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2019 (11) TMI 1600 - AT - Income TaxIncome accrued in India - PE in India - taxability of the income earned by the Appellant as as “Royalty" or “Fee for Technical Services‟ or “Business Profits" - income received by the Appellant from provision of software solutions to Celltick Mobile Media (India) Private Limited (Celltick India') for onward distribution to third party customers in India as taxable in India as 'royalty' income tinder Section 9(l)(vi) - out of the total receipt 50% was considered as being attributable to the assessee PE in India - AO also assessed the 20% of such receipt as expenditure incurred and accordingly quantified the total income liable to be taxed in India - DRP held that the income is liable to be taxable in India as “Business Profit‟ in terms of Article 7 of the India-Israel Tax Treaty and further that the subsidiary i.e. Celltick India, constituted a dependent agent PE of the assessee in India - HELD THAT:- As decided in own case [2019 (3) TMI 563 - ITAT MUMBAI] appellant before us is a tax resident of Israel and in terms of the arrangement with its subsidiary in India, i.e. Celltick India, it is engaged in providing software solutions for onward distribution to third party customers in India. In terms of such arrangement effective from March, 2011, a copy of which has been placed it emerges that the price realised from the ultimate customer is shared between the assessee and its Indian subsidiary, i.e. Celltick India, on 50-50 basis. For the present, the issue relating to characterisation of income is not being contested by the assessee as it has sought to challenge the untenability of the addition only on the basis of the proposition that once ‘arm’s length principle’ has been satisfied qua the relevant transactions, there can be no further profits attributable to the assessee in India even if it has a PE in India. While canvassing such proposition, assessee also does not bring into question the stand of the Revenue that there is a PE of the assessee in India. The point sought to be made by the assessee is that the compensation remaining with the Indian subsidiary, i.e. Celltick India, is adequate and justified on the basis of the Transfer Pricing analysis, and the same has been so accepted by the income-tax authorities in the case of Celltick India for the very same assessment year. According to the assessee, no further income could be attributable to it on account of its PE in India. In our considered opinion, the proposition sought to be canvassed by the assessee has the approval of the Hon'ble Supreme Court in the case of Morgan Stanley & Co. [2007 (7) TMI 201 - SUPREME COURT] In view of the aforesaid discussion, in our view, since the appropriate ‘arm’s length principle’ has been satisfied in the present case, nothing more would be left to be taxable in India by attributing any further income to the PE of the assessee in India. - Decided in favour of assessee.
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