Permanent establishment test failed where Indian branch activities were not proved, defeating taxability and transfer pricing adjustments.

The Revenue failed to establish that the Indian branch constituted a permanent establishment, because the record did not show that the assessee's own business was carried on through that fixed place or that the seconded personnel were employees rendering services on its behalf. The branch existed with RBI approval, but the evidence distinguished intended activities from actual operations and did not prove business activity in India during the year. In the absence of a permanent establishment under Article 5, attribution under Article 7 or Article 9 and any transfer pricing adjustment did not arise, and the assessee was not liable to tax in India for the year.

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Issues: Whether the assessee's Indian branch constituted a permanent establishment in India and, if not, whether its income could be taxed in India or any transfer pricing adjustment made.

Analysis: The assessee's branch office in India existed with RBI approval, but the Revenue had to establish that the assessee's own business was wholly or partly carried on through that fixed place. The material showed that the payments related to salaries of seconded personnel, yet it was not established that those personnel were employees of the assessee company or that the assessee itself rendered services to Whirlpool Corporation USA or Whirlpool of India Ltd. The statement of the assessee's representative, read as a whole, distinguished between intended activities and actual activities, and the record did not prove that the branch had carried on business operations during the year. Since no permanent establishment was shown to exist under Article 5 of the treaty, the attribution provisions under Article 7 or Article 9 and the transfer pricing exercise did not arise.

Conclusion: The assessee did not have a permanent establishment in India and was not liable to tax in India for the year under consideration.

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