9911796707
TMI Blog2012 (6) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... nt originally conducted through Aramex International, Bermuda. 3. The Aramex group is in the business of door-to-door express shipments by air and land and performing related transport services. It has expertise, experience and personnel and technical information and know-how required for the business. As per the business arrangement and now under the agreement between the applicant and AIPL, AIPL has to look after the movement of packages within India both outbound and in-bound. The applicant has entered into the agreement for the movement of packages within and outside India. According to the applicant, in terms of the agreement the applicant is responsible for transportation of packages throughout the world outside India and AIPL is responsible for transportation of packages in India. In the application, the applicant has classified broadly the international express business of AIPL in the following manner: Outbound consignments In respect of outbound consignments, AIPL picks up the consignments from the respective consignors in India and gets them delivered to a destination outside India. On such consignments reaching the overseas destination, the applicant arranges to get the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AIPL in connection with the invoicing and payment functions, the payments are chargeable to tax in India. It may be noted that the questions asked are only in respect of the activities conducted outside India by the applicant and the payment received by the applicant from AIPL for carrying out the obligations outside India. 5. After hearing both sides this Authority allowed the application under section 245R(2) of the Act to give a ruling on the following questions: 1. On the facts and circumstances of the case, amongst others, where the applicant has no office, equipment, employee or agent in India and no operations are carried out by the applicant in India, whether there exists (i) a permanent establishment (PE) of the applicant in India in connection with the international express business under the "agreement between the Government of Singapore and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. („the India-Singapore tax treaty)" or (ii) any other basis to attribute or allocate income taxable in India to the applicant? 2. In the case the answer to question (1) is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manent establishment of the Aramex group in India. All profits arising from the business in India through AIPL must be taxed in India on that basis. The structure adopted by the Aramex group is with the deliberate intention of trying to avoid payment of legitimate tax due on the income earned by the group from its business in India and such attempt at avoidance, should not be countenanced. The applicant has created the Singapore entity just to seek the benefit of the Singapore-India Double Taxation Avoidance Convention. This Authority ought to rule that a part of the income earned by the applicant from the activities referred to in the application, viz. outbound activities, is liable to be taxed in India. 8. I may straight away say that in terms of the agreement dated 1.4.2010, the application before this Authority has been filed before any return of income relating to the relevant assessment year had been filed before the income-tax authorities and the objection that the question is already pending before the income-tax authorities cannot be accepted. It may be true that the transaction(s) prior to 1.4.2010 were on the same or even identical lines with the Aramex entity in Bermud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that the basis of the order made under section 195 (2) of the Act was sound, that there was no commercial reason established for creating a Singapore entity, the applicant, and for entering into the agreement dated 1.4.2010. Aramex group has business all over the world and the income from India to it must be held to be taxable in India. AIPL is not even free to engage any other service provider for rendering services to customers for delivery of articles outside the country and could do so only if the Aramex group has no representative in that particular country. This provision in the agreement clearly showed that there was no independent existence for AIPL. The whole scheme adopted is an attempt to avoid payment of legitimate taxes due on the income arising from India. 11. AIPL is a 100% subsidiary of Aramex International Bermuda. Aramex group has admittedly business in various countries all over the world including India. Its business in India is conducted by it through AIPL. No doubt, AIPL has been formed as a subsidiary and has an identity under the Companies Act, 1956. The fact remains that the business is that of Aramex group and the reputation and appealability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsidiary entity would be a permanent establishment of the group‟? Common sense says, that it would be. After all, a permanent establishment is defined to be a permanent place of business. Which is the permanent establishment of Aramex group in India in this case? It is clearly the location of its subsidiary in India. 15. When a business cannot be carried on exclusively in so far as it relates to customers in India like in the present case, without intervention of another entity, a subsidiary, normally that entity must be deemed to be the establishment of the group in that particular country. The position may be different when the entity is an independent entity uncontrolled by the group unless it satisfies the other requirements mentioned in Article 5(2) of the DTAC. But 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, I am of the view that the Indian subsidiary must be taken to be a permanent establishment of the group in India. It is not pretended that the without its part being played by the Indian entity, AIPL, the business of the applicant could be successfully tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confines of paragraph 10 of Article 5? Merely entering into an agreement describing the subsidiary controlled legally or persuasively by the principal as an independent entity or a non-exclusive agent, would not bring the case of a subsidiary like AIPL within the ambit of paragraph 10 to Article 5 of the DTAC. I find considerable force in the argument on behalf of the Revenue that the agreement put forward by the applicant relating to its business with AIPL is a mere camouflage to screen the fact that AIPL is really a permanent establishment of the applicant‟s group in India. I am, therefore, of the view that AIPL should be considered as a permanent establishment of the applicant, on the facts and in the circumstances of the case. 18. Paragraph 8 of Article 5 of the DTAC provides that where an agent of an independent status to whom paragraph 9 does not apply, is acting in a Contracting State on behalf of an enterprise of the other contracting state, that enterprise shall be deemed to have a permanent establishment, notwithstanding paragraphs 1 and 2 of Article 5, if it habitually exercise in that state an authority to conclude contracts on behalf of the enterprise or habitu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
