Tax implications of a “Dependent Agent Permanent Establishment” explained

DDIT vs. B4U International Holdings Ltd (ITAT Mumbai)

The assessee, a Mauritius company, was engaged in telecasting TV channels. It had an advertisement collection agent in India who collected revenue from time slots given to Indian advertisers. The assessee claimed that its profits from India were not chargeable under the DTAA because (i) it did not have a PE and (ii) assuming the agent was a PE, the agent had received an arms’ length fee from the assessee and further profits could not be attributed. The department relied on DHL Operations B.V. 142 TM 1 (Mum) and claimed that as the assessee was dependent on the Indian agents, the Indian agents constituted a “Dependent Agent PE” and that despite arms’ length fee to the agents, profits were attributable to the DAPE. HELD by the Tribunal: