Facts of the Case

  • The appeals were filed by the Commissioner of Income Tax (International Taxation)-3 against a common order of the ITAT dated 28.05.2019.
  • The dispute covered Assessment Years: 2004-05, 2006-07, 2007-08, and 2009-10 (excluding AY 2005-06).
  • The ITAT allowed the assessee’s appeal regarding attribution of global profits to its Indian PE, reducing attribution from 75% to 35%.

 Issues Involved


  1. Whether the ITAT was correct in restricting attribution of global profits to 35% for the Indian Permanent Establishment.
  2. Whether a higher attribution (i.e., 75%) as contended by the Revenue was justified.

 

Petitioner’s Arguments (Revenue)

  • The Revenue challenged the ITAT’s decision, contending that a higher percentage of global profits (75%) should be attributed to the Indian PE.
  • It was argued that the scale and nature of operations in India justified a larger attribution.

 

Respondent’s Arguments (Assessee – Rolls Royce PLC)

  • The assessee relied on prior judicial precedents, particularly the Delhi High Court ruling in its own case.
  • It was contended that profit attribution at 35% was already settled and judicially accepted, and no deviation was warranted.

 

Court’s Findings / Order

  • The Delhi High Court observed that the issue was already covered by its earlier judgment in:
    Rolls Royce PLC vs Director of Income Tax, International Taxation (2011) 339 ITR 147.
  • The Court found no reason to take a different view from the earlier binding precedent.
  • Accordingly, the Court dismissed all the appeals filed by the Revenue.

 

Important Clarification

  • The judgment reinforces that once an issue of profit attribution to a Permanent Establishment is settled by precedent, consistency must be maintained.
  • The Court emphasized judicial discipline and adherence to earlier rulings in identical matters.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3917-DB/VSA19022020ITA1102020_163703.pdf

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