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2015 (5) TMI 760 - AT - Income TaxPermanent establishment (PE) of the assessee in India - whether receipts on account of advisory services and guarantee commission had to be assessed in India? - Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - Held that:- We find that Rabo India [RI] had made payment to the assessee for providing advisory services to it and under the head guarantee commission,that RI was paying the assessee more than 30% of its income,that the basic dispute between the AO and the asessee is as to whether the assessee had permanent establishment in India or not and as to whether the services rendered by RI could be treated activities carried out by the assessee. Before proceeding further, we are of the opinion that there is nothing on record to prove that provisions of Article5(1)of the Agreement are applicable. Article 5(1) stipulates that PE for the purpose of convention meant a fixed of business through which the business of the enterprise was wholly or partly carried on. Thus it is clear that the asessee was not having fixed place of business in India. FAA had rightly held that provisions of said Articles i.e.5(1)were not applicable. - Decided in favour of assesse. Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - None of the receipts comprising in total amount of ₹ 1,30,21,079/-, is taxable in India as held by CIT(A) - hHeld that:- The agreements entered into by RI with outsiders and the agreements entered in to by RI with the asessee have to examined to understand the real nature of the transaction.It also appears that some material was made available to the FAA,but it is found that he did not call for a remand report from the AO in that regard.The role of expatriate Director deputed to India has not been inquired in to.What were his duties and what function actually he had performed,is not known. Similarly, the circumstances in which guarantee commission was paid by RI to the asessee are not discussed by the FAA.The circumstances,under which RI for approached the asessee which entitled it to get roughly one third of the commission,are not known.In short,the appeal has been decided by discussing the principles governing DTAA and not mentioning as to how those principles were applicable to the facts of the case.In our opinion,the matter needs further investigation.Therefore, in the interest of justice, the matter is restored back to the file of the AO to determine the issue afresh after affording a reasonable opportunity of hearing to the asessee - Decided partly in favour of revenue for statistical purposes.
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