Case Law Details
OT Africa Line Limited (now known as Delmas UK Limited) Vs DDIT (ITAT Mumbai)
Issue under consideration is whether AO is correct in holding that the agent in India was a ‘Dependent Agent’ constituting a permanent establishment (PE) and the appellant was, therefore, liable to be taxed as per India UK DTAA?
ITAT state that it is admittedly a case of dependent agent permanent establishment (DAPE), it was put, as a proposition, to the parties that the controversy regarding existence of permanent establishment could perhaps be a wholly academic issue inasmuch as once the agent is paid an arm’s length remuneration for the services rendered, as is not even in dispute in the present case, no further profit can be attributed to the PE. As per Hon’ble Supreme Court’s judgment in the case of CIT Vs Morgan Stanley & Co Inc, held that, “In our opinion considering the judgment, if the correct arm’s length price is applied and paid then nothing further would be left to be taxed in the hands of the Foreign Enterprise.”.
Respectfully following the esteemed views of Hon’ble jurisdictional Supreme Court, ITAT hold that once an agent has been paid arm’s length remuneration, and the income embedded in such remuneration has been taxed in India, no further profits can be taxed in the hands of the DAPE. Accordingly, the action of the authorities below, in bringing income of the DAPE- independent of the agency remuneration received by the agent of the assessee, is unsustainable in law. ITAT, therefore, uphold the plea of the assessee and delete the impugned addition in the hands of the assessee. Accordingly, the appeal is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
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