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2017 (4) TMI 391 - AT - Income TaxBranch office in India constituted a permanent establishment (PE) - article 5 of the India-US Double Taxation Avoidance Agreement - Held that:- As various features as have been brought out before us, the activity profile of the branch office has not been examined by either of the lower authorities. As has been observed by us in the earlier part of our order that the Assessing Officer has not done any factual analysis at all and the learned Commissioner of Income-tax (Appeals) has done a brief factual analysis but that was full of mistakes or lacks clarity and precision. Under these circumstances, it is difficult at this stage to apply the correct legal principles on the real facts. Therefore, we find it appropriate to send this issue back to the file of the Assessing Officer who shall take into account. All the facts and circumstances of the case and pleadings and documentary evidences as has been made before us and that may be made by the assessee before the Assessing Officer in support of its claim. The Assessing Officer shall give adequate opportunity of hearing to the assessee for furnishing all detailed submissions and requisite documentary evidences and these shall be taken into account before deciding this issue afresh. The Assessing Officer shall accordingly decide the issue keeping in view the facts of the case and applicable judgments as may be relied upon by the learned counsel before the Assessing Officer to decide whether the Indian branch constitutes a permanent establishment in India of the assessee-company in terms of article 5 of the India-US Double Taxation Avoidance Agreement. This ground may be treated as allowed for statistical purposes. Sale of shrink wrap software - whether did not involve receipt of consideration which could be said to be "royalty" - Held that:- Revenue has contended that the learned Commissioner of Income-tax (Appeals) has erred in taking this decision as the Indian branch office acted as permanent establishment in India of the assessee-company. Thus, this ground is dependent upon the outcome of the issue of determination of permanent establishment. The issue of permanent establishment has been restored to the file of the Assessing Officer for deciding it afresh. Since the issue in the Revenue's appeal is dependent upon the issue of permanent establishment which has been restored to the file of the Assessing Officer, this ground is also restored to the file of the Assessing Officer. The Assessing Officer shall first decide the issue of permanent establishment which has a bearing on the ground raised by the Revenue in its appeal and then decide the issues under appeal.
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