Income- tax Act. 1961: 7:1 The Assessing Officer/ the Dispute Resolution Panel have erred in holding that the royalty income is "effectively connected" with the alleged PE of the Appellant in India and is therefore taxable u/s. 44DA of the Income-tax Act, 1961. 7:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject and in particular the provisions of the India-USA. DTAA, the Assessing Officer / the Dispute Resolution Panel the "royalty" received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 since it does not have any PE in India and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof js incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 7:3 The Appellant further submits that even if it be held that the royalty income is effectively connected to the alleged PE in India of the Appellant then such amount should be restricted to Rs. 168,83,59,420 which is in accordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited.

no.6 decided in favour of the assessee, in principle, though the matter , 1836 and 7174/Mum/2017, 53,7739 and 7740/Mum/19 Assessment year: 2011-12 to 2016 17. Page 51 of 51 will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for ground no. 7, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case.

116. Ground no. 6 is thus allowed for statistical purposes in the terms indicated above, and ground no.7 is dismissed as infructuous.