Arm's length remuneration to a dependent agent PE prevented further profit attribution under the India-Singapore treaty.

A dependent agent permanent establishment in India does not give rise to further profit attribution where the agent has already been remunerated at arm's length. On that basis, income from 21 voyages was treated as not taxable in the foreign enterprise's hands under the India-Singapore treaty. The commentary also notes that levy of interest under sections 234B and 234C did not survive, the point being covered against the revenue by binding jurisdictional precedent.

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Issues: (i) Whether income from 21 voyages could be brought to tax in India under Article 7 of the Double Taxation Avoidance Agreement between India and Singapore on the footing that the assessee had a dependent agent permanent establishment, when the agent had already been remunerated at arm's length price. (ii) Whether the levy of interest under sections 234B and 234C of the Income-tax Act, 1961 survived.

Issue (i): Whether income from 21 voyages could be brought to tax in India under Article 7 of the Double Taxation Avoidance Agreement between India and Singapore on the footing that the assessee had a dependent agent permanent establishment, when the agent had already been remunerated at arm's length price.

Analysis: CMA was accepted as the assessee's dependent agent and, therefore, a permanent establishment in India within Article 5. The disputed receipts related to voyages for which commission and allied charges had been paid to CMA, and those receipts had been determined at arm's length in the hands of CMA. The Tribunal followed the view that where the associated enterprise constituting the permanent establishment is already remunerated at arm's length price, nothing further remains to be attributed to the permanent establishment for taxation in the hands of the foreign enterprise.

Conclusion: The income from 21 voyages was not taxable in the hands of the assessee.

Issue (ii): Whether the levy of interest under sections 234B and 234C of the Income-tax Act, 1961 survived.

Analysis: The ground was covered against the revenue by the jurisdictional High Court decision relied upon by the Tribunal, and no separate adjudication on facts was required.

Conclusion: The levy of interest under sections 234B and 234C did not survive.

Final Conclusion: The assessee succeeded on the principal transfer-pricing and treaty attribution dispute, while the challenge to interest also failed to survive, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where a dependent agent permanent establishment is already remunerated at arm's length price, no further profits are attributable to the foreign enterprise through that permanent establishment for tax purposes.

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