IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’: NEW DELHI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT and SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER (Assessment Year: 2021-22)

Hyosung Corporation, vs. ACIT, C/o Advocate Ananya Kapoor, Circle Int. Tax 2(1)(1), 12, Central lane, Bengali Market, Delhi.

New Delhi – 110 001.

(PAN : AACCH1033M)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri Salil Kapoor, Advocate Shri Anil Chachra, Advocate REVENUE BY : Shri Vijay B Vasanta, CIT DR Date of Hearing : 29.01.2025 Date of Order : 23.04.2025

ORDER

PER S.RIFAUR RAHMAN,AM:

1. This appeal has been filed by the assessee against the final assessment order dated 24.08.2023 passed u/s 143(3) r.w.s.144C (13) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) subsequent to the directions of the Ld. Dispute Resolution Panel (DRP)/TPO vide order dated

25.07.2023 for Assessment Year 2021-22.

2. Brief facts of the case are, assessee had filed its return of income for AY

2021-22 on 15.03.2022 declaring total income as Nil and claimed refund of TDS amounting to Rs.63,41,430/-. The case was selected for scrutiny and notices u/s 143 (2) and 142 (1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee along with questionnaire through ITBA portal. In compliance, assessee filed the relevant information as called for through online.

3. Assessee is a company incorporated under the laws of Republic of Korea.

It functions in a variety of industrial and technology areas. In India, the assessee is engaged in power business. As per the information available on record, assessee is having Permanent Establishment (PE) in India. During the year under consideration, there is no offshore supply, hence, no profit attribution was made during the year. During assessment proceedings, a notice dated 15.12.2022 was issued to the assessee and asked to explain that assessee had adjusted the losses under the head ‘PGBP’ with your FTS income of Rs.60,19,976/- and the FTS income is not attributable to the PE in India, therefore, why the same should not be disallowed and added back to the income of the assessee. In this regard, it was submitted that assessee has set off of losses under the head ‘Profit and gains from business or profession’ (PGBP) amounting to Rs.4,81,02,640/- from the head ‘income from other sources’ amounting to Rs.1,82,89580/-. The income earned under the head ‘income from other sources’ pertains to interest earned on income-tax refund and ‘fee for technical services’ (FTS). It was submitted that set off of business losses from FTS income is allowed under the relevant provisions of the Act as well as by Income Tax return filing utility (ITR-6). The assessee has elaborately submitted the setting off of business losses against the FTS income in accordance with law as per section 71 of the Act and set off of high tax rate loss with low tax rate income by relying on India-Korea DTAA and decisions of ITAT, Bangalore in IBM India Pvt. Ltd. in ITA Nos.489 to 498/Bang/2013 and Hitachi Zosen Corporation vs. DCIT (1999) 68 ITD 235 (Mum.) wherein ITAT Mumbai has relied upon. After considering the detailed submissions of the assessee, the Assessing Officer found not tenable and he observed that assessee has relied on the application of section 70 of the Act in this case, however assessee itself considered that there is no specific provision which allows the setting off of losses against the income from royalty and FTS. The Assessing Officer relying on the jurisdictional ITAT, Delhi in the case of M/s. Iveco Spa, Italy vs. ADIT in ITA No.5696/Del/2012 and decision of Hon’ble Uttarakhand High Court in the case of Samsung Heavy Industries Co. Ltd. vs. DIT 42 taxmann.com 140 dismissed the contentions of the assessee and he observed from Article 7 of India-Korea DTAA that such set off of business loss of PE with the income of HO is not allowed as royalty and FTS income cannot be attributed to PE without any connection and the income of abo