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2012 (6) TMI 187 - AAR - Income TaxDTAC between India and Singapore - permanent establishment - applicant (Singapore Company) being part of Aramex group of companies who is in the business of international express, entered into an agreement dated 1.4.2010 with AIPL(Indian subsidiary of Aramex International Ltd ) - key features of the agreement are that the applicant appointed APIL as a non-exclusive service provider and APIL undertakes the international express business of the applicant - contract on principal to principal basis Held that:- Aramex group cannot successfully conduct its business of transporting and delivering articles from and in India without AIPL performing its role in India. When a business cannot be carried on exclusively in so far as it relates to customers in India without intervention of another entity, a subsidiary, normally that entity must be deemed to be the establishment of the group in that particular country. In a case where a 100% subsidiary is created for the purpose of attending to the business of the group in a particular country, here, in India, that Indian subsidiary must be taken to be a permanent establishment of the group in India. AIPL may have an independent existence as a subsidiary, however, authority over it of the principal, vertical or persuasive, cannot be in doubt. Therefore, there exists a permanent establishment of the applicant in India in connection with its international express business under the DTAC between India and Singapore and receipts by the applicant from outbound and inbound consignments attributable to the permanent establishment in India is taxable in India. Whether the transaction between the applicant and AIPL as per agreement dated 1.4.2010 is on arms-length basis has to be verified to determine whether any income can still be attributed to the permanent establishment in India. Receipts by the applicant from AIPL would be subject to withholding tax under Section 195 of the Income-tax Act.
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