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Net App B.V. Versus DDIT, Circle-2 (1) , International Tax, New Delhi, Vice-Versa

Permanent establishment of assessee in India - profit attribution to that permanent establishment - Held that:- Assessee does not have a permanent establishment in India. Therefore, the income of the assessee is not chargeable to tax with respect to sale of the hardware products in India. - Income arising to the assessee from sale of software and sale of subscription is set aside to the file of the Ld. assessing officer to decide the issue in view of the decision of the Hon‘ble Delhi High Co .....

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n order. - Interest chargeable u/s 234A and 234B - Held that:- Assessing officer is directed to re-compute the interest chargeable under section 234A of the income tax act after granting credit of tax deduction at source claimed by the assessee, if found in order. - The Ld. and assessing officer is further directed to not to charge interest under section 234B of the income tax act on the income of the assessee which is subject to withholding tax. - ITA No. 4781/Del/2013, And ITA No. 634/ .....

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ent Year 2008-09:- 1. The learned AO has erred, in law, by holding that on account of the activities of NetApp India Private Limited ("NetApp India"), a permanent establishment ("PE") is constituted for NetApp B.V. in India under the India-Netherlands Treaty ("Treaty"). 2. The learned AO has erred, in law and in facts, by artificially splitting income from storage products into the hardware component and software, and taxing these income streams separately under the .....

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nd in facts, by holding that the income from the provision of the services is royalty income and fees for technical services ("FTS") under Article 12(4) of the Treaty and consequently liable tax in India. 6. The learned AO has erred, in law, by holding that despite payment of an arm's length price to NetApp India (the alleged PE of the Appellant in India) for the marketing and sales support services, additional income relating to supply of storage products, subscriptions and servic .....

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precedents in the matter. 8. The learned AO has erred in law, in not giving effect to the DRP's directions for adopting the gross profit margin (of 26% for AY 2008-09) of the Appellant in computing income from the sale of software, subscriptions and services in India, attributable to the alleged PE in India and has instead considered 100% of such receipts as being attributable to the alleged PE in India. 9. The learned AO has erred, in law, by invoking the provisions of section 44DA to tax .....

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section 234A the Act amounting to INR 4,25,05,160, for a period in excess of the actual delay of 18 months in filing the return of income for AY 2008-09 and computing such interest without considering credit for tax deducted at source of INR 3,05,91,767. 12. The learned AO has erred in law and in fact, in levying interest under section 234B of the Act, amounting to INR 13,38,91,254, disregarding the fact that the entire income of Net App B.V., which has been held to be taxable, was subject to w .....

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;PE") is constituted for NetApp B.V. in India under the India-Netherlands Treaty ("Treaty"). 2. The learned AO has erred, in law and in facts, by artificially splitting income from storage products into the hardware component and software, and taxing these income streams separately under the provisions of the Act read with the applicable provisions of the Treaty. 3. The learned AO has erred, in facts and in law, by holding that the income from the sale of software is royalty incom .....

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consequently liable tax in India. 6. The learned AO has erred, in law, by holding that despite payment of an arm's length price to NetApp India (the alleged PE of the Appellant in India) for the marketing and sales support services, additional income relating to supply of storage products, subscriptions and services is attributable to the alleged PE and taxable in India. 7. The learned AO has erred, in law, by holding that income from the supply of storage products is taxable in India in the .....

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rvices in India without allowing for any expenditure incurred by the Appellant outside India and by considering 100% of such receipts as being attributable to the alleged PE in India. 9. In computing the Appellant's tax liability, the learned AO has erred in not providing credit for taxes deducted at source amounting to INR 4,57,54,106, as claimed by the Appellant for AY 2010-11. 10. The learned AO has erred in levying interest under section 234A the Act amounting to INR 1,96,73,100 by compu .....

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c) of the Act, since the Appellant is not liable to tax in India. 4. Facts are common to both the appeals for impugned assessment years, which are set out in narrow compass. The appellant company is a non-resident company situated at Netherlands, part of NetApp group , engaged in the business of selling storage system equipments and products including embedded software and rendering certain services in India. Assessee sales NetApp products and services in India through third party distributors w .....

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appeal) also in Netherland. b. US CO has a subsidiary in India known as Net App India (ICo). ICo, belonging to Net App Group, provides some services to assessee, which are marketing and sales support, assistance in organizing trade shows, ascertaining market trends, competition analysis and assistance in pre sales marketing as promotional material for Net App products and services. 5. The appellant is engaged in the business of selling storage equipment and products and rendering of certain serv .....

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responsible for the sale process. 6. Appellant provides services through third party service providers and Netapp India private limited i.e. ICo, in terms of agreements entered with them by the appellant. The assessee earns income in India from (i) sale of storage products, (ii) sale of subscriptions and (iii) Provision of support services. The subscriptions for software are sold independently with respect to NetApp products and it charges for product upgrades, enhancements, bug fixing and rele .....

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Net App Group, provides some services to assessee such as marketing and sales support, assistance in organizing trade shows, ascertaining market trends, competition analysis and assistance in pre sales marketing as promotional material for Net App products and services. For rendering these services ICo has entered into an agreement on 27.04.2002 with M/s. Network Appliances BV (known as NetApp BV)(the assessee) titled as Commission Agent Agreement . According to this agreement, the assessee was .....

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es iii. NetApp India shall engaged in promotional activity for BV products and services iv. NetApp India shall respond to inquiries for NetApp BV products and services v. NetApp India shall advise NetApp BV on marketing strategies and local market conditions. vi. NetApp India shall provide information on market trends, competitions, and new products and services in the market. vii. NetApp India shall at the request of NetApp, provide technical support services for the products (Technical Service .....

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to this agreement. i. NetApp India shall account for expenditures and receipts ii. NetApp India shall report expenditure and receipts iii. NetApp India shall provide general administrative assistance c. Limitation of authority. NetAPP India shall not have the authority to conclude contracts in the name of NetApp and shall not maintain,. Except as provided under Clause 3(e), a stock of merchandise belonging to NetApp BV or otherwise make any commitments whatever on behalf of NetApp BV, as agent o .....

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titute the parties as partners, joint ventures, employer and employee, co-owners, or otherwise as participants in a joint undertaking, or (iii) allow either party to create or assume any obligation on behalf of the other for any purpose whatsoever. NetApp India shall be solely responsible for, and shall indemnify, and hold NetApp BV free and harmless form, any and all claims, damages or lawsuits (including attorney s fees incurred by NetApp BV) arising out of its acts or the acts of NetApp India .....

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assessment order, ld. Assessing Officer held that the assessee has a business connection in India u/s 9(1) of the Income Tax Act, therefore its income is chargeable to tax in India as it deemed to accrue and arise in India in terms of section 9 (1) (i) of the act. It was also held that assessee has a permanent establishment in India in accordance with Article 5 of India Netherland DTAA because of existence of NetApp India. The main reasons for reaching at this conclusion is that Indian Subsidiar .....

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assessee of supply and licenses cannot be performed in India. He was further of the view that NetApp India has many sales offices in India which are the outlets acting as sales outlets for the India customers. He further held that NetApp India s role is central and core to the business of the assessee and as assessee is mainly engaged as a trader, the role of marketing and pre sales activities acquire more importance. Therefore, the ld Assessing Officer reached at a conclusion that the assessee .....

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rectors, NetApp India does have powers to conclude contracts on behalf of NetApp BV (assessee). Therefore, the provisions of article 5 (5) (b) does not apply in the present case. On the basis of above premises, the ld Assessing Officer was of the view that the assessee has permanent establishment in India in form of NetApp India within the meaning of Article 5(1), 5(2) and 5(5) of the Double Taxation Avoidance Agreement between India and Netherland. 10. The assessee has received a sum of ₹ .....

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y, it can be taxed under Article 12 of the DTAA and not article 12(7) and Article 7 of the DTAA. Therefore, in nutshell the contention of the assessee is that software licensing income is not chargeable to tax in India as royalty income and even otherwise if it is taxed as royalty income it is not effectively connected with its alleged PE and hence, not chargeable as business income. 11. Ld. AO rejected contention of the assessee of not having a permanent establishment in India. Therefore he hel .....

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02016/- was treated as business income chargeable to tax under Article 7 of the DTAA as royalty income effectively connected to the permanent establishment and taxed it at normal rate of 42.23%. 12. Similarly, the assessee is also earning service fees on account of services rendered to its India clients of ₹ 223963915/-. The contention of the assessee the such payments are not chargeable to tax in India either as royalty or as a fees for technical services as there is no right, property or .....

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chargeable to tax under Article 7 of the DTAA. Therefore out of ₹ 223963915/- he granted deduction of ₹ 41113319/-and charged balance of ₹ 182850796/- as royalty effectively connected to the permanent establishment chargeable to tax under article 7 as business income attributable to the permanent establishment taxed it at normal rate of 42.23%. 13. Furthermore assessee has received a sum of ₹ 631007053/- as payments towards hardware. According to the assessing officer pa .....

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dian AE. Further assessee submitted that there cannot be any attribution of income as assessee has incurred operating losses. This argument was also rejected by the Ld. assessing officer stating that the operating losses arise because of the huge commission expenses paid by the assessee for booking global sales. Further according to Ld. assessing officer, assessee is only a trading company and no research and development activities undertaken, the Indian office of the permanent establishment are .....

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lishment of the assessee amounting to ₹ 43404949/-. 14. Accordingly the Ld. assessing officer issued draft assessment order where total taxable income of assessee was computed at ₹ 503257761/-. Aggrieved by the draft Assessment order, appellant preferred objection before the Ld. Dispute Resolution Panel-II, New Delhi. Ld. DRP vide its direction under section 144C (5) of the Income Tax Act 1961 dated 28th of May 2013 held that consideration received by the assessee from license of sof .....

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associated enterprise is not at arm s length and therefore an adjustment has been made, which is still being contested at appeal stages. In nutshell, the Ld. DRP confirmed the action of the Ld. assessing officer. 15. Based on the direction issued by the Ld. the DRP, ld. assessing officer passed assessment order under section 143 (3) read with section 144C of the Income Tax Act on 25th of June 2013 determining the total taxable income of the assessee of ₹ 503257761/-. Against this assessme .....

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permanent establishment in India. He further submitted that assessee does not have any fixed place of business at its disposal through which it is carrying on its business wholly or partly in India. He further submitted that appellant does not have any employees in India nor its personnel visits or seconded to Indian entity. He made a distinction between the business carried on by the appellant and business carried on by the Indian enterprise. He submitted that Indian entity is merely a service .....

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yees of the Indian entity do not work under the control and supervision of the appellant. In nutshell he submitted that the function test together with not having any fixed place of business shows that appellant does not have a permanent establishment in India in terms of article 5 (1) of the Double Taxation Avoidance Agreement. He relied on the decision of Hon ble Supreme Court in case of Morgan Stanley & Co. inc 292 ITR 416 and of Hon ble Delhi High Court in case of DIT vs. E-Funds IT solu .....

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ormed by the Indian entity are mostly in the nature of preparatory and auxiliary activities such as conducting market survey, distributing information on appellant s product, responding to Inquiries, promotional activity such as presentations etc. In nutshell he submitted that no activities performed or services rendered by an Indian entity which meet the threshold requirement for creating a permanent establishment under article 5 (1) of the Double Taxation Avoidance Agreement. He further submit .....

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ntracts on behalf of the company or maintains any stock of goods of the company for delivery on behalf of the company. He submitted that majority of the sale is made by the assessee company to its distributors in India on principal-to-principal basis and not as an agent of the appellant. He further submitted that the distributors are not legally or economically dependent on the appellant. He further stated that Indian entity does not have an authority to conclude contracts on behalf of the compa .....

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process in their own name. Therefore, his argument was that Indian entity does not bind the assessee company in any manner in relation to its contract for sale. He submitted that all important element of a contract for sale such as price and credit terms are determined and decided by the appellant including the approval of the purchase orders. He submitted that Indian entity is just performing the activity of liaison, communication and support to the customers. With respect to the global sales, .....

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hat Indian entity does not habitually conclude contracts on behalf of the company but it is the distributors in India who will conclude contracts with the end-users, customers in their own name. 19. Regarding the dependency of the Indian entity on the appellant, he submitted that revenue of the Indian entity is derived from providing information technology services and IT enabled services and not the marketing and sales support services, therefore his argument was that Indian entity is not solel .....

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ary company between the parties it does not become the permanent establishment of the appellant. 21. On the issue of attribution of income to the permanent establishment in India, he relied on the decision of Hon ble Supreme Court in case of Morgan Stanley where it is held in principle that, if the permanent establishment has been compensated at arm s length price taking into account all the functions performed by it, there should not be further attribution of income to the permanent establishme .....

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attributable to the actual activity of the permanent establishment for such sales, or businesses and it cannot be determined based on the total amount received by the enterprise. Therefore, he submitted that, assuming while denying, the income that can be attributed to the Indian PE is what an independent marketing support service provider in India would in uncontrolled conditions earn. He further submitted that when the Indian enterprises have been compensated at arm s length price as per the .....

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med by these parties, major risk has been taken by the appellant and distributors and no risk rests on the Indian entity. 24. Ld. departmental representative submitted that agreement of the appellant with the Indian entity titled as commission agent was entered into on 27/04/2002, whereas the appellant filed its first return of income for assessment year 2008 2009 on 31/3/2010 i.e. after 27 months of the due date to claim refund of tax deducted at source. This proved that the assessee was carryi .....

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he taxability of that particular income arising in the hands of the assessee in India for this year. He further stressed that that appellant has entered into various commission agent agreements for sale of products and technical support service. The assessee has entered in to a distributorship agreement with Nat App holding and manufacturing B.V., the immediate holding company in the Netherlands and as a result of the distributorship agreement, Assessee Company has been charged with costs relati .....

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he appellant directly for goods delivered to the customers by Netapp India. He stated that services to the customers of the appellant were provided by the employees of Indian entity who were science graduates/engineers and he also submitted that 20 employees of Indian entity provided technical services, which apparently included two non-Indians who might be on deputation from the group companies. He further referred to the business of the appellant in India and business of the Indian company, ba .....

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purposefully silent on the role of Indian entity in the process leading to receipt of the orders from the customers, giving discounts and advising on Taxes to the client. He further drew the reference to the reseller agreement of the assessee with other resellers as well as the commission agents agreement of the appellant with Indian entity. He drew an analogy that Indian Company is making sales of products in India. 25. He further referred that claim of the appellant that Indian entity is an i .....

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t of remuneration. In nutshell, his argument was that Indian entity is functioning exclusively for the appellant and Indian entities prohibited to perform similar services to any other entity and hence Indian entity is not an agent of independent status in terms of paragraph 5 and 6 of article 5 of the double taxation avoidance agreement but is a "dependent Agent . Based on the above arguments he submitted that it is the Indian entity who is selling the products and rendering the services a .....

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ut the prices, then how the purchase orders can be issued by the customers directly to the appellant, based on this, his argument was that all these functions are performed by the employees of Indian entity on behalf of appellant. 26. He further stated that offices of Indian entity are local sales office of the appellant and that is the fixed place of business of the appellant in India. For this he submitted that t business with regard to the sale of products, licensing of software and after sal .....

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arguments, he submitted that appellant has fixed place of business at its disposal and therefore there is a permanent establishment of the assessee in India. 27. He further stressed that Indian entity is not an agent of independent status and therefore there is an agency permanent establishment of the assessee in India. To support his argument, he referred to the relevant treaty provisions in article 5 (5) of the double taxation avoidance agreement and raised the argument that Indian entity has .....

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ppellant was asked to prove the negative that it has no permanent establishment in India and he submitted that that the question how the contract for sale including terms and conditions, prices etc are arrived at in respect of Indian customers. He further referred to the decision of the coordinate bench in case of Amadeus global travel distribution SA (2008 - TII - 03 - ITAT - DEL - INTL) which has been affirmed by Hon ble Delhi high court. In nutshell, he contended that Indian entity is not an .....

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hat the Ld. transfer pricing officer has held that it did not receive compensation at arm s length and made an adjustment on account of transfer pricing of ₹ 184528940/-. He further submitted that though the functional analysis carried out by the assessee is not disturbed by the Ld. transfer pricing officer, but he did not take into account several functions, which have been identified in the assessment, order as well as apparent from document submitted by the appellant. He mainly stated t .....

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ch attribution of profits is required. He further submitted that functional analysis has not considered the financial and administrative activities performed by Indian entity for appellant. He alleged that Indian entities offices acted as local sales offices and employees of Indian entity acted as local managers of the appellant. He further stated that Indian entity has provided pre sales and post sales support services from various offices in India however to the learned TPO, assessee submitted .....

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hat the transfer pricing analysis carried out in the case of Indian entity has not considered many vital functions performed by Indian entity and the use of assets of appellant by the Indian entity. He therefore submitted that decision of the Hon ble Supreme Court in the case of Morgan Stanley (292 ITR 416) are applicable in the case of the assessee wherein it has been held that if the transfer pricing analysis does not adequately reflect the functions performed and the risk assumed by the enter .....

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voidance treaty. Regarding the adoption of the global profit rate which was objected by the Ld. authorized representative he submitted that the contention of the Ld. authorized representative is against the methodology described in article 7 (2) of the double taxation avoidance agreement. He further stated that appellant s reliance on the decision of Hon ble Delhi High Court in case of BBC worldwide Ltd is not correct because in that case 15% of all receipts were paid to the Indian company towar .....

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that if the income from services is not acceptable as fees for technical services than full profit need to be attributable to India as all services are performed in India and no operations in this regard are performed outside India. 31. During the course of hearing Ld. departmental representative further made an application for admission of additional evidence under rule 29 of Income Tax Tribunal Rules, 1963 that are in the form of information available in public domain and downloaded from the w .....

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ng considered as a business connection of the assessee in India. He further submitted that the appellant had two directors who are also on the board of the Indian company which fact should be taken into account. He further referred to the Commission Agency Agreement of assessee with Indian associated enterprise effective from 27/04/2002, which provides marketing sales technical activities, which are the core activities for assessee since it is a trading concern. The main contention was that thes .....

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establishment in India. He submitted that assessee s business activity test also fulfils, as it is not providing mere back-office support services. He further stated that Indian associated enterprise is not an independent entity but it is a dependent agent because revenue is only derived from group-associate enterprise, the authority to conclude contracts, and legal and economic dependence of the Indian entity also rests on the appellant. On the attribution of profits, he vehemently concluded t .....

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inted on a non-exclusive basis. Sales are made to global customers outside India through Master Service agreements at pre agreed terms. The company also engages itself in direct sales contracts, where though the distributors are responsible for the sale process, title of the goods passes directly to the customers to enable them claim of indirect tax exemptions on import of goods. The appellant provides services to their customers through third-party service providers and Indian entity by virtue .....

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the Indian entity is incorporated and therefore he submitted that there is no finding that Indian entity is engaged in any sales to the customers in India. He further referred to the assessment order of Indian entity wherein the functional profile of that particular entity was examined. He submitted that Ld. TPO has compared the function of the Indian entity with that of a commission agent and goes on to observe that the commission agent also does not make any sales to the customers but acts onl .....

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evenue has challenged this appeal before the Bangalore bench of the ITAT for exclusion of the comparables. He submitted that there is no allegation in the transfer pricing assessment that Indian entity is making any sales to the customers in India. In nutshell, he submitted that it is not the case of the revenue that Indian entity is making sales in India but primarily is that the functions undertaken by Indian entity are very vital and without this core functions, appellant would not be in a po .....

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e being any tangible material on record to substantiate any of such allegations. Therefore, he submitted that it is not open to the revenue to make out a totally new case and the only option available with the revenue is to support the findings of the Ld. assessing officer from the facts existing on record even if they are incorporated or not in the assessment order. Despite this, he submitted that all such allegations are unsubstantiated and they are repudiated as under. a. On the issue of the .....

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National petroleum construction company versus DCIT, Blue Star Engineering company vs. CIT 73 ITR 283 and DCIT vs. Ericsson A B 343 ITR 470. b. On allegation that Indian entity has authority to conclude contracts by virtue of common directors he submitted that directors of both the entity are not in engaged in day-to-day activities of the appellant or in negotiation of any contracts or performing the marketing functions in India on behalf of the appellant. He submitted that mere commonality of d .....

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he business of the appellant. Merely because there are transactions between the Indian subsidiary and the foreign company, it does not mean that Indian subsidiary constitutes a permanent establishment for the foreign parent in India. He further relied upon the order of the Ld. TPO in case of Indian entity where it is stated that NetApp India does not conclude contracts for the sale of NetApp products in India. He submitted that permanent establishment is required to be seen from the provisions o .....

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or appellant he submitted that Ld. assessing officer has failed to establish that appellant takes significant or strategic decisions relating to its global business in India. He submitted that board meetings of the appellant are held outside India and further the fixed place of permanent establishment are also not satisfied. For this proposition, he referred to the commentary on double taxation avoidance agreement of Prof Klaus Vogel and OECD commentary on article 5 as well as the decision of CI .....

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particular manufacturer or wholesaler therefore it is not falling within the definition of sales outlet. He further referred that provisions of DTAA has carved out an exclusion from the definition of permanent establishment whether the place of business for the purpose of storage display of goods or the supply of information does not constitute a fixed place permanent establishment. f. With respect to the additional evidences filed by the Ld. departmental representative of the website extract, .....

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with existences or otherwise of permanent establishment of the appellant in India by Indian entity. g. With respect to the allegation that sales are not on principal-to-principal basis and Net App India doing financial and administrative functions, he submitted that such financial and administrative functions are only in relation to the marketing and support functions of the Indian entity, which does not sell products. h. With respect to the denial of learned departmental representative that ac .....

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the Indian entity is carrying on its own business as a service provider and not the business of the appellant. He submitted that because there are certain transactions between the Indian subsidiaries in the foreign parent it does not mean that the Indian subsidiary constitutes a permanent establishment for the foreign parent in India. j. On the issue whether the Indian entity is an independent agent or not and that all the services being provided by Indian entity on behalf of the appellant, he .....

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f the appellant. k. Regarding the transfer pricing adjustment made in the case of the Indian entity he relied upon the decision of Adobe Systems Inc he submitted that even if there is a dispute in relation to the transfer pricing assessment of the Indian entity it is liable to be resolved in proceedings relating to that Indian entity and it does not make any difference in the hands of the appellant. He submitted that even otherwise the transactions between the appellant and Indian entity are at .....

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to certain arguments of the learned DR stating that Indian entity discusses all terms with distributors, it negotiates discounts to resellers, decision on sales are taken by Indian entity, the Indian entity obtains orders from customers, the purchase orders are rooted through Indian entity, from the perspective of customers who makes no distinction between the appellant and the Indian entity and that not all the functions are captured in the transfer pricing study of the Indian entity where ass .....

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ded by the employees of net tap India and deputation of 2 employees for rendering technical support services, he submitted that these are the pure guesswork and there is no material to suggest or support the revenue s argument on these aspects. He submitted that customers in India are customers of the distributors and the distributors engage themselves into the sales process with the customers and Indian entity only performs a marketing support role to the distributors who sell to the end user c .....

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ment with respect to the double taxation avoidance agreement. Regarding not capturing the all the functions of the Indian entity he submitted that transfer pricing study report has listed out all the marketing and sales support functions that Indian entity is performing. It also highlights the role of the distributor in the sales function in India on behalf of the appellant. He further submitted that user of all the assets such as labour, equipment, the data, the literature brochures and promoti .....

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t be indicative of determination of permanent establishment of the appellant. He further submitted that all the costs, which are related to the transaction with the appellant, are duly accounted for and even otherwise, it does not have any impact in determination of the P permanent establishment. He further submitted that that separate disclosure with respect to hardware and software components embedded in it is only because of the different rate structure of custom duty payable on these product .....

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constitute an agency permanent establishment. On the issue of maintenance of call centers of Indian entity he submitted that it is but natural for a marketing support service provider to have the call Centre facilities. In any way, he submitted that same is also captured in TP study report of Indian entity that is carrying on ITES services. He further submitted that preparation of the sales forecast for the appellant is also part of the marketing support services and cannot be used against the .....

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semination of information about the products and promotional activities and for this purpose it needs to have the right to use the trade Marks given that it is a separate legal entity different from the appellant. He submitted that even otherwise this is not a condition for determination of the PE of the appellant. m. On the last issue of the claim of text deducted at source he submitted that tax deduction at source has been made on services and subscription payments received by the appellant wh .....

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Delhi high court in case of DIT versus e-funds IT solutions, and Adobe Systems Inc, National petroleum Construction Company versus DIT. In substance, his argument was that appellant does not have any permanent establishment in India in absence of a fixed place PE or an agency PE and therefore the income is not chargeable to tax in India. 34. We have carefully considered the rival contentions. The facts are undisputed that Assessee is a non-resident company who is resident of Netherlands and h p .....

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licability of DTAA or The Income tax Act and whatever is more beneficial shall be applied to the assessee. 35. On examining the contention of the assessee with respect to the services provided by the Indian company to the appellant which are in the nature of order processing function, providing marketing strategies such as providing of marketing information analysis and pre-sales support to educate customers or products, advertisement and sales promotion, identification of the potential business .....

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rgeable to tax under the provisions of section 9 of the income tax act. Honourable Delhi high court in case of DAT versus M/s E funds IT solution (364 ITR 256) (Delhi) has held as under:- 72. No arguments have been addressed before us on the aspect of legal connection which justifies taxation of a non-resident under Section 9(1)(i) of the Act on income which is deemed to be accrue or arise in India. The Tribunal in the impugned order has held that the assessees had business connection in India f .....

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exist, not because the assessees were associated enterprise or had a subsidiary in India, but because the e-Funds India was providing information and details to the assessees in USA for the purpose of entering into contracts with third parties and subsequently the said contracts were performed fully or partly by e-Funds India as an assignee or sub-contractee and looking at the nature of the said transactions and the manner in which contracts were executed and where the assessee had assumed and .....

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ion of the income Tax Act 1961, now if the provisions of DTAA are more beneficial to the assessee, same shall be applied. According to the provision of the DTAA, it is required to be seen that whether income earned in India by the assessee are falling within the definition of Royalty or fees for technical services or Business Income . Based on these characterizations the Income shall be determined for chargeability under respective articles of DTAA. The Main Income Stream of the assessee is S .....

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cription income it has been held that it is chargeable to tax as Royalty income in terms of Article 12 of the DTAA and as it is effectively connected with the PE, it shall also be chargeable to tax as Business Income. Service Fees Income of the assessee of ₹ 223963915/- for installation, warranty and professional services was also considered as Royalty or FTS and as held to be effectively connected with the Permanent establishment was charged to tax as business income applying provision of .....

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rt services attached to the sales in India for the sole benefit of Net app BV. According to him the Indian company is a subsidiary of the net app group which has been formed for performing marketing and other services which are attached to the sale of net products. According to the assessing officer the subsidiary company is performing the marketing and promotion activities and without such activity no sale/supply/licensing can happen. Therefore, without the association of Net App India the busi .....

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ole is Central and core to the commercial business of appellant. With respect to preparatory or auxiliary services, he held that as appellant is a trading concern such activities cannot be regarded as auxiliary and preparatory services but are core services. The Indian company in terms of the commission agreement also performs the activity of educating the potential as well as existing customers and imparts training to them. In nutshell, the Indian company looks for potential customers in India, .....

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on/signing of contract is not material and by virtue of common directors, they were eligible to sign contracts for foreign company as well as for Indian agent establishes that agent do have powers to conclude contract. He further held that appellant has the sole responsibility of providing technical/maintenance assistance to its customers and this activity is done with the help of the Indian company. He held that when Indian company personnel are providing such services or imparting such informa .....

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him as the installation activities happen in India, which last for 1 to 2 days the contract for supply of goods is not completed on mere delivery of goods but by acceptance of the goods by the buyer. He further held that the Indian company is a dependent agent of the foreign company as the independence of agent must exist in both legal and economic respects. He further stated that the economic relation between the assessee and the Indian agent i.e. Indian company are not at arm s length and depe .....

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a dependent agent of the foreign entity within the meaning of articles 5 (1), 5 (2) and 5 (5) of the double taxation avoidance agreement. 39. Therefore now we first look at article 5 of India - Netherland treaty which deals with the issue of permanent establishment. ARTICLE 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of the enterprise is wholly or partly carried on. 2. T .....

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re than 183 days. 3. A building site or construction, installation or assembly project constitutes a permanent establishment only where such site or project continues for a period of more than six months. 4. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include : (a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise ; (b) the maintenance of a stock .....

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of information, for scientific research, or for other activities which had preparatory or auxiliary character, for the enterprise ; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent o .....

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in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise ; 6. An enterprise of one of the States shall not be deemed to have a permanent establishment in the other State merely because it carries on business in that other State through a broker, a general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when th .....

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ther State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment or the other. 40. According to the article 5 (1) of DTAA permanent establishment means a fixed place of business through which the business of the enterprise is wholly or partly carried on. Therefore, the requirements are that a. there has to be a fixed place of business and b. Through that, business of the foreign enterprise should be wholly or partly carr .....

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esident of the other state, or which carries on business in the other state (whether through a permanent establishment or otherwise), shall not of itself constitute another company a permanent establishment of the other. On looking at the above clause it is apparent that holding or a subsidiary company by themselves would not become permanent establishment of each other. The words used in the said paragraph are equally important because the term holding or parent company or a subsidiary company .....

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venience is being referred to as DTAA), it would be appropriate, at the outset, dispel any doubt or contention that establishing a subsidiary in the other treaty country would result in creating or establishing a PE of a foreign holding company in the said third country. Again to be fair to the Revenue, no such contention has been raised and the said legal position is clear and luminescent from paragraph 6 to Article 5 of the DTAA. The said paragraph reads:- "6. The fact that a company whic .....

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paragraph are equally important because the term "holding" or "parent company" or a "subsidiary company" is not used. The said paragraph uses the expression "controls or is controlled by a company", which is resident of the other contracting State. Use of the word "controls" or "controlled" is significant and defines the scope and ambit of the said clause. Paragraph 6 states that the company, which controls or is controlled and carries .....

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y may not be a PE of a subsidiary (the later question is not subject-matter of the present decision and we express no opinion on the said question though it may be a relevant aspect, which the tax adjudicators, policy makers and the legal draftsmen in India and abroad may have to deal with). Indeed if this principle is not applicable it could be argued that the Indian subsidiary, i.e., e-Fund India's income could be taxed in the country from where it is controlled or managed. A subsidiary ca .....

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nd pervades but will give way to the exceptions carved out and stated in the DTAA. The legal principle is simple, a subsidiary being a resident of the State in which it is incorporated and functioning is taxed for its income. Subsidiary's income is separately allocated and brought to tax in the country where it is situated or is a resident of. This clearly distinguishes a subsidiary form a foreign assessee, which is directly carrying on business and has residence in another country through t .....

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business carried on by the subsidiary company is managed by the parent company does not constitute the subsidiary company a permanent establishment of the parent company." 12. Similarly, in Arvid A. Skaar in Permanent Establishment, Erosion of Tax Treaty Principle, Second Indian, Reprint, 2008 has succinctly explained the legal position at page 540 paragraph 36.2.1 as under:- "The treaty-based protection of related companies recognises the legal independence of related companies for ta .....

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ause. Consequently, the position of some older pre-OECD authors, that a subsidiary can never constitute a PE for the parent, has not been sustained. The conventional position of the OECD-based tax treaty doctrine is that a subsidiary PE can only be based on the agency clause. However, the tax treaties aim at allowing the source state to tax business profits with a certain economic allegiance to the country expressed through the enterprise's PE. This intention must also apply when the parent .....

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of justification of right of taxation in source State and relate to the domain of PE principle and inter state neutrality as a theory. Issue of source State in the present factual matrix has been touched below. 14. The aforesaid principle is no longer res integra and has been lucidly elucidated by the Supreme Court in DIT (International Taxation) v. Morgan Stanley & Co. Inc. [2007] 292 ITR 416/62 Taxman 165 (SC) in the following words:- "32. The object behind enactment of transfer prici .....

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on, investment losses, deductible expenses, carry-forward and set-off losses etc. However, deviations are made by DTAA in cases of royalty, interest etc. Such deviations are also made under the I.T. Act (for example: Sections 44BB, 44BBA etc.). Under the impugned ruling delivered by the AAR, remuneration to MSAS was justified by a transfer pricing analysis and, therefore, no further income could be attributed to the PE (MSAS). In other words, the said ruling equates an arm's length analysis .....

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cing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a situation, there would be a need to attribute profits to the PE for those functions/risks that have not been considered. Therefore, in each case the data placed by the taxpayer has to be examined as to whether the transfer pricing analysis placed by the taxpayer is exhaustive of attribution of profits and that would depend on the functional and factual analysis to be undertaken in .....

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n of the dependence or otherwise of the subsidiary in its capacity as an agent for the parent. This is consistent with the rule in paragraph 7 of Article 5. But, as paragraph 41 of the Commentary indicates, the subsidiary may be considered a dependent agent of its parent by application of the same tests which are applied to unrelated companies." 16. It has been observed below, that subsidiary can constitute PE, other than dependent agent PE. A write-up in Bulletin for International Taxation .....

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;) states in Art. 5(7) that: [t]he fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other state (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other (emphasis added) This follows from the principle that, for the purpose of taxation, such a subsidiary constitutes an in .....

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subsidiary that is at the disposal of the parent (the "right-to-use test") and that constitutes a fixed place of business (the "location test" and the "duration test") through which the parent carries on its own business (the "business activity test"), gives rise to a PE of the parent under Art. 5(1), subject to Art. 5(3) and (4), of the OECD Model. In addition, under Art. 5(5) of the OECD Model, a subsidiary constitutes an agency PE of its parent if the .....

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f the Indian company have not functioned for the business of the appellant company. Further, the control over the financial and administrative activities of Indian company by the appellant by virtue of clause 2 (b) of the agreement wherein that the Indian company shall account for expenditure and receipts, and shall also report and provide general administrative services to the appellant are also for the reason of the control over the commission agent itself and cannot be said that such reportin .....

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ntention of the revenue that merely because it is a group subsidiary in India of the net app group, it becomes a permanent establishment of appellant. 42. Now we proceed to examine whether the assessee has a Permanent establishment in India with respect to article 5 (1) of the double taxation avoidance agreement. The fact remains that appellant neither has any employees in Indian nor does its personal or employees visit or is seconded to India. The only reason why it has been held by the Ld. ass .....

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here to say that where a person opt in service in relation to his business from another person. Then the service provider carries on the business of the services recipient. As it is stated that there is an agreement between appellant and the Indian company for provision of certain services which are listed in paragraph 3 of the commission agent agreement dated 27/04/2002. According to that agreement the Indian company shall inform appellant of all the orders placed by the customers immediately u .....

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and the Indian entity is a commission agent of the appellant the Indian company shall maintain a representative set of products for demonstration purposes only. The Indian company is also responsible to maintain a response mechanism probably to all the enquiries and request by the customer or potential customers relating to the sale of products by the appellant. For the services the Indian company will be remunerated a service fee as stated in paragraph No. 5 of that agreement. Therefore, on rea .....

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fficer has stated that the services provided by the Indian company to the appellant s Central and core activities to hold that Indian entity is a permanent establishment of the appellant. The Ld. assessing officer has also not put forth any evidence which leads to the fact that it is not the business of the Indian company that is being carried out in India, but it is the business of the appellant being carried out in India through the Indian entity such as deployment of the staff by appellant to .....

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ost plus basis and transaction is undertaken at arm s length, it has been held as under:- 32. Para (1) of Article 5 defines a PE to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on. The term 'fixed place of business' includes premises, facilities, offices which are used by an enterprise for carrying on its business. The fixed place must be at the disposal of an enterprise through which it carries on its business wholly or partly. A .....

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eiterated the above-stated attributes; after quoting from various authors, this Court held that "The term 'through' postulates that the taxpayer should have the power or liberty to control the place and, hence, the right to determine the conditions according to its needs". In the present case, there is no allegation that the Assessee has any Branch Office or any other office or establishment through which it is carrying on any business other than simply stating that Adobe India .....

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a PE in India in terms of Article 5(1) of the Indo-US DTAA. 33. In E-Funds IT Solution (supra), this Court had expressly negated that an assignment or a sub-contract of any work to a subsidiary in India could be a factor for determining the applicability of Article 5(1) of the Indo-US DTAA. The Court had further expressly held that: "Even if the foreign entities have saved and reduced their expenditure by transferring business or back office operations to the Indian subsidiary, it would not .....

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ormed by the foreign assessee does not create a fixed place permanent establishment." 34. Thus, the AO's view that Adobe India constituted the Assessee's PE in terms of paragraph 1 of Article 5 of the Indo-US DTAA is palpably erroneous and not sustainable on the basis of the facts as recorded by him. In the present case, it is been alleged that the transfer pricing officer of the Indian entity had made an adjustment to the marketing and sales support function and appeal of the India .....

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ant. He therefore relied on the decision of the Hon ble Delhi High Court in case of Adobe Systems Inc (Supra) wherein it has been held that even if there is a dispute in relation to this, it is liable to be resolved in proceedings relating to the Indian entity. We are of the opinion that transfer-pricing dispute in the assessment proceedings of the Indian entity does not have any bearing on determination of permanent establishment of appellant in India. Indeed, it is a matter of dispute between .....

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entity has the authority to conclude contracts by virtue of common directors who are eligible to sign contracts on behalf of foreign company as well as Indian agent. On these facts, it was also contended by revenue that it constitutes a place of management for the appellant. It is further contended that Indian entity has local sales offices in India. Further, the website of the net Group mentions the Indian entity sales representative in the sections which mentions the offices of Indian entity. .....

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net app India as an authority to conclude contracts on behalf of appellant. The reliance is aptly placed on the decision of the coordinate bench in ITO versus Pubmatic India (P.) Ltd. (158 TTJ 398) (MUM) wherein it has been held that merely because one of the directors is common in both the companies does not constitute the assessee as PE. Even otherwise the common director and holding of the company by itself does not constitute either company as a Permanent Establishment of the other as per P .....

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xercising that authority to conclude contracts on behalf of appellant. According to us, Revenue has failed to establish with credible evidence that such authority is vested in Indian company and Indian company habitually exercises that authority. The contract placed before us emphatically denies any such authority with the agent and further in absence of any evidence placed before us by revenue, this argument of revenue does not find support from us. Therefore we are of the opinion that accordin .....

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It is pertinent to note here that the website pages under this section also referred to the list of the addresses of other resellers and service providers were the parties who conducted sales process and perform sales in India. Therefore this argument of the revenue also does not find favour with us. On the contention of that Indian entity constitutes a place of management for appellant is devoid of any merit as the Ld. and assessing officer has not led to any evidence to establish that the app .....

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of revenue that the local sales offices in India of Indian entity are being used by the appellant and therefore there are sales outlets in India which falls under the article 5 (2) (h) has permanent establishment. The term sales outlet is not defined in any legislation. However, the general meaning of the term is a place of business for retailing of the goods and Tom outlet in particular is generally defined as a store that sells the goods of a particular manufacturer or wholesaler. Therefore S .....

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e customers, in the local offices of the Indian entity are only providing marketing support function and not making sales of the net app products. In the website of the group also these are the contact us places therefore they are only contact points for the customers for enquiring about the goods of appellant. Therefore, the activities of Indian entity are only part of its marketing support services and are for the business of the Indian entity and cannot be said that they are made for sales in .....

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artmental representative or in the orders of the lower authority when sales has taken place from these outlets. In view of this we do not agree with the views of the revenue that the local offices of the assessee are sales outlet constituting permanent establishment of the appellant. With respect to the allegation that Indian entity is not providing mere backup office support services, but engaged in the capacity building of the net app India group, we are of the opinion that Indian entity is ca .....

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alleged by revenue that activities of Indian entity are not on principle-to-principle basis as it is also doing financial and administrative functions, also reports of expenditure incurred to the appellant according to the terms of the commission agreement. However, we do not find any evidence on record to support the above contention as no evidence has been drawn to our attention that these functions are with respect to the sale of products or services of the appellant. According to the agreeme .....

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f specifications, assistance, and supervision etc however it cannot lead to an inference that the appellant by exercising the above rights creates its permanent establishment in India. For an agent to be of an independent status, (1) the agent must be legally independent of the principal, (2) the agent must be economically independent of the principal; and (3) the agent must represent the principal in the ordinary course of business. Legal Independence of the agent must be tested on the line of .....

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elf suggests that its revenue is not wholly or substantially derived from the activities of the appellant but from other AEs also. It was submitted that 85% to 90 % of the revenue for the year of ICo is from IT/ ITEs services and not from marketing support services. Further the risk matrix of the Ico is also not brought on record by the Ld AO. Further, it is not the case of the revenue that ICO is performing wholly and exclusively for the assessee. Therefore, in absence of any evidence of econom .....

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relation to its operation and it is an independent agent and therefore it would not create an agency PE in India of the appellant. These facts remain uncontroverted. Furthermore, merely because the Indian entity provides services to the net app group including the appellant, it cannot be said that permanent establishment of the appellant is in India because the permanent establishment is required to be established with respect to the appellant and not to the group. Ld. departmental representati .....

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hat all functions of the Indian entity are not captured in transfer pricing documentation prepared by Indian entity which did not include assets given free of cost to the Indian entity. It is further contended that the agreement with the resellers are signed after 40 days and net app India has incurred expenses on freight, shipping and transportation of the goods and therefore it is engaged in delivery of goods and performing functions of sale on behalf of appellant. It is further alleged that s .....

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ntal representative made before us, however, we do not agree with any of them as no evidence has been laid before us which even remotely suggest that Indian entity discusses all terms with the distributors, negotiates discounts to the resellers and decision on sale is taken by the Indian entity in India. With respect to the purchase orders the Indian entity do not solicit or accept purchase orders on behalf of the appellant but the purchase orders raised on the appellant are through distributors .....

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documentation and assets given free of cost are not recorded therein, we are of the opinion that this issue is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in case of E funds IT solutions (supra) wherein it has been held that even if the software or intangible data was provided free of cost or otherwise by the appellant to an Indian entity, it does not automatically result in the Indian entity constituting a permanent establishment of the appellant i .....

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efore us and even otherwise; this aspect on standalone basis does not give any indication that the appellant has a permanent establishment in India. No evidence has been brought on record by revenue to suggest that this expenditure is incurred on import of goods, which are sold by the appellant. With respect to the allegation that the parts are replaced in 4 hours and therefore inventory is maintained by Indian entity for the purpose of sale. It was submitted that s required for performing certa .....

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the premises are used as sales outlet. In any case, no evidences or instances have been led that the Indian entity is maintaining any stock of goods of the appellant for delivery on behalf of the appellant. With respect to the allegation that Indian entity has a call Centre, It was submitted that the net app group operated call centers in four locations across the world including India and the post sales support services are provided through its call centre to the customers throughout the world .....

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t of its own business functions in the course of carrying on its own business in India and for this, the Indian entity is remunerated for such services which are already been captured in the transfer pricing documentation. It was also vehemently contended that the allegation of the revenue about deputation of two employees for rendering technical support services is devoid of any merit as this fact was denied in the assessment proceedings where enquiries were conducted under section 133 (6) of t .....

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for this purpose, it has right to use the trademark which is not held by the appellant but different entity. As this transaction is not between the appellant and the Indian entity where it is undisputed that the trademarks are not owned by the appellant but by different entity, these facts does not lead to creation of a permanent establishment in India of appellant. 45. We would like to mention here that in the present case the Ico has performed many functions but has not reached at the thresho .....

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loyees and customers of the company to determine the actual activities carried out by the Ico in India. Further BEPS Action point 7 is also on the issue to address the tax experience that the foreign enterprise is able to avoid the application of Article 5(5) of the OECD Model Tax Convention, to the extent that the contracts concluded by the person acting as a commissionaire are not binding on the foreign enterprise. Since Article 5(5) relies on the formal conclusion of contracts in the name of .....

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racts. Therefore while deciding the appeals before us; we were led by the facts for the year under appeals only. 46. In view of our above findings, we hold that the assessee does not have a permanent establishment in India under the provisions of double taxation avoidance agreement between India and Netherland. In view of this ground No. 1 of the appeal of the assessee is allowed. 47. Consequently, Ground No. 2, ground No. 6, 7, 8 and 9 of the appeal of the assessee are not required to be adjudi .....

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ubmitted that now the issue is squarely covered in favour of the assessee in view of the decision of the Hon ble Delhi High Court in case of Director of income tax versus Infrasoft Ltd 264 CTR 329 (Delhi). He also submitted a chart during the course of hearing that compares the software considered by Hon ble Delhi High Court and the features of the software licensing agreement in the present case. He has demonstrated that the issue involved is similar stating various aspects of software licensin .....

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opies of the Software shall be the exclusive property of Infrasoft Clause 2(h) of Infrasoft license agreement: (h) Licensee may not copy, decompile, disassemble or reverse-engineer the Software without Infrasoft s written consent. The Licensee s rights shall not be restricted by this Clause 2(h) to the extent that local law grants Licensee a right to do so for the purpose of achieving interoperability with other software and in addition thereto Infrasoft undertakes to make information relating t .....

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) The Software shall be used only for Licensee s own business as defined within the InfrasoftLicence Schedule and shall not, without prior written consent from Infrasoft: (i) be loaned, rented, sold, sublicensed or transferred to any third party (ii) used by any parent, subsidiary or affiliated entity of Licensee (iii) Used for the operation of a service bureau or for data processing. Clause 1 of Software License: Supplier grants to Buyer a non-exclusive license to use the accompanying software .....

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party may: (a) reverse engineer or try to reconstruct or discover any source code or underlying ideas used in the Software; or (b) remove or conceal any product identification or proprietary notices contained in or on the Software or products; or (c) except as allowed in Supplier s user documentation, modify or create a derivative work of any part of the Software. Buyer must not publish or provide any results of benchmark tests run on the Software to a third party without Supplier s prior writt .....

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or file formats of, or of any components used in the Software by any means whatever; or (ii)remove or conceal any product identification, copyright, patent or other notices contained in or on the Software or accompanying documents; or (iii) modify the Software, incorporate it into or with another Software, or create a derivative work of any part of the Software. Customer must not publish or provide any results of benchmark tests run on the Software to a third party without NetApp s prior writte .....

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appeal is similar to the issue decided by the Hon ble Delhi High Court. Therefore we set aside ground 34 of the appeal of the assessee back to the file of the Ld. assessing officer to decide the issue afresh considering the decision of the Hon ble Delhi High Court. In the result ground No. 3 and 4 of the appeal of the assessee is allowed with above direction. 50. The ground No. 5 of the appeal of the assessee is with respect to the treatment given by the Ld. assessing officer to the service inco .....

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ts customer with third-party service providers in India. The customers of deducted tax at source on these payments under the fees for technical services. According to the assessee the above income is not chargeable to tax in India, as Indian customers or distributors does not envisage the use of any right, property or information for which are royalty under article 12 (4) of the tax treaty. Further, it is stated that the these services would not also be regarded as fees for technical services as .....

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officer has further held that the nature of the services is predominantly technical in nature and these services enable the users to enjoy the benefits of the hardware and software in a better manner. 51. Ld. authorized representative submitted before us that payments for provision of installation, warranty and professional services are not FTS as they are not ancillary and subsidiary to a royalty transaction. Further, these services do not make available any technical knowledge, experience, et .....

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ement. 52. We have carefully considered the rival contentions. The company provides installation, integration and training assistance to the Indian customer in relation to the products sold by it. The company also provides warranty services for the products purchased by the customers in India. For a period of 3 years and the warranties undertaken without any additional cost to the customer as the prize of the warranties already included in the sale prices. The company also offers supplementary o .....

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ngement with Indian company through the sales support agreement. The Ld. assessing officer has held that the services are predominately-technical services in the nature and has concluded that it is ancillary to the royalty and hence royalty as defined in the act as well as the double taxation avoidance agreement and therefore it is chargeable to tax in India. The Ld. assessing officer has further held that as the assessee is rendering service through qualified personnel of net app India or third .....

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de available to the customers using Net app BV products. In fact, the warranty service is taken by the buyer of the product to keep the goods purchased in good condition for its lifespan. We simply failed to understand that how the installation and warranty services at least can be said to be make available to the buyer. In view of this we reject the argument of the revenue that such services fees are chargeable to tax as fees for technical services. In the result ground No. 5 of the appeal of t .....

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at source after verification of the tax deduction at source certificates provided by the appellant. In the result ground No. 10 of the appeal of the assessee is allowed accordingly. 54. Ground No. 11 of the appeal of the assessee is against levy interest under section 234A of the income tax act for the period of excess of the actual delay of 18 months in filing the return of income for assessment year 2008 2009 and computing such interest without considering credit for tax deducted at source of .....

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f the income tax act, despite the entire income of appellant is subject to withholding taxes in India and, therefore, no such advance tax was payable by the assessee. This ground of appeal is also set aside to the file of the Ld. assessing officer with a direction that if the income of the appellant is chargeable to tax in India and, if it is subject to tax withholding the no interest under section 234B of the income tax act is chargeable. In the result ground No. 12 of the appeal of the assesse .....

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