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2010 (2) TMI 118 - AAR - Income TaxSupply of hardware in India – DTAA with Singapore – Permanent Establishment (“PE”) - A non-resident company in singapore is engaged in the business of manufacture and sale of Hard Disk Drives - It has been supplying Disks to Original Equipment Manufacturers (OEMs) in India. The applicant states that in order to minimize the delays in the procurement of inputs from the applicant, the OEM has proposed to put in place a Vendor Managed Inventory (VMI) model. Under the VMI model, the applicant would enter into agreements with ‘Independent Service Providers’ (ISPs) in India who would stock disks in India on behalf of the applicant and deliver the same to the OEM on a ‘Just-in Time’ basis Held that: - By merely outsourcing the operations leading to supplies of products, it cannot be said that the applicant does not carry on any business in India from a fixed place. The ground realities cannot be disregarded. The question whether the person carrying on business operations on behalf of or pursuant to the instructions of the applicant is a dependent or independent agent is not very material in considering the applicability of Art.5.1. The business of the applicant at a fixed place is being carried on through the media of the warehouse provider who can also be characterized as service provider. Having regard to these facts and features, we have to accept the contention of the Revenue that the demarcated space in the warehouse of ISP constitutes the fixed place of business within the meaning of Art.5.1 of DTAA. - For the purpose of computation of profits of the PE in relation to the sales activity in India, it should be treated as a separate and distinct enterprise wholly independent of the enterprise of which it is a PE. The amounts paid to ISP/YCH and other expenses, if any, incurred should be deducted.
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