Mumbai ITAT: remunerated at arm's length price by the assessee, no further profit could be attributed

 

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.