Business connection and permanent establishment arise where a subsidiary performs continuous tender, negotiation, and contract functions for a non-resident.

A continuous and systematic role performed in India by a subsidiary in relation to a non-resident's tender-related and contract-signing activities can create a business connection under section 9(1)(i). The arrangement here went beyond isolated or preparatory functions because the subsidiary handled tender information, submission, follow-up, negotiation within set parameters, documentation, and contract execution on the applicant's behalf. On the assumed facts, those activities were sufficient to establish a permanent establishment under article 5 of the treaty, and the subsidiary's authority-and-contract functions meant articles 5.5 and 5.6 did not protect the applicant.

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Issues: Whether the proposed activities of the Indian subsidiary created a business connection in India and a permanent establishment of the non-resident applicant in India.

Analysis: The proposed arrangements contemplated a continuing and systematic role for the Indian subsidiary in relation to tender information, submission and follow-up of tenders, negotiation of terms within prescribed parameters, documentation, and signing of contracts on behalf of the applicant. The relationship was not confined to isolated transactions but extended across the series of India-related commercial operations. On those facts, the subsidiary's functions were not merely preparatory or auxiliary and the existence of a controlled subsidiary alone was not the sole basis of the finding; rather, the breadth and continuity of the subsidiary's activities established the requisite business connection under section 9(1)(i). Under the treaty, article 5 treated furnishing of services through personnel in India, and the authority-and-contract functions of the subsidiary, as creating a permanent establishment, while articles 5.5 and 5.6 did not avail the applicant on the assumed facts.

Conclusion: The proposed arrangements created a business connection in India and a permanent establishment in India, and the issue was answered against the applicant.

Ratio Decidendi: A continuous, intimate, and systematic role performed in India by a subsidiary in relation to a non-resident's commercial operations can constitute a business connection and, under the applicable treaty, a permanent establishment, even where the subsidiary is said to act within parameters fixed by the non-resident.

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