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2014 (2) TMI 442 - HC - Income TaxBusiness Connectioin - India-US DTAA - dependency test - Held that:- The assessees have business connection in India, but the tribunal has given a wide and broad meaning to the term “business connection‖ and what is attributable and taxable as “business connection‖ has not been adjudicated and decided. This is because both the Assessing Officer and the assessees have proceeded that in terms of Section 90(2) of the Act, provisions of the DTAA were more beneficial to the assessee. Existence of PE in India - Mutual Agreement Procedure (MAP) - Held that:- The MAP procedure and agreement, is no doubt relevant but cannot be determinative or the primary basis to decide whether the assessee had PE in India. - Conditions of Articles 5(4) are not satisfied in the present case. It is not the case of the Revenue that e-Fund India was authorized and habitually exercised authority to “conclude” contract or was maintaining stock or merchandise from which it delivered goods or merchandise on behalf of the assessee or secured orders on behalf of the assessee. Therefore, the conditions and requirements of subclauses (a), (b) and (c) to Article 5(4) are not satisfied. - assessees did not have "permanent establishment" in India The transactions between the assessees and e-Fund India were at arm”s length and were taxed on arm”s length principle. There was no allegation or considered finding of the tribunal that the transactions were not in ordinary course of business. In these circumstances, even otherwise requirements of Article 5(5) are not satisfied in the present case. Real and intimate connection must exist between operations carried out in India and business by nonresident outside India, and profits of business outside India attributed to operations carried out in India, can be only subjected to tax. This is clear from the explanation to Section 9(1)(i) and only such income operations carried out in India have to be attributed and taxed. When DTAA and provisions of the Act apply to an assessee, then the Article of DTAA or the provision of the Act will apply depending upon, which one of the two is more beneficial or advantageous to the assessee. Reassessment u/s 147 - Held that:- non communication of reasons to believe was inconsequential and did not prejudice the assessee. Tribunal has on examining the original records came to a factual finding giving cogent reasons, why reasons to believe were in fact recorded before issue of notice. Challenge to the proceedings under Section 147/148 of the Act is therefore, rejected.
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