Arm's length pricing barred further profit attribution in India despite an alleged permanent establishment.

Accepted arm's length pricing of an international transaction was treated as sufficient to exhaust further attribution of profits in India, even where a permanent establishment was alleged. On that basis, no additional income could be taxed in India merely because the assessee was said to have a permanent establishment, since the cross-border transaction had already been remunerated at arm's length. The principle applied was that profits attributable to a permanent establishment cannot again be brought to tax where the related transaction has already been benchmarked at arm's length. The matter was decided in favour of the assessee.

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Issues: Whether, where the international transaction was accepted at arm's length price, any further income could be attributed to the assessee in India on the basis of an alleged permanent establishment.

Analysis: The accepted arm's length pricing of the assessee's transaction with its associated enterprise was treated as sufficient to exhaust the attribution exercise. On that footing, no further profits were held taxable in India merely because a permanent establishment was alleged to exist. The decision proceeded on the settled principle that profits attributable to a permanent establishment cannot again be added where the related cross-border transaction has already been remunerated at arm's length.

Conclusion: The issue was decided in favour of the assessee, and no further income was held attributable in India on account of the alleged permanent establishment.

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