| COURT: | Delhi High Court |
| CORAM: | S. Muralidhar J, Vibhu Bakhru J |
| SECTION(S): | 147, 148, Article 5, Article 7 |
| GENRE: | Domestic Tax, International Tax |
| CATCH WORDS: | Dependent Agent Permanent Establishment, Permanent Establishment, Reopening |
| COUNSEL: | R. P. Bhat |
| DATE: | May 16, 2016 (Date of pronouncement) |
| DATE: | May 19, 2016 (Date of publication) |
| AY: | 2004-05, 2005-06, 2006-07 |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| Entire law on what constitutes a Permanent Establishment (PE) in India in terms of Article 5(1), 5(2)(l) or Article 5(5) of the Indo-USA DTAA explained. If the alleged PE has been assessed on ALP basis in terms of Article 7, no income has escaped escapement so as to justify issue of s. 148 notice | |
Even if the subsidiary of a foreign company is considered as its PE, only such income as is attributable in terms of paragraphs 1 and 2 of Article 7 can be brought to tax. In the present case, there is no dispute that Adobe India – which according to the AO is the Assessee’s PE – has been independently taxed on income from R&D services and such tax has been computed on the basis that its dealings with the Assessee are at arm’s length (that is, at ALP). Therefore, even if Adobe India is considered to be the Assessee’s PE, the entire income which could be brought in the net of tax in the hands of the Assessee has already been so taxed in the hands of Adobe India. There is no material that would even remotely suggest that the Assessee has undertaken any activity in India other than services which have already been subjected to ALP scrutiny/adjustment in the hands of Adobe India
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