2023 (3) TMI 711 - AT - Income Tax

Existence of a PE in India - Profit attribution - CIT-A held that CIS did not constitutes a dependent agent PE of the appellant in Indian and does not have a service PE but sustained the fix placed PE in India and that assessee has business connection in India to be covered under the provisions of Section 9 of the Act - HELD THAT:- The issue of holding fixed place permanent establishment of the assessee in India, in assessee’s own case the Tribunal for assessment year 2013-14[2020 (11) TMI 1101 - ITAT DELHI] and 2014-15 [2023 (1) TMI 1234 - ITAT DELHI] has upheld the following findings of Ld. CIT(A) wherein on the proposition of PE deserves to be upheld. The employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed place of business at their disposal. CIS was practically the projection of assessee’s business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee has a fixed place PE in India Article 5(1) of the DTAA is upheld. Decided against assessee.

Dependent agent PE - Business model of the Appellant and in absence of any material on record that the conditions mentioned in Article 5(4) of the DTAA is satisfied viz. habitually exercising authority to conclude contracts or maintaining stock of goods or habitually securing orders. CIS did not constitute a dependent agent PE of the Appellant in India.

Payment link charges / IPLC charges being taxable under royalty - We hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held, that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee.