The Assessing Officer disallowed payments made by the assessee concerning purchases from seven group companies as tax at source had not been deducted by the assessee on the payments on the ground that they were chargeable to tax in India. Five of the group companies were residents of Japan and the United States of America, while two were residents of Singapore and Thailand, respectively. The conclusion reached by the Assessing Officer about the taxability of the payments made by the assessee in India was based on the rationale that since MC Japan (one of the group companies) had acquiesced in the jurisdiction of the Revenue as it had a liaison office located in India, which was treated as its permanent establishment, the business model of the remaining group companies being identical, they would stand on the same footing. In other words, the Assessing Officer concluded that all seven group companies had permanent establishments in India. The Assessing Officer passed a draft assessment order on December 31, 2009. By order dated September 30, 2010, the Dispute Resolution Panel sustained the addition, which resulted in the final assessment order dated October 25, 2010 being passed under section 143(3) / 144C of the Act. On appeal to the High Court on the questions whether the Tribunal fell into error in holding that section 40(a)(i) of the Act, 1961 could not be applied in view of the “non-discrimination” provisions in article 24(3) of the Double Taxation Avoidance Agreement between Indian and Japan1, and article 26(3) of the Double Taxation Avoidance Agreement between India and the United States of America2, and whether the Tribunal fell in error in reversing the findings of the Dispute Resolution Panel with respect to the existence of the permanent establishments in India, there was a difference of opinion between the judges who comprised the Division Bench. The matter was referred to a third judge. The third judge held that  on the facts Non-Resident had no Permanent Establishment in India-Non-discrimination clause in Double Taxation Avoidance Agreement applicable. Disallowance is not justified.Provisions of agreement more beneficial to assessee is applicable. Order of Tribunal is affirmed.   (AY. 2006-07)