Adobe Systems Incorporated vs Assistant Director Of Income Tax … on 16 May, 2016

1. The Petitioner, Adobe Systems Incorporated (hereafter the

‘Assessee’), has preferred the present petitions under Article 226 and 227

of the Constitution of India, impugning three separate notices dated 30 th

March, 2011 (hereafter „the impugned notices‟) issued under Section 148

of the Income Tax Act, 1961 (hereafter the „Act‟) for Assessment Years

(AYs) 2004-05, 2005-06 and 2006-07 respectively. The Assessee further

impugns three separate orders dated 8th March, 2013 (hereafter

„impugned orders‟) passed by the Assessing Officer (hereafter „the AO‟)

rejecting the objections raised by the Assessee against the assumption of

jurisdiction under Section 148 of the Act.

2. Briefly stated, the controversy in these petitions involves the

question whether Adobe Systems India Private Limited (an Indian

W.P.(C) 2384/2013, 2385/2013 & 2390/2013 Page 2 of 31
subsidiary of the Assessee and hereafter referred to as „Adobe India‟)

could be considered as its Permanent Establishment (PE). And if so,

whether any part of the Assessee’s income, could be attributed to such PE

in respect of the activities carried out by Adobe India, income from which

had been subjected to transfer pricing scrutiny/adjustment.

2.1 The Assessee disputes that it has a PE in India. It further contends

that since the income of Adobe India has been assessed at Arm’s Length

Prices (ALP), no part of Assessee’s income could be attributed to Adobe

India even if it was assumed to be the Assessee’s PE in India. On the

other hand, it is the Revenue’s case that the activities carried out by the

Adobe India are the core business activities of the Assessee; Adobe India

is the Assessee’s PE in India; the cost plus basis on which Adobe India is

remunerated by the Assessee does not capture the fair share of Assessee’s

income attributable to its PE; and that a part of the Assessee‟s income,

computed on profit split method, is chargeable to tax under the Act.

2.2 Whilst the Assessee claims that there is no tangible material for the

AO to have any reason to believe that the Assessee’s income has escaped

assessment, the Revenue contends that the transfer pricing report as

submitted by Adobe India provides sufficient reason to form a belief that

the Assessee’s income had escaped assessment.

Source: Indian Kanoon

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