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2012 (6) TMI 15 - AT - Income TaxDependent Agent - Permanent Establishment - assessee, a Mauritius company, engaged in telecasting TV channels had an advertisement collection agent in India who collected revenue from time slots given to Indian advertisers - assessee claimed that its profits from India were not chargeable under the DTAA because (i) it did not have a PE and (ii) even if Indian agent is assumed to be PE, the agent had been remunerated at ALP and further profits could not be attributed - Revenue contending that as the assessee was dependent on the Indian agents, the Indian agents constituted a “Dependent Agent PE” - Held that:- A plain reading of clauses of agreement demonstrates that Indian agent is not the decision maker, nor it has the authority to conclude contracts. The agent has no authority to fix the rate or to accept an advertisement. It can merely forward the advertisement and the assessee has the right to reject. The agent is independent contractor and is not servant or employee of the assessee. On facts it cannot be said that the Indian Representative has “habitually exercises” authority to conclude contracts. In the case on hand, there is neither legal existence of such authority, nor is there any evidence to prove that the agent has habitually exercised such authority. In fact, the Principal has raised all the invoices. Thus Article 5.4 of indo- Mauritius DTAA is not attracted in this case. Further, Article 5.5 states that “when the activities of such an agent are devoted exclusively or almost exclusively on behalf of the assessee enterprises”. These wordings refer to the activities of an agent and its devotion to the non-resident and not the other way round. In present case, Indian agent's revenue from Non-resident constituted merely 4.69% of the total income and hence cannot be termed as dependent agent. Neither Article 5.4 nor Article 5.5 of the Indo-Mauritius DTAA are attracted this case. Hence, the assessee has no P.E. in India. Alternatively, even if it is held that there is a PE of the assessee in India, then we hold that as the rate of commission of 15%, was accepted as ALP by the TPO for A.Y. 2003-04 to 2003-04 and 2004-05, no further profit is attributable to the P.E. This is the rate mentioned in Board Circular No. 742 of the order 1996
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