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2017 (1) TMI 1367 - HC - Income TaxTaxability in India - whether the said offices (LOs) could be regarded as PE ? - whether its income from imports in India were not taxable by reason of the Indo-Japan Double Taxation Avoidance Agreement (Indo-Japan DTAA)?- Held that:- In the present case, both the CIT(A) and ITAT have found that the four expatriate employees posted in India performed purely preparatory functions: identifying a JV partner, negotiating with parties, seeking regulatory approvals and clearances, consulting management experts, lawyers and accountants toward setting up of the JV, towards entering into agreements, etc. They did not even enter into agreements on behalf of the assessee; instead they merely signed them as witnesses. These could not per se or by themselves amount to a business connection as to create a PE in India. The DTAA clearly envisions that offices that perform auxiliary and preparatory services are not to be treated as business connection. In the present context, the expression means carrying on activities, other than the main business functions, that aid and support the assessee. In the context of the contracts in question, where the main business is insurance business - coverage of industries and others who are subject to general insurance policies by entering into contracts of insurance, collecting premia, setting up networks of distributors or offices for that purpose etc., the functions performed by the expatriates in the liaison office were of auxiliary character - an activity which aids and supports the Assessee in carrying on its main business, but not the business itself. The findings of the authorities below, therefore, were warranted and call for no interference. - Decided against the Revenue and in favour of the assessee.
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