Permanent establishment and treaty relief turn on contract authority and proof of tax residency under the Mauritius treaty.

A non-resident enterprise is taxable in the source State only if it has a permanent establishment there, and a solicitation agent becomes a permanent establishment only when it habitually exercises authority to conclude contracts in the foreign enterprise's name. On the facts, the Indian company acted as a solicitation and collection agent, but final acceptance of advertisement contracts remained with the Mauritian enterprise, so a permanent establishment was not established. Treaty relief under the business profits article was also made conditional on proof that the applicant was a taxable resident of Mauritius and actually liable to income-tax there, rather than exempt as an offshore entity.

---

---

Issues: (i) whether the solicitation agent in India constituted a permanent establishment of the Mauritian enterprise under the India-Mauritius tax treaty; (ii) whether the enterprise could claim treaty relief under the business profits article only if it was liable to tax in Mauritius.

Issue (i): whether the solicitation agent in India constituted a permanent establishment of the Mauritian enterprise under the India-Mauritius tax treaty.

Analysis: The treaty distinguished between a fixed place of business, a dependent agent, and an agent of independent status. The agent was not shown to have a fixed place of business in India, and common shareholding by itself could not make the Indian company a permanent establishment. On the facts, the Indian entity acted as a solicitation and collection agent and not as an independent agent, but the treaty required more than dependence alone: a non-independent agent became a permanent establishment only if it habitually had and exercised authority to conclude contracts in the name of the foreign enterprise. The agreement and current arrangement showed that final acceptance of advertisement contracts remained with the Mauritian enterprise, and the record did not establish habitual exercise of contract-concluding authority in India.

Conclusion: The Indian solicitation agent was not established as a permanent establishment of the Mauritian enterprise on the material then before the Authority.

Issue (ii): whether the enterprise could claim treaty relief under the business profits article only if it was liable to tax in Mauritius.

Analysis: The treaty benefit depended on the applicant being an enterprise of a Contracting State, which in turn required that it be a resident and a taxable unit under Mauritius law. The Authority noted the absence of reliable evidence on the Mauritius tax position of the applicant and held that eligibility for treaty relief depended on proof that the applicant was actually liable to income-tax there and not enjoying complete exemption as an offshore entity.

Conclusion: Treaty relief under the business profits article was available only if the applicant proved liability to tax in Mauritius.

Final Conclusion: The ruling substantially favoured the applicant on the core permanent-establishment question, but treaty relief was made conditional on proof of Mauritius tax liability, so the Indian taxability of the business profits was not unconditionally determined in the applicant's favour.

Ratio Decidendi: Under the treaty, a non-resident enterprise is taxable in the source State only if it has a permanent establishment there, and a non-independent agent constitutes such a permanent establishment only when it habitually exercises authority to conclude contracts in the name of the enterprise; treaty benefits also require proof that the claimant is a taxable resident of the other Contracting State.

---