MITSUBISHI CORPORATION INDIA PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

The only issue assailed before us is against the disallowance made u/s 40(a)(i) of the Act. Briefly stated, the facts of the case are that the assessee is a company engaged in trading of goods directly imported from overseas suppliers and procured indigenously. The assessee is a 100% subsidiary of Mitsubishi Corporation, Japan, a general trading company. During the course of assessment proceedings, it was observed that the assessee made purchases from its six associated enterprises (AEs) amounting to Rs.2951.02 crore, detailed as under :-

SPDC Ltd., Import of 1,264,72,774 2-13-10 Nagata-Cho, goods Chiyoda-Ku

The AO noted that no deduction of tax at source was made before making payments of such purchase price. Invoking the provisions of section 195, the AO held that the assessee ought to have deducted tax at source. In the absence of such non-deduction, the AO estimated gross profit on such purchases made by the assessee, at 2.75% of the sale price. 50% of such profit was attributed to business operations of these companies in India, which resulted into an addition of Rs.40,57,66,566/-. This was done by the AO following the view canvassed by him in his order for the assessment year 2010-11. The assessee remained unsuccessful before the Dispute Resolution Panel (DRP). That is how, an addition of Rs.40.57 crore came to be made. The assessee is aggrieved against this addition.

We have heard the rival submissions and perused the relevant material on record. It is noticed from the assessment order itself that the AO followed the view taken by him in his order for the A.Y. 2010-11 for making this addition. The DRP, though took cognizance of the orders passed by the Tribunal on such issue in favour of the assessee for earlier years, chose to go with the AO’s view as in his opinion no finality was attached to such orders of the tribunal. It is a matter of record, and also not controverted by the ld. DR as well, that the Tribunal in its orders for earlier years has deleted the disallowance u/s 40(a)(i) under similar circumstances by applying non-discrimination clause under the Double Taxation Avoidance Agreement in respect of some of the purchase transactions and by holding that no PE existed of the related entities in respect of the others. A chart has been placed before us enumerating purchase made by the assessee during the year from the related parties in respect of which disallowance has been made. It can be seen that all the parties are similar to earlier year except Mitsubishi Corporation (Thailand) Ltd. and SPDC Ltd. In so far as the other parties from whom purchases were made by the assessee, the issue stands squarely covered in favour of the assessee by the earlier orders passed by the Tribunal. As regards Mitsubishi Corporation (Thailand) Ltd., which is one of the new companies from whom the assessee made purchases during the year, the finding given in earlier orders qua no PE of related entity, applies.

In the result, the appeal is allowed.