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2011 (8) TMI 313 - HC - Income TaxDouble Taxation Avoidance Agreement between India and the United Kingdom - Computation of profit - Research and development expenses - The Assessing Officer had adopted the global profits being trading profit which represents gross profit less commercial marketing product support cost and general administration cost, but before net of the research and development expenses and exceptional items - Held that:- if some activities are carried out by the assessee wholly outside India in respect of which no profit can be attributable to the activities in India, then such profit cannot be taxed in India. In the same fashion if some activities are carried outside India resulting into loss to the assessee, such loss is also to be ignored while computing the profit, which is composite, to the proportionate of activities in India. The activities in India are in the form of marketing and sales. Therefore, all the expenses incurred till the marketing are to be reduced - The research and development activities which result into loss to the assessee and admittedly not being carried out in India is to be ignored while computing global profits to be attributed to Indian operations - Decided against the assessee. Tax liability - Prima facie papers itself show the extent of work being handled by RRIL for appellant in India - RRIL is not only 100% subsidiary of the appellant but also maintains a permanent office in India to undertake all such activities - Thus, it can be concluded that the appellant has a business connection in India within the meaning of Section 9(1) (i) of the Act and under the Income-Tax Act, its income is chargeable to tax in India arising out of such business connections - Decided against the assessee.
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