Arm's length pricing bars further profit attribution to an alleged Indian permanent establishment on the same income stream.

Where related-party remuneration for the Indian subsidiary was accepted as arm's length, no further profits could be attributed to the foreign enterprise's alleged Indian permanent establishment on the same income stream. The ITAT followed its earlier order in the assessee's own case and treated the arm's length pricing as sufficient to rule out additional attribution of income in India. The Tribunal also noted that the subsidiary's profitability exceeded the benchmark later reflected in the APA, which supported the conclusion that no further adjustment was justified. The addition for profit attribution was deleted in favour of the assessee, while the penalty ground did not yield substantive relief.

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Issues: Whether any further profits could be attributed in India to the assessee's alleged permanent establishment when the remuneration to the Indian subsidiary was found to satisfy the arm's length principle.

Analysis: The arrangement between the foreign assessee and its Indian subsidiary provided for sharing of receipts on a 50:50 basis. The Tribunal followed its earlier decision in the assessee's own case and applied the principle that once the relevant transaction is accepted at arm's length, no further profits can be attributed merely because a permanent establishment is alleged to exist in India. The Tribunal also noted that the subsidiary's profitability for the year exceeded the benchmark indicated by the later APA, reinforcing that no additional attribution was justified.

Conclusion: No further income could be attributed to the assessee in India, and the addition made on account of alleged profit attribution was deleted in favour of the assessee.

Final Conclusion: The assessment addition based on further attribution of profits to the alleged Indian permanent establishment was set aside, while the penalty ground was not granted substantive relief.

Ratio Decidendi: Where the related-party remuneration is accepted at arm's length, further profits cannot be attributed to the foreign enterprise's Indian permanent establishment on the same income stream.

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