Issue: Relevance
of determination of Permanent Establishment where the transactions were at
Arm's Length Price between the Assessee and foreign enterprise
The assessee was a non-resident company, incorporated in the US.
The assessee executed an Advertisement Sales Representation Agreement dated 29
February 2000 with News Television (India) Limited ('NTIL'), now known as Star
India Private Limited ('SIPL') as its representative for marketing and
collection of advertisement revenue for which SIPL was remunerated commission
at 15%. The assessee submitted during the course of assessment proceedings that
the income from advertisement air time was business income and in the absence
of a Permanent Establishment (PE) of the assessee in India, the same was not
taxable. The ld. AO however, held that SIPL constitutes PE of the assessee by
holding it as a dependant agent as per para 4(c) of the Article 5 of India-USA
DTAA and taxed the advertisement revenue earned by the assessee as business
income on a net basis.
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