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2015 (4) TMI 905 - AT - Income TaxDTAA between India and Switzerland - Existence of Permanent Establishment/Business connection in India - Taxability of business Income earned in India, by company incorporated outside India - Applicability of Interest u/s 234B - Held that:- The decision of the Hon’ble Delhi High Court in the case of E-Funds IT Services [2014 (2) TMI 442 - DELHI HIGH COURT] , wherein Hon’ble Court has held that establishing subsidiary in the other treaty country would not result in creating and establishing a PE of a foreign holding company in the said third country. Thus, at the outset the subsidiary SRSIPL of the assessee does not constitute a PE of its holding company i.e. the assessee. Considering the services rendered by SRSIPL in the light of the OECD commentary, SRSIPL cannot be considered as PE of the assessee. The decision relied upon by Ld. DR do not support the Revenue on the facts of the present case, like in the case of Delhi Bench of the Tribunal in the case of Motorola Inc. (supra, the facts were that the employees of the assessee had worked both for the assessee as well as its Indian subsidiary. The employees also had the right to enter the office of the Indian subsidiary either for the purpose of working for Indian subsidiary or for the purpose of working for the assessee and the Indian subsidiary provided perquisite to the employees of the assessee and the assessee paid salaries to the employees, on these facts the Indian subsidiary was considered as place of business. However, facts of the case in hand clearly show that the employees of the SRSIPL has only provided services to SRSIPL and there is no noting on record to prove that the employees had provided services to the assessee or the assessee is paying their salaries or perquisites. The decision of the Hon’ble Supreme Court in the case of Morgan Stanley [2007 (7) TMI 201 - SUPREME Court] has been duly considered by the Hon’ble Delhi High Court in the case of E-Funds IT Solutions (supra). To sum up, the assessee does not have any business connection in India in the light of Explanation-2 to section 9(1) of the Act. The assessee does not have any PE in India. The facts on record show that there is neither Service PE nor Agency PE in the form of SRSIPL. Considering the facts in totality in the light of the relevant provisions of the law and the DTAA and the judicial decisions referred to herein above, we have no hesitation in setting aside the assessment order and accordingly we direct the AO not to treat the income of the assessee as taxable under the Act. Interest u/s 234B of the Income Tax Act, 1961 - We find that at para-10.6 the DRP following the decision of Hon’ble Bombay High Court in the case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]has directed the AO not to levy interest as the assessee is from a foreign country. The AO has not followed the direction of the DRP. We accordingly, direct the AO to follow the directions of the DRP. Ground No.3 is treated as allowed for statistical purposes. - Decided partly in favour of assessee.
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