WESTERN UNION FINANCIAL SERVICES INC.,GURGAON vs. DDIT, NEW DELHI

Briefly stated facts are that the assessee is a foreign company incorporated in USA and is engaged in the business of rendering money transfer services from abroad. Some of the remittances made through the assessee, by the remitters abroad are destined in favour of individuals residing in India and the assessee has appointed representatives in India who provide services of making payments to individual beneficiaries in India, and according to the assessee such representatives are independent pertains like banks, post office, travel agents etc. having substantial business of their own. Assessee claims that there were no liaison offices in India. For both the AYs 2007-08 and 2008-09, the AO found that the assessee has a business connection in India u/s 9 of the Income Tax Act, 1961 (in short “Act”), the assessee had a Permanent Establishment (in short “PE”) in India under Article 5 of the Indo- US Taxation Avoidance Agreement, the arm’s length remuneration paid to the representatives in India will not extinguish the tax liability of the assessee in India; that 50% of the net profit earned abroad from funds remitted to India is taxable in India. In respect of the AY 2007-08, the assessee carried the matter before the Dispute Resolution Panel-II (in short “DRP”), New Delhi and the DRP held that from the chart furnished by the assessee, the facts involved in this matter for the AY 2007-08 were covered by the decision of the Tribunal for the AY 2001-02 in assessee’s own case, but since the Department filed an appeal before the Hon’ble High Court, they declined to interfere with the orders of the Transfer Pricing Officer (in short “TPO”) and confirmed the assessment orders on all the issues including charging of interest u/s 234B of the Act.

In respect of AY 2008-09, the assessee carried the matter in appeal to the Ld.CIT(A)-XXIX, New Delhi and by order dated 29.07.2011, Ld.CIT(A) followed the order of the Tribunal for the AY 2001-02 in assessee’s own case and allowed the appeal of the assessee. Hence, the assessee is in appeal before us for the AY 2007-08 in Revenue is in appeal before us for the AY 2008-09 in ITA No.4956/Del/2011.

Heard the Ld. Counsel on either side and perused the material papers on record. Ld. DR heavily placed reliance on the assessment orders for both the years and also the order of the DRP for AY 2007-08. Ld.AR placed reliance on the decision of this tribunal in assessee’s own case in ITA No.1572-74/Del/2010 & CO.No.163-165/Del/2010 and in ITA No.5551 & 5552/Del/2012 for the AY 2001-02, for the AY 2002-03, 2003-04 & 2005-06 and AY 2004-05 & 2009-10 respectively. He submitted that in the order dated 24.09.2010 passed by the Ld.DRP for the AY 2007-08 vide paragraph No.4, the DRP, on a comparison of the facts relating to the AY 2001-02 with the facts for AY 2007-08 found that the facts are similar and as a matter of fact the facts for the AY 2007-08 are squarely covered by the order of the Tribunal in assessee’s own case for the AY 2001-02. For that matter, Ld. CIT(A) by order dated 29.07.2011 for the AY 2008-09 vide paragraph Nos.5 & 6 held that the facts relating to the year 2008-09 are similar to the facts involved in the 2001-02 AY and the matter was covered by the order of the Tribunal for the AY 2001-02 in ITA No.4889/Del/2014. Both the parties also admitted before us that the facts involved for the years 2007-08 & 2008-09 are similar to the facts involved for the year 2001-02.

We have carefully considered these facts in the light of the orders of the Co-ordinate Benches of this Tribunal for the year 2001-02, 2002-03, 2003-04, 2005-06 & 2004-05, 2009-10. In for the AY 2001-02, the Tribunal considered the issues at length and reached the conclusions that though the assessee has a business connection in India, they had neither fixed nor the agencies PE in India, as such in the absence of any PE in India, the profits, if any, attributable to Indian operations could not be assessed as business profits under Article 7 of the Treaty. The Tribunal further held that the liaison office could not be considered to be fixed place PE of the assessee as it carries out the activities which are of a preparatory or auxiliary character. It was also held that the agents engaged by the assessee in this matter are independent agents under Article 5(5) of the Treaty and they do not habitually exercise the authority to conclude the contracts on behalf of the assessee, and on that premise it was held that there is no agency PE of the assessee in India. The sum and substance of the order of a Co-ordinate Bench of the Tribunal is that though the assessee had business connection, since they do not have any fixed place PE or agency place PE in India, and in the absence of any PE in India, the profits if any attributable to India’s operation could not be assessed as business profits under Article 7 of the Treaty. Facts being similar for all the years involved in this matter, we find it difficult to reach a different conclusion and the consistent view taken by the Tribunal for all the earlier years could not be disturbed without any compelling reasons.

The conclusions reached by the Tribunal for the AY 2001-02 answers all the grounds raised by the assessee for the AY 2007-08 and Revenue for the AY 2008-09 as such while respectfully following the consistent views of the Co-ordinate Bench of this Tribunal, we hold that the findings of the DRP for the AY 2007-08 cannot be sustained, and at the same time, finding of the Ld.CIT(A) for the AY 2008-09 cannot be interfered with. Consequently has to be allowed while ITA No.4956/Del/2011 has to be dismissed. We order accordingly.

In the result, appeal of the Revenue in is dismissed and the appeal of the assessee in is allowed.