Arm's length remuneration can exhaust profit attribution, leaving no separate Indian tax on the same transactions through PE claims.

Where transactions with an associated enterprise are already benchmarked at arm's length, no further profit attribution in India is warranted merely on the basis of an alleged permanent establishment. The transfer pricing study was treated as capturing the functions and risks assumed by the assessee, so the same income could not be subjected to additional attribution under the PE framework. The principle applied is that an arm's length remuneration for the relevant transactions exhausts the profit attribution exercise for those transactions, leaving no separate basis for further Indian taxation on the same stream of income.

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Issues: Whether, once the transactions between the assessee and its associated enterprise were accepted at arm's length, any further income could still be attributed to the assessee in India on the basis of a permanent establishment.

Analysis: The arm's length principle was treated as exhaustive for the relevant transactions. Since the transfer pricing analysis showed that the assessee had been remunerated at arm's length for the functions and risks assumed, no further profits remained to be attributed in India on the PE basis. The decision followed the settled position that where the transfer pricing study adequately captures the functions and risks, separate attribution of additional profits is not warranted.

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

Final Conclusion: The assessee's cross objections were allowed on the core attribution issue, and the revenue's appeals were treated as academic or infructuous to that extent.

Ratio Decidendi: Where an associated enterprise is remunerated at arm's length for the functions and risks undertaken, no further profits can be attributed in India on the same transactions merely because a permanent establishment is alleged to exist.

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