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2007 (4) TMI 616 - AT - Income TaxAccrual of Income in India - DTAA between India and Singapore - Computation of profits for dependent agent permanent establishment - whether or not once a “dependent agent”(DA) is paid an arm' s length price for the services rendered by him to the foreign company, any further income, other than the income so earned by the dependent agent, can be said to be attributed to the “dependent agent permanent establishment”(DAPE), and, accordingly, be brought to tax in the permanent establishment State - HELD THAT:- As a matter of fact, in case the plea of the assessee is to be accepted, the whole concept of agency permanent establishment will be rendered meaningless. The profits earned by the dependent agent, or even independent agent, are anyway to be taxed in the host country of which the dependent agent is resident. The existence of the permanent establishment is therefore rendered meaningless by the interpretation sought to be canvassed by the assessee. It is well-settled that no law or treaty can be interpreted in such a manner so as to make a clause meaningless. The interpretation is required to be made ut res magis valeat quampereat, i.e, making it effective rather than making it redundant. We are of the considered view that the tax liability of a foreign enterprise, in respect of its dependent agency permanent establishment, is not extinguished by making an arm' s length payment to the dependent agent. There is no dispute in the present case to the extent that the assessee-company has a dependent agent in India, and that the profits of the dependent agent permanent establishment are, therefore, taxable in India. Since the assessee has not produced any details of computation of profits of such DAPE, and had instead accepted the tax liability on presumptive basis at 10 per cent. under CBDT Circular at the time of filing of income-tax return, we are of the considered view that the Assessing Officer had rightly taxed the income on that basis. The relief given by the Commissioner by holding that the taxability of the arm' s length remuneration to the dependent agent extinguishes the tax liability of dependent agent permanent establishment as well, is unjustified and we vacate the same. Ground No. 1 is thus allowed - Appeal is partly allowed
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