“business connection”

International TaxSection 9(1)(i)Section 9(1)(i)833 judgments

The decision most relied on for business connection is Ishikawajima Harima Heavy Industries Ltd. v. DIT (288 ITR 408), cited in 394 judgments on BharatTax.

Leading authorities on business connection

Ishikawajima Harima Heavy Industries Ltd. v. DIT

288 ITR 408 · 2007 · Supreme Court

394

citing judgments

Income from offshore supply of goods and services is not taxable in India if the entire transaction, including transfer of ownership and payments, occurs outside India.

CIT v. Toshoku Ltd.

125 ITR 525 · 1980 · Supreme Court

270

citing judgments

A non-resident commission agent is not chargeable to tax in India on commission income if no business operations are carried out in India. Consequently, no TDS is required under Section 195 on such payments.

Transmission Corporation of Andhra Pradesh v. CIT

239 ITR 587 · 1999 · Supreme Court

243

citing judgments

The Supreme Court lays down principles for deducting tax at source (TDS) under Section 195 on payments to non-residents, including aspects of income deemed taxable in India and the application of Double Taxation Avoidance Agreements (DTAAs) under Section 90.

Motorola Inc. v. Dy. CIT

95 ITD 269 · 2005 · High Court

213

citing judgments

Revenue must demonstrate the existence of a Permanent Establishment (PE) of a foreign enterprise in India, including establishing that transactions underlying a Dependent Agent PE were not at arm's length. Income from the sale of goods is not taxable in India if title and risk in the goods pass outside India.

CIT v. R.D. Aggarwal and Co.

56 ITR 20 · 1965 · Supreme Court

156

citing judgments

A 'business connection' for non-residents requires a real and intimate relation between their trading activities outside India and activities within India, contributing directly or indirectly to their earnings. The Supreme Court assigned a wide meaning to this term.

CIT v. Faizan Shoes (P.) Ltd.

367 ITR 155 · 2014 · High Court

139

citing judgments

Disallowance under section 40(a)(i) for non-deduction of tax at source on export agency commission paid to a non-resident does not apply if the non-resident's income is not taxable in India under section 9(1), such as when the agent operates outside India without a permanent establishment or business connection in India.

Set Satellite Pte Ltd. v. CIT

307 ITR 205 · 2008 · High Court

citing judgments

If a Dependent Agency Permanent Establishment (DAPE) is remunerated at arm's length based on transfer pricing principles, no further profits can be attributed to the foreign enterprise. The principles of profit attribution under DTAA Article 7 are pari-materia to Section 9(1)(i) of the Income Tax Act.

IT Solution Inc. v. ADIT

86 Taxmann.com 240 · 2017 · Supreme Court

citing judgments

Once the arm's length principle has been satisfied under transfer pricing provisions, no further profit can be attributed to a person even if they have a permanent establishment in India. A reassessment notice based solely on the allegation of a permanent establishment is unsustainable if the arm's length price procedure has been followed.

Judgments citing business connection

Maruti Suzuki India Ltd., New Delhi vs. DCIT, Circle-16(1), New Delhi

ITA 8009/DEL/2018[2014-15]Status: HeardITAT Delhi20 Apr 2023AY 2014-15

Bench: Shri G. S. Pannu, Shri N.V.Vasudevan & Shri Vikas Awasthyआअसुं.6997/म ुं/2019(धन.व. 2016-17) Deputy Commissioner Of Income Tax Circle 11(3)(1), Mumbai ...... अपीलाथी/Appellant बनाम Vs. Total Oil India Pvt. Ltd. 3Rd Floor, The Leela Galleria, Andheri ( East), Mumbai 400 059 ..... प्रधिवादी/Respondent Pan: Aaace-2175-M C.O. No.57/Mum/2019 Total Oil India Pvt. Ltd. Mumbai – 400 059 ...... Cross Objector बनाम Vs. Deputy Commissioner Of Income Tax ...... प्रधिवादी/Respondent Circle 11(3)(1), Mumbai.

For Appellant: Shri Niraj ShethFor Respondent: Shri Vinod Tanwani, CIT-DR

Section 115

Section 9 of the Act provides for source based taxation on the basis of characterization of income, for example, Income from business connection or property or assets in India or from the transfer of capital asset situated in India is deemed to have their source in India. Likewise, another genre

Uk Grid Solution Ltd, United Kingdom vs. DCIT, Circle-3(1)(1), International Taxation, New Delhi

The appeal is allowed

ITA 2088/DEL/2022[2019-20]Status: DisposedITAT Delhi17 Apr 2023AY 2019-20

Bench: Sh. N.K.Billaiya & Sh.Anubhav Sharmaita No. 2088/Del/2022, A.Y. 2019-20 Uk Grid Solution Limited Vs. Deputy Commissioner Of St. Loeonards Building, Harry Income Tax Kerr Drive, Circle- 3(1)(1), Stafford, St16 1Wt, International Taxation United Kingdom New Delhi Pan : Aaica6271A

Section 143(3)Section 90(2)

relevant provisions of the India-UK DTAA. From the facts of the case, there is no doubt that UK Grid has a “business connection” under section 9(1 )(i) of the Act and a 'Construction PE’ under the provisions of Art. 5(2) of the India-UK DTAA. Therefore ... provisions of the Act. 4. That the DRP/ assessing officer erred on facts and in law in arbitrarily holding that the Appellant had business connection in India during the subject assessment year. 5. That the DRP/ assessing officer erred on facts and in law in arbitrarily holding that

Uk Grid Solution Ltd, United Kingdom vs. DCIT, Circle-3(1)(1), International Taxation, New Delhi

The appeal is allowed

ITA 2087/DEL/2022[2018-2019]Status: DisposedITAT Delhi12 Apr 2023AY 2018-2019

Bench: Sh. N.K.Billaiya & Sh.Anubhav Sharmaita No. 2087/Del/2022, A.Y. 2018-19 Uk Grid Solution Limited Vs. Deputy Commissioner Of St. Loeonards Building, Harry Income Tax Kerr Drive, Circle- 3(1)(1), Stafford, St16 1Wt, International Taxation United Kingdom New Delhi Pan : Aaica6271A

Section 143(3)Section 9Section 90(2)

Sage International Inc., Usa vs. ACIT, Circle Int. Taxation 3(1)(2), Delhi

In the result, the appeal of the assessee is allowed

ITA 2214/DEL/2022[2018-19]Status: DisposedITAT Delhi10 Apr 2023AY 2018-19

Bench: Shri G.S.Pannu & Shri Kul Bharat[Assessment Year : 2018-19] Sage International Inc., Vs Acit, 105, Townline Road, 2 Pmb 332, Circle 3(1)(2), Vernon Hills, Foreign United International States, Usa. Taxation, Delhi. Pan-Aaycs9212R Appellant Respondent Appellant By Shri Pradeep Dinodia, Ca Respondent By Shri Bhuvnesh Kulshrestha, Cit Dr Date Of Hearing 28.02.2023 Date Of Pronouncement 10.04.2023 Order Per Kul Bharat: The Present Appeal Filed By The Assessee Is Directed Against The Order Of Assessing Officer Passed U/S 143(3) R.W.S 144C(13) Of The Income Tax Act, 1961 (“The Act”) Dated 15.07.2022 For The Assessment Year (“Ay”) 2018-19 .

Section 143(3)Section 234ASection 4Section 90

that shall be deemed to accrue or arise in India. In the present case, sub clause (i) which pertains to the taxability due to business connection is relevant, reproduced as follows: "9.(1) The following incomes shall be deemed to accrue or arise in India:- (i) all income accruing ... arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India" On perusal and analysis

Sunbeam Auto Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the assessee in ITA No

ITA 235/DEL/2017[2013-14]Status: DisposedITAT Delhi06 Apr 2023AY 2013-14

Bench: Shri G.S. Pannu, Hon’Dble & Ms. Astha Chandraassessment Year: 2011-12 Sunbeam Auto Ltd. Vs. Addl. Cit, S-323, Panchsheel Park, Range-9, New Delhi 110 017 New Delhi. Pan Aabcs2948F (Appellant) (Respondent) Assessment Year: 2011-12 Addl. Cit Vs. Sunbeam Auto Ltd. Special Range-8, S-323, Panchsheel Park, Room No. 199A, New Delhi 110 017 C.R. Building, Pan Aabcs2948F New Delhi. (Appellant) (Respondent) Assessment Year: 2013-14 Sunbeam Auto Ltd. Vs. Dcit, S-323, Panchsheel Park, Circle-24(2) New Delhi 110 017 New Delhi. Pan Aabcs2948F (Appellant) (Respondent)

For Appellant: Ms. Shashi M Kapila, AdvocateFor Respondent: Shri Umesh Takyar, Sr. DR

Section 143(1)Section 143(3)Section 14ASection 264Section 37(1)Section 40Section 43(1)

Permanent Establishment (“PE”) in USA. Both the parties to whom the assessee paid commission are tax residents of USA and had no business connection in India nor they have any PE in India. None of the agents is related to any of the Director of the company directly or indirectly ... concluded that since the sales agents rendered services outside India and that they had no ‘business connection’ or PE and that they are tax residents of USA, the payments made and remitted directly to them in foreign exchange are not taxable under the provisions of India-USA DTAA. Therefore, there

Addl. CIT, New Delhi vs. M/S. Sunbeam Auto Pvt. Ltd., New Delhi

In the result, the appeal of the assessee in ITA No

ITA 5127/DEL/2016[2011-12]Status: DisposedITAT Delhi06 Apr 2023AY 2011-12

For Appellant: Ms. Shashi M Kapila, AdvocateFor Respondent: Shri Umesh Takyar, Sr. DR

Section 143(1)Section 143(3)Section 14ASection 264Section 37(1)Section 40Section 43(1)

Sunbeam Auto Ltd., New Delhi vs. Addl. CIT, New Delhi

In the result, the appeal of the assessee in ITA No

ITA 4378/DEL/2016[2011-12]Status: DisposedITAT Delhi06 Apr 2023AY 2011-12

For Appellant: Ms. Shashi M Kapila, AdvocateFor Respondent: Shri Umesh Takyar, Sr. DR

Section 143(1)Section 143(3)Section 14ASection 264Section 37(1)Section 40Section 43(1)

Lahmeyer Holding Gmbh, Germany vs. DDIT, New Delhi

In the result, the appeals are partly allowed

ITA 5615/DEL/2011[2008-09]Status: DisposedITAT Delhi31 Mar 2023AY 2008-09

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Deyassessment Year: 2008-09 Lahmeyer International Vs. Ddit, Gmbh, Circle-3(2), Friedberger Strasse 173, International Taxation, 61118 Bad Vilbel, New Delhi Deutschland (Germany) Pan :Aaacl6802E (Appellant) (Respondent) With Assessment Year: 2008-09 Lahmeyer Holding Gmbh Vs. Ddit, (Formerly Lahmeyer Circle-3(2), International International Gmbh), Taxation, Friedberger Strasse 173, New Delhi 61118 Bad Vilbel, Deutschland (Germany) Pan :Aaacl6802E (Appellant) (Respondent)

Section 234BSection 234CSection 271(1)(c)Section 44D

Revenue's contention, it is undisputed fact that the income earned by the assessee was in the nature of FTS, there is business connection and income accrues and arises or deem to accrue and arise in India. The regional existence of place of PE and the article

Lahmeyer International Gmbh, Germany vs. DDIT, New Delhi

In the result, the appeals are partly allowed

ITA 5614/DEL/2011[2008-09]Status: DisposedITAT Delhi31 Mar 2023AY 2008-09

Section 234BSection 234CSection 271(1)(c)Section 44D

Maan Aluminium Ltd., Pithampur vs. ITO (It & Tp), Bhopal

ITA 6/IND/2020[2015-16]Status: DisposedITAT Indore31 Mar 2023AY 2015-16

Bench: Ms. Suchitra Kamble & Shri B.M. Biyani(Conducted Through Virtual Court) Assessment Year: 2015-16 Maan Aluminium Ltd. Ito (It & Tp), 427, Orbit Mall, Bhopal बनाम/ 4Th Floor, Ab Road, Vs. Indore (Appellant / Assessee) (Respondent / Revenue) Pan: Aapcm 0088 C / Tan: Bplm 07361 E Assessee By Shri Sudhir Padliya, Ar Revenue By Shri Ashish Porwal, Sr. Dr Date Of Hearing 06.01.2023 Date Of Pronouncement 31.03.2023

Section 195Section 201(1)Section 9Section 90(4)

through Indian agents of non-resident payees, as mentioned in last column of the above Table; therefore the non-residents payees were having a Business- Connection (“BC”) in India in terms of section 9 of the Income-tax Act, 1961 as well as a Permanent-Establishment (“PE”) in terms ... incomes shall be deemed to accrue or arise in India :— (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through

Constructora Sanjose Sa, Haryana vs. DCIT/ACIT-Int-Tax, Haryana

ITA 582/DEL/2022[2018-19]Status: DisposedITAT Delhi21 Mar 2023AY 2018-19

Bench: Shri N. K. Billaiya & Shri Anubhav Sharmaconstructora Sanjose Sa, Vs. Dcit/ Acit-Int-Tax, Unit No. 602, Global Foywer Haryana Building Gold Course Road, Gurgaon -122002 (Appellant) (Respondent) Pan: Aafcc6553Q

For Appellant: Shri Ved Jain, AdvFor Respondent: Shri Sukesh Kumar Jain, CIT-DR

Section 143(3)Section 144C(13)Section 234A

this regard, it is noted that the assessee had not submitted details regarding underlying transactions which led to foreign exchange fluctuation loss, their business connection with Indian operations etc. The assessee was also provided fresh opportunity to provide the relevant information viz. copy of contract/agreement, nexus with Indian operations ... Assessing Officer has simply stated that the assessee has not submitted details regarding transactions which led to foreign exchange fluctuation loss, their business connection and purpose of incurring such loss. In this regard we would like to the following before your honours: Purpose and business connection of foreign currency exchange

ACIT Central-2, Indore vs. Shri Vinod Bansal, Khandwa

In the result, appeal filed by the Revenue is dismissed

ITA 213/IND/2021[2018-19]Status: DisposedITAT Indore16 Mar 2023AY 2018-19

Bench: Ms. Madhumita Roy & Shri Bhagirath Mal Biyaniit(Ss)A No.213/Ind/2021 (Assessment Year: 2018-19) Vs. Acit, Central-2, Vinod Bansal, Indore Khandwa "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aiepb3961B (Appellant) .. (Respondent) Revenue By : Shri P. K. Mishra, Cit.D.R. Shri S.N. Agrawal, Ca Assessee By : 19.12.2022 Date Of Hearing 14.03.2023 Date Of Pronouncement O R D E R Per Ms. Madhumita Roy - Jm: The Instant Appeal Filed By The Revenue Is Directed Against The Order Dated 09.08.2021 Passed By The Ld. Cit(A)-3, Bhopal (M.P.) (Hereinafter Referred To As ‘Ld. Cit(A)’) Arising Out Of The Order Dated 28.12.2019 Passed By The Dcit (Central)-2, Indore (Hereinafter Referred To As ‘Ld. Ao’) Under Section 143(3) Of The Income-Tax Act, 1961 (Hereinafter Referred To As ‘The Act’) For Assessment Year (Hereinafter Referred To As ‘A.Y.’) 2018-19 With The Following Ground:

For Appellant: 19.12.2022For Respondent: Shri P. K. Mishra, CIT.D.R

Section 132Section 143(2)Section 143(3)Section 153ASection 69

found any thing about any business activities carried out by the appellant. The appellant during the course of search, explained that he has business connection of oil sale with Pandit ji of Delhi. Oil business was carried out by the firm M/s M G Oil and M/s Vinod Industries

Quasar Media Private Limited, New Delhi vs. ACIT Circle-20(2), New Delhi

Appeal are allowed and the remaining grounds being consequential in nature follow the event

ITA 7088/DEL/2019[2015-16]Status: DisposedITAT Delhi10 Mar 2023AY 2015-16

Bench: Sh. Kul Bharatdr. B. R. R. Kumar

For Appellant: Sh. Anil Bhalla, CAFor Respondent: Sh. Sanjay Kumar, Sr. DR

Section 195Section 40Section 5Section 9(1)Section 9(1)(b)Section 9(1)(i)Section 9(1)(vi)

section 9(1)(1)(vi). The AO held as under:- “5. First of all, assessee has himself accepted that NTTA and Dimension have business connection in India in terms of section 9(1)(i) of the Act and hence amounts paid to them are taxable in India. 6. Secondly, assessee

Tge Gas Engineering Gmbh, Germany vs. DCIT, Circle Int. Taxation 3(1)(1), Delhi

In the result, the appeal of the assessee is partly allowed

ITA 1958/DEL/2022[2018-19]Status: DisposedITAT Delhi09 Mar 2023AY 2018-19

Bench: Shri Narendra Kumar Billaiya & Shri Kul Bharat[Assessment Year : 2018-19] Tge Gas Engineering Gmbh, Vs Dcit, Mildred-Scheel-Str., 1 D-53175 Circle-International Bonn, Germany, Germany. Taxation 3(1)(1), Pan-Aadct7387B Delhi. Appellant Respondent Appellant By Shri S.K.Aggarwal, Ca Respondent By Shri Gangadhar Panda, Cit Dr Date Of Hearing 14.12.2022 Date Of Pronouncement 09.03.2023 Order Per Kul Bharat, Jm : The Present Appeal Filed By The Assessee For The Assessment Year 2018- 19 Is Directed Against The Order Of Ld. Cit(A), International Taxation 3(1)(1), Delhi Passed U/S 143(3) R.W.S. 144C(13) Of The Income Tax Act, 1961 (“The Act”) Dated 28.07.2022. The Assessee Has Raised Following Grounds Of Appeal:-

Section 143(3)Section 144CSection 270A

ground as under: "The AO has held the Project Office as constituting a PE in India in terms of the lndia- Germany DTAA and business connection in terms of the IT Act. Under Paragraph 3 of Article 7 of India-Germany DT AA, in the determination of profits ... Paper Book for (2007) 158 Taxman 259 connection and the income a copy of judgement (SC) accruing or arising out of such business connection is clear and explicit. In the instant case, the permanent establishment's non- involvement in transaction in question excludes it from being a part

Sh. Yash Paul Malhotra (HUF), Jalandhar vs. Income Tax Officer Ward-2(2), Jalandhar

In the result, the appeal of the assessee bearing ITA No

ITA 225/ASR/2019[2016-17]Status: DisposedITAT Amritsar01 Mar 2023AY 2016-17

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 115BSection 139Section 143(3)Section 250Section 69

vehemently argued and mentioned that during assessment proceeding the assessee was in capable to submit the documents to show the business connection of the excess stock and cash. Accordingly, the ld. AO correctly implemented the tax in special rate u/s 115BBE of the Act. 5. We heard the rival submission

Smiths Detection Asia Pacific Pte Limited, Delhi vs. DCIT, Circle-3(1)(2) Int. Taxation, New Delhi

In the result, the appeal of the assessee in ITA No

ITA 2258/DEL/2022[2019-20]Status: DisposedITAT Delhi22 Feb 2023AY 2019-20

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: ShriHimanshu Sinha, AdvFor Respondent: Shri Sukesh Kumar Jain – CIT-DR

Section 143(3)

inclined to remit the matter to the adjudicating authority. We reiterate, in the circumstances, not all the profits of the assessee company from its business connection in India (PE) would be taxable in India, but only so much of profits having economic nexus with PE in India would be taxable ... offshore supply were outside India, and therefore cannot be deemed to accrue or arise in the country. (5) There exists a distinction between a business connection and a permanent establishment. As the permanent establishment cannot be said to be involved in the transaction, the aforementioned provision will have no application

Travelport Lp, Georgia Usa vs. DCIT, International Taxation Circle-3(1)(1), New Delhi

In the result, the appeal of the assessee in ITA No

ITA 6503/DEL/2019[2011-12]Status: DisposedITAT Delhi09 Feb 2023AY 2011-12

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Ravi Sharma, AdvFor Respondent: Shri Jitender Kumar – CIT-DR

Section 144Section 144C(13)Section 147Section 148Section 234ASection 234C

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘G’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI ANUBHAV

Umw Sher (L) Limited, New Delhi vs. Assesising Officer, International Taxation Circle-3(1)(1), New Delhi

In the result, appeals are allowed, as indicated above

ITA 570/DEL/2021[2017-18]Status: DisposedITAT Delhi01 Feb 2023AY 2017-18

Bench: Shri Saktijit Dey & Dr. B.R.R. Kumar

Section 115ASection 143(3)Section 144C(13)Section 44BSection 44DSection 9(1)(vi)Section 9(1)(vii)

Section 9 of the Act speaks of certain categories of income deemed to accrue or arise in India, whether directly or indirectly through any business connection in India or through any property in India or through or from any asset or source of income in India. Clause (vi) of section

Umw Sher (L) Limited, New Delhi vs. Assesising Officer, International Taxation Circle-3(1)(1), New Delhi

In the result, appeals are allowed, as indicated above

ITA 569/DEL/2021[2012-13]Status: DisposedITAT Delhi01 Feb 2023AY 2012-13

Bench: Shri Saktijit Dey & Dr. B.R.R. Kumar

Section 115ASection 143(3)Section 144C(13)Section 44BSection 44DSection 9(1)(vi)Section 9(1)(vii)

Cairn Energy Hydrocarbon Ltd., Gurgaon vs. DCIT, Intl. Taxation, Circle, Gurgaon

In the result, the appeals of the assessee are partly allowed and the appeals of the revenue are dismissed

ITA 6278/DEL/2018[2014-15]Status: DisposedITAT Delhi31 Jan 2023AY 2014-15

Bench: Sh. Saktijit Deydr. B. R. R. Kumarita No. 6357/Del/2013: Asstt. Year : 2010-11 Dcit, Vs Cairn Energy Hydrocarbon Ltd., C/O. Cairn India Ltd., 3Rd & 4Th Circle-3(2), International Taxation, Floor, Vipul Plaza, Suncity, Sector- New Delhi 54, Gurgaon (Appellant) (Respondent) Pan No. Aaccc3279J

For Appellant: Sh. Ajay Vohra, Sr. AdvFor Respondent: Sh. Gangadhar Panda, CIT-DR

Section 40aSection 57Section 80I

interest of Rs. 3619348/- from FDs wherein the assessee has invested the surplus funds in the FDs has nothing to do with the business connection. In the instant FDs, we find that there was no compulsion on the part of the assessee to invest in bank FDs as a part