Delhi ITAT in the case of LG electronics held that there is no TDS liability on notional profit.

 Delhi Tribunal Held that No TDS on PE's Notional Profit - A Game-Changer for Compliance!

In a significant decision, the Delhi Tribunal has provided crucial clarity on the tax implications for LG India concerning notional profit attributed to LG Korea's Permanent Establishment (PE) in India.

Key highlights from ruling:

1. LG India cannot be treated as an assessee-in-default under Section 201(1)/201(1A) for notional profit attributed to LG Korea's PE in India. This decision aligns with the jurisdictional High Court judgment in Samsung India.

2. The Tribunal emphasized that the attribution of profit based on DRP directions in the case of LG Korea is purely notional. It is derived from a methodology adopted by DRP, restricting the income attributable to the PE. This stands in contrast to actual payments made by LG India.

3. Recognizing the challenges posed by attributing profit to a PE based on notional income, the Tribunal stated, "the assessee cannot be expected to perform an impossible act of computing TDS on a notional payment."

This ruling sheds light on the complexities arising from notional income attribution and the practical challenges faced by assesses in complying with TDS requirements. Stay tuned for more insights into evolving tax jurisprudence.