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Honda Motor Co. Ltd., In.re. (2021) 434 ITR 229 (AAR)

S. 195 : Deduction at source-Non-resident-Agreement with Indian Import of cars as completely built up units on principal to principal basis-Title and risk in goods transferred at port of delivery, payment made outside India and transaction complete outside India-No business connection-Not liable to deduct tax at source-DTAA-India-Japan. [S. 9(1)(i), 195, Art. 5(1)(9)]

The issue before the AAR was “Whether on the facts and circumstances of the case and in law, whether the applicant i.e. Honda Motor Co. Ltd. would be considered to have a permanent establishment (“PE”) in India by reason of its business transaction and related activities  with Honda Siel Cars India ltd  (“HSCI”) under the provisions of India-Japan DTAA?”  

“ On the facts and circumstances  of the case whether the amount  received / receivable by the applicant, i. e. Honda Motor Co Ltd from HSCI as consideration for offshore supply of raw material /components / capital goods  and CR-V cars would be liable to tax in India under the provisions of the Act and India-Japan  DTAA ? “

“ If the answer to question Nos. 1 and 2 above is negative, whether HSCI would be liable to withhold taxes under section 195 of the Act  on the payments to be made by HSCI towards the off shore supplies made by the applicant, i.e. Honda Motor Co, Ltd ? “

The application was admitted on 5-5 2012,

The AAR held that

  1. No 1. The applicant, Honda Motor Co. Ltd, would not be considered to have a permanent establishment (“PE”) in India by reason of its business transaction and related activities with Honda Siel Cars India Ltd (“HSCI”) under the provisions of India-Japan DTAA.
  2. No.2. The amounts received / receivable by the applicant from HSCI as a consideration for offshore supply of raw material /components / capital goods and CRV cars would not be liable to tax in India under the provisions of the Act and India-Japan DTAA subject to verifications as mentioned in para 37 of the ruling.

 

  1. No. 3. Because of answer to question Nos. 1 and 2, the payment to be made by HSCI towards the offshore supplies of parts made by the applicant will not be subjected to withholding of tax under section 195 of the Act. AAR No. 1100 of 2011 dt. 23-10-2019. (AR.2009-10)