No functions, assets and risks analysis is required before AY 2002-03 for determination of profits attributable to dependent agent permanent establishment; no further attribution if dependent agent paid arm’s length commission

DIT Vs. BBC Worldwise Ltd. (Delhi High Court)- Bombay High Court in Set Satellite (Singapore) Pvt. Ltd. (supra) held that if correct ALP is applied and paid, nothing further would be left to be taxed in the hands of the foreign enterprise. In the said case, Morgan Stanley (supra) as well as Circular No. 23 issued by the CBDT was taken into consideration. The Court was also pleased to record that the commission paid to the agent was 15% services performed by the assessee‘s agent in India was in line with the existing industry standards in India at the prevalent time.

Reliance was also placed on Para 3 of  Circular No. 742 dated 02.5.1996 issued by the CBDT, which referred to the fact that the agent‘s commission from foreign telecasting companies is 15% or so of the gross sum, to contend that the CBDT itself had considered 15% as the normally accepted commission rate payable to agents of the telecasting companies.

IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA No.1341 of 2010

ITA No. 703 of 2011, ITA No. 705 of 2011

Pronounced on: 30^th September, 2011

DIRECTOR OF INCOME TAX

VS

BBC WORLDWIDE LTD.

JUDGEMENT

A.K. SIKRI, J.