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2011 (8) TMI 30 - AAR - Income TaxDTAA between India and USA - Permanent establishment - Liaison office - The activity of purchase is one that involves expenditure and is in no way related to generation of revenue. No revenue generating activity takes place in India and consequently there can be no question of any right to receive income arising in India - The approval by the Reserve Bank of India for setting up the liaison office is relied on in support. Article 5(3) (d) of the DTAA is referred to in support of the exclusion - whether the activities undertaken by the liaison office on behalf of the applicant are activities limited to or confined to the purchase of goods in India by the applicant - There is, thus, clear authority for the position that all activities other than the actual sale cannot be divorced from the business of manufacture and sale especially in a case like the present, where the sale is of a branded product, designed and got made by the applicant under supervision, under a brand owned by the applicant - There cannot be much doubt in such circumstances that the liaison office would be a permanent establishment of the applicant within the meaning of article 5.1. of the DTAA In terms of Article 5 of DTAA, the applicant has a permanent establishment in India, the applicant is liable to be taxed in India in terms of Article 7(1) of the DTAA on so much of the profits as is attributable to the permanent establishment or to other business activities carried on in India of the same or similar kind as those effected through that permanent establishment - The Indian Liaison Office involves a “Permanent Establishment‟ for the applicant under Article 5.1 of the DTAA with USA - income attributable to Liaison office is taxable in India
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