Commission base and permanent establishment rules controlled the tax adjustment; profit attribution was deleted while one issue was remanded.

Commission on local content or equipment reimbursement depends on the distribution and representation agreement: where the schedule excludes local non-Varian supplies from the commission base, the reimbursement issue requires fresh factual verification and the adjustment does not stand without proper examination. On permanent establishment, the Indian branch was held not to be a dependent agent PE of the foreign group entity under the applicable treaty position, following the assessee's earlier years' ruling; profit attribution in India was therefore deleted on the accepted facts. The interest ground did not survive for adjudication.

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Issues: (i) Whether reimbursement received for local content/equipment was to be included in the commission base; (ii) Whether the assessee's Indian branch constituted a permanent establishment of the foreign group entity so as to permit attribution of profits in India.

Issue (i): Whether reimbursement received for local content/equipment was to be included in the commission base.

Analysis: The commission entitlement depended on the terms of the distribution and representation agreement, particularly the schedule dealing with commission computation. One version of the schedule stated that commission was to be calculated on sale value net of freight, insurance and other charges, while another expressly provided that where local non-Varian content was procured to fulfil an order, commission would not be computed on local supplies. The factual basis for including reimbursement in the gross sales figure was therefore not conclusively examined by the Assessing Officer.

Conclusion: The issue was restored to the Assessing Officer for fresh examination and verification; the addition did not survive at this stage.

Issue (ii): Whether the assessee's Indian branch constituted a permanent establishment of the foreign group entity so as to permit attribution of profits in India.

Analysis: The issue was covered by the Tribunal's earlier decision in the assessee's own case for prior assessment years, where it had been held that the Indian branch was not a dependent agent and did not constitute a permanent establishment of the foreign group entities under the relevant treaty provisions. Following that binding precedent, profit attribution in India could not be sustained on the facts accepted in the present year.

Conclusion: The assessee's Indian branch was not a permanent establishment of the foreign group entity, and the profit attribution addition was deleted.

Final Conclusion: The appeal succeeded only in part: one issue was sent back for reconsideration, while the profit-attribution addition was deleted and the interest ground did not survive for adjudication.

Ratio Decidendi: Commission cannot be computed on reimbursed local supplies where the governing agreement excludes such items from commission base, and profit attribution in India cannot be sustained absent a dependent-agent permanent establishment.

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