An entity cannot be disregarded merely because it is a tax resident of a country with which India has a favourable Tax Treaty

The Mumbai Income-tax Tribunal (“the Tribunal”), in a recent judgment in the case of Satellite Television Asia Region Vs. ADIT [2010-TII-58-ITAT-MUML-INTL] held that the Assessing Officer (“AO”) cannot consider the assessee a Permanent Establishment (“PE”) blocker or conduit company when there are commercial reasons for its existence. This means that they cannot tax the entire advertisement revenues in the hands of parent company.

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