Grounds for business connection in India and taxability in terms of section 9(1) of the Income Tax Act

This judgement clarifies the grounds for establishing a business connection in India and subsequent taxability under Section 9(1) of the Income Tax Act. The Income Tax Appellate Tribunal ruled that the appellant, a Mauritian firm selling advertisement time, did not have a business connection in India or a Permanent Establishment (PE) there. Consequently, the assessment order was deemed unlawful, and the appeal was allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH,
NEW DELHI [THROUGH VIDEO CONFERENCE]
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 1219/DEL/2017
[Assessment Year: 2012-13]

ESPN Star Sports Mauritius

SNC et Compagnie

[Now known as ESS Advertising

(Mauritius) SNC et Compagnie]

5th Floor, Ebene Esplanade,

24, Cyber City, Ebene Mauritius.

vs

The Dy. C.I.T

Circle 1(2)(2)

[Intl. Taxation

New Delhi

Date of Hearing : 11.10.2021
Date of Pronouncement : .10.2021
Assessee by : Shri Poras Kaka, Sr. Adv
Shri Dinesh Chawla, Adv
Revenue by : Shri Gangadhar Panda, CIT-DR
ORDER

That on facts and in law, the appellant denies its liability to be “assessed” under the Income-tax Act, 1961 (‘the Act’) and the assessment order made under section 143(3) of the Act is bad in law.

2. Briefly stated, the facts of the case are that the appellant is a partnership firm established under the laws of Mauritius and is engaged in the business of selling advertisement time and programme sponsorship from Mauritius in connection with the programming via non-standard television on ESPN, Star Sports and Start Cricket programming services.

3. Considering the past history of the assessee in light of the decision of this Tribunal [supra] read with the decision of the Hon'ble Supreme Court in the case of E-funds IT Solutions Inc. [supra], we hold that the assessee has no business connection in India in terms of section 9(1) of the Act and has no PE under Article 5(2), 5(4) and 5(5) of India Mauritius DTAA.

4. In the result the appeal of the assessee in ITA No. 1219/DEL/2017 is allowed. The order is pronounced in the open court in the presence of both the representatives on .10.2021.

Please find attached the enclosed file for the full judgement