Permanent establishment analysis under the India-Germany treaty barred taxation of royalty and technical fee receipts as business profits.

In the absence of a fixed place of business or other permanent establishment in India, the foreign assessee's royalty and fees for technical services could not be attributed to any Indian PE. On the facts, the Indian subsidiary was not treated as the assessee's permanent establishment, and no fresh material was shown to disturb the position taken in earlier years. As a result, Article 7 of the India-Germany DTAA could not be used to tax those receipts as business profits. The royalty and fees for technical services were separately dealt with under Article 12 to the extent admitted.

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Issues: Whether the assessee had a permanent establishment in India and, if not, whether the royalties and fees for technical services received by it could be taxed in India as business profits under Article 7 of the India-Germany DTAA.

Analysis: The recurring factual position in the assessee's own earlier years was followed, and no new material was brought to show that the assessee had a fixed place of business in India during the year. On the facts, the Indian subsidiary was not established as a permanent establishment of the foreign company, and there was no basis to attribute the impugned receipts to any alleged PE. Once the receipts were not attributable to a PE, Article 7 could not be invoked to tax them as business profits. The royalty and fees for technical services were separately offered to tax to the extent admitted under Article 12.

Conclusion: The assessee did not have a permanent establishment in India, and the receipts in question were not taxable as business profits under Article 7; the Revenue's challenge failed.

Ratio Decidendi: In the absence of a permanent establishment in India, and in the absence of attribution of receipts to any such establishment, royalties and fees for technical services cannot be taxed as business profits under Article 7 of the applicable tax treaty.

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