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2011 (1) TMI 529 - AT - Income TaxInternational taxation - Estimation of income on notional basis - DTAA with USA - due to legal restrictions under the Companies Act, these persons cannot be adequately remunerated by WIL as it has incurred losses continuously. Therefore, the parent company has paid remuneration of these persons through the branch of the assessee - it is held that the assessee company is acting as a consultant to the parent company and in this role it is the guiding force for managing the affairs of WIL - The additional evidence consists of economic analysis report, in which it has been opined that the net profit ratio should be in the vicinity of 17.19%. Therefore, taking the variation of 5% into account, it should be fixed at 12.19% - no employee of the assessee company has been deputed to the WIL as all the employees have been deputed by the parent company to the WIL, which on such appointment become the employees of the WIL - he transfer pricing regulations come into effect only when profit earned by an assessee is to be allocated in two jurisdictions, which is not the case here. Therefore, these regulations cannot be used for deeming certain amount as income whether, the branch office of the assessee in India constitutes PE in India - The position becomes a little more confused as according to US laws, the accounts of the parent company and the assessee company have to be merged and, thus, the distinction between the assessee and the parent company becomes blurred - it is argued that the branch office is taking up all the activities which are generally managerial in nature and these activities are undertaken for the benefit of the parent company, being the purpose for which the company has been incorporated - it is held that the assessee company does not have a PE in India as understood under paragraph No. 1 of Article 5 As the assessee is not chargeable to tax in India in terms of the provision contained in Article 5 of the tax treaty, it is not necessary for us to go into the question whether transfer pricing adjustment could be made in determining such profit - Decided in favour of the assessee
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