Deputation of personnel under Indian company control did not create a permanent establishment or taxable business profit in India.

Mere deputation of personnel to an Indian company on a hire basis did not create a permanent establishment of the foreign enterprise in India where the personnel worked under the Indian company's direction, supervision and control, and the foreign enterprise had no control over their work. The receipts were confined to reimbursement of salary costs paid in advance to the deputed personnel, so the arrangement was not treated as technical services and no taxable business profit arose in India. On those facts, the foreign enterprise had no permanent establishment in India and the reimbursement receipts were not taxable as business income.

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Issues: Whether deputation of personnel to an Indian company on a hire basis created a permanent establishment of the foreign enterprise in India and whether the amounts received were taxable as business income in India.

Analysis: The arrangement showed that the foreign enterprise only selected and supplied personnel who worked under the direction, supervision and control of the Indian company. The foreign enterprise did not render services through those personnel, had no control over their work, and the Indian company could remove them. The amounts received were only reimbursement of salaries paid in advance to the deputed personnel. On these facts, the deputation was not a technical service arrangement and did not amount to a permanent establishment. Even assuming a permanent establishment, no profit arose in India because the receipts were only reimbursement of expenses.

Conclusion: The foreign enterprise did not have a permanent establishment in India and the reimbursement receipts were not taxable as business income in India.

Final Conclusion: The revenue's challenge failed and the addition was not sustainable, as the income arose only by way of salary reimbursement for personnel working under the Indian company's control.

Ratio Decidendi: Mere deputation of personnel under the control and supervision of the Indian company, with receipts confined to reimbursement of salary cost, does not create a permanent establishment or taxable profit in India.

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