CIT (International Tax-1) Vs EXL Service.Com Inc (Delhi High Court)
Delhi High Court held that outsourcing solutions including transaction processing services and Internet/voice-based customer care services for its clients to subsidiary in India doesn’t result in creation of Permanent Establishment [PE] in India under India-USA DTAA.
Facts- The Assessee is a company incorporated under the laws of Delaware, USA. It develops and deploys business process outsourcing solutions including transaction processing services and Internet/voice-based customer care services for its clients. The Assessee is stated to be providing such services to customers located in the USA and the UK. The parent company of the group as on 31.03.2002 was Conseco Inc., which held 100% of the paid-up capital of Exl, USA. The Assessee company (Exl. Inc) performs sales and marketing function, contract negotiations and conclusion of contracts and customer relationship management.
Exl India entered into a service agreement with the Assessee under which, Exl India provides internet and voice-based customer care services and backroom operation services to the customers of the Assessee and in consideration of these services, Exl India invoices the Assessee at predetermined hourly rates and in return, the Assessee raises invoices on the end customers.
AO held that the Assessee had established a Permanent Establishment (PE) in India under Article 5 of the India-USA DTAA and under Section 9(1)(ii) of the Act, respectively, holding that its income was taxable in India for the years under consideration. Tribunal partly allowed the appeal. Being aggrieved, department has preferred the present writ.
