Independent distributor without authority to conclude contracts does not create an agency permanent establishment under tax treaty rules.

Taj India was held not to be an agency permanent establishment of the foreign assessee under Article 5(4) of the India-Mauritius DTAA because the distributor acted independently on a principal-to-principal basis, with authority only to market and promote the channel and to enter arrangements in its own name. The Tribunal and first appellate authority found that Taj India did not habitually conclude contracts in the assessee's name and that the conditions for a dependent agent were absent. Those concurrent factual findings were not shown to be perverse, so no substantial question of law arose and the Revenue's challenge failed.

---

---

Issues: Whether Taj India constituted an agency permanent establishment of the assessee in India under Article 5(4) of the India-Mauritius Double Taxation Avoidance Agreement for the distribution income, so as to make that income taxable in India.

Analysis: The distribution agreement showed that Taj India was appointed as the exclusive distributor in India, with authority to market and promote the channel and to enter into arrangements in its own name. The first appellate authority and the Tribunal both found, on a reading of the agreements and the conduct of the parties, that Taj India was acting independently in relation to its distribution rights and that the relationship was on a principal-to-principal basis. It was also found that Taj India did not habitually exercise authority to conclude contracts in the name of the assessee, nor did the conditions necessary to treat it as a dependent agent under Article 5(4) exist. The finding was a concurrent finding of fact and no perversity was shown.

Conclusion: Taj India did not constitute an agency permanent establishment of the assessee for the distribution income, and that income was not taxable in India on that basis.

Final Conclusion: No substantial question of law arose from the Tribunal's order, and the Revenue's challenge failed.

Ratio Decidendi: Where the distributor acts independently under a principal-to-principal arrangement and lacks authority to habitually conclude contracts in the name of the foreign enterprise, no agency permanent establishment arises under Article 5(4).

---