Permanent establishment upheld, but profit attribution to the Indian branch was remanded for recomputation.

A permanent establishment in India under the India-US DTAA was upheld because earlier years' findings in the assessee's own case had already treated the Indian branch as a taxable presence, and the preparatory or auxiliary activity argument was rejected. Profit attribution to the Indian branch was not finally determined; following prior year directions, the matter was restored to the Assessing Officer for fresh recomputation in line with earlier appellate decisions. The appeal was therefore partly allowed, with the related revenue grounds disposed of for statistical purposes.

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Issues: (i) Whether the assessee had a permanent establishment in India under the India-US Double Taxation Avoidance Agreement. (ii) Whether the profits attributable to the branch in India required fresh recomputation.

Issue (i): Whether the assessee had a permanent establishment in India under the India-US Double Taxation Avoidance Agreement.

Analysis: The assessee's objection to the existence of a permanent establishment was rejected in view of the earlier years' findings in the assessee's own case, where the branch in India had already been held to constitute a permanent establishment under the relevant treaty provisions. The plea that the Indian operations were only preparatory and auxiliary, and therefore insufficient to create a taxable presence, was not accepted.

Conclusion: The existence of a permanent establishment in India was upheld against the assessee.

Issue (ii): Whether the profits attributable to the branch in India required fresh recomputation.

Analysis: On attribution of profits, the Tribunal followed its earlier decisions in the assessee's own case for preceding assessment years and directed that the income be recomputed by the Assessing Officer in accordance with those decisions. The dispute on comparables and profit attribution was therefore not finally determined by the Tribunal itself in this round and was restored for recomputation. The related revenue grounds were also treated as allowed for statistical purposes because the matter on attribution had been sent back.

Conclusion: The profit attribution issue was set aside and restored to the Assessing Officer for recomputation.

Final Conclusion: The assessee failed on the permanent establishment issue, but succeeded in obtaining a remand on the profit attribution question, resulting in a partial allowance of the appeal with the connected revenue appeal disposed of for statistical purposes.

Ratio Decidendi: Where the existence of a permanent establishment has already been conclusively found in earlier years on materially identical facts, that finding can be followed, while the quantum of profit attributable to the permanent establishment may still be remanded for recomputation in accordance with the governing appellate directions.

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