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2015 (10) TMI 1768 - HC - Income TaxIncome received or deemed to be received in India - accrual of income - Whether the Indian liaison office involves a permanent arrangement for the application under Article 5.1 of the DTAA? - Whether any portion of the income attributable to the liaison office on account of the activity of vendors co-operation of global production management and planning and equitable quality assurance strategy, quality development and is liable to tax? - Held that:- In the instant case, the liaison office of the petitioner identifies a competent manufacturer, negotiates a competitive price, helps in choosing the material to be used, ensures compliance with the quality of the material, acts as go-between, between the petitioner and the seller or the manufacturer, seller of the goods and even gets the material tested to ensure quality in addition to ensuring compliance with its policies and the relevant laws of India by the suppliers. Therefore, it is of the view that the aforesaid activities carried on by the liaison office, cannot be said to be an activity solely for the purpose of purchasing the goods or for collecting information for the enterprise. We find it difficult to accept this reasoning. If the petitioner has to purchase goods for the purpose of export, an obligation is cast on the petitioner to see that the goods, which are purchased in India for export outside India is acceptable to the customer outside India. To carry on that business effectively, the aforesaid steps are to be taken by the seller i.e., the petitioner. Otherwise, the goods, which are purchased in India may not find a customer outside India and therefore, the authority was not justified in recording a finding that those acts amounts to involvement in all the activities connected with the business except the actual sale of the products outside the country. In our considered information, all those acts are necessary to be performed by the petitioner – assessee before export of goods. Consequently, the reasoning of the authority that for the same reasons, the liaison office in question would qualify to be a permanent establishment in terms of Article 5 of the DTAA is also erroneous. That liaison office is established only for the purpose of carrying on business of purchasing goods for the purpose of export and all that activity also falls within the meaning of the words "collecting information" for the enterprise. - Decided in favour of assessee.
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