Indian Subsidiary Not a Dependent Agency PE if Transactions Are Subject to TPO Adjustment

Qlik Tech International AB Vs DCIT (ITAT Bangalore)

In the case of Qlik Tech International AB vs DCIT, the Income Tax Appellate Tribunal (ITAT) Bangalore reviewed the assessment order concerning the classification of Qlik Tech’s Indian subsidiary as a dependent agent permanent establishment (PE). The AO had deemed the Indian subsidiary, Qliktech India Pvt. Ltd., a dependent agent PE based on its role in identifying customers, negotiating terms, and concluding contracts for software sales. Consequently, the AO attributed taxable income to the foreign entity and imposed a 30% tax on revenues. However, ITAT found that the transactions were outright sales recorded in both parties’ books and had already undergone transfer pricing adjustments. ITAT ruled that the dependent agent PE classification was unwarranted but referred the matter back to the AO for re-evaluation in light of new evidence.

Additionally, ITAT addressed disputes regarding interest on income tax refunds, TDS credit, and the applicability of interest under Sections 234A and 234B. While the claim regarding tax refund interest was dismissed, ITAT directed the AO to verify TDS credit and recalculate interest liabilities in accordance with the law. The appeal was partially allowed, underscoring the need for adherence to procedural fairness and accurate assessments. This judgment highlights the complexities of cross-border taxation and transfer pricing in India’s evolving tax landscape.