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2012 (10) TMI 128 - AT - Income TaxLiaison Office - CIT(A) hold it not to be considered as a Permanent Establishment in India & no profit accrues or arises in India - Held that:- Circular No. 163 convey the impression that a non-resident is liable to be taxed on a portion of the profits attributable to the purchase of raw materials required for the purposes of manufacture and sale abroad, if the purchases are made in India through a regular agency established in India for this purpose. By virtue of clause (b) of the Explanation to section 9(1)(i), the correct legal position is that in the case of a non-resident, no income shall be deemed to accrue or arise in India through or from operations which are confined to purchase of goods in India for the purpose of export. Tribunal in assessee’s own case for the assessment years 2004-05 and 2005-06 held that the L.O. of the assessee was performing the activities of assorting of diamonds, checking of the right quality of diamonds and price negotiation as per the instructions and specification of the assessee. These activities of the LO is only part of the purchasing process of the diamonds and did not bring any physical or qualitative change in the goods purchased. Even otherwise, the function of the LO are prior to purchase of the diamonds and not subsequent to the purchases. Therefore, no quality change is brought by the L0 while doing the operation of purchasing in India for export purposes - in favour of assessee.
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