2013 (2) TMI 923 - AT - Income Tax

No Permanent Establishment (PE) in India - Income Earned in India taxable or not? u/s 12(2) of the DTAA - The assessee company is tax residence of USA and has entered into an agreement with an Indian company for the distribution of the cinematographic films in India and has received royalty at specified rates. A.O. held that such receipt is business income of the assessee and taxable in India being the profit attributable to PE in India. - HELD THAT : - If income arises to the Non-Resident due to the business connection in India, the income accruing or arising out of such business connection can only be taxed to the extent of the activities attributed to PE. In this case, the assessee does not have any PE in India therefore the amount received under the agreement of distribution is not taxable in India.

Decision in the case of - ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. Versus DIRECTOR OF INCOME-TAX - 2007 (1) TMI 91 - Supreme Court, relied upon.