Dependent agent permanent establishment yields no further attribution where the Indian agent is already paid arm's length remuneration.

No taxable permanent establishment was established on the facts because the foreign enterprise did not have a fixed place of business at its disposal in India under Article 5(1) or Article 5(2). Even on the Revenue's alternative case of a dependent agent permanent establishment under Article 5(4), Article 7 permitted attribution only of profits actually attributable to that PE, and no further income could be attributed where the Indian agent had already been remunerated at arm's length for the functions performed and risks assumed. A remand to re-examine the agent's remuneration was declined because the record showed no specific deficiency in the existing compensation. The arrangement was therefore tax-neutral and no additional income was taxable in India.

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Issues: Whether the assessee had a taxable permanent establishment in India and, if a dependent agent permanent establishment existed, whether any further profits could be attributed to it when the Indian agent had already been remunerated on an arm's length basis.

Analysis: The factual analysis did not establish a fixed place of business at the disposal of the foreign enterprise, so a permanent establishment could not be sustained under the basic rule in Article 5(1) or the listed-places rule in Article 5(2). On the Revenue's own case, at best the matter concerned a dependent agent permanent establishment under Article 5(4). For attribution under Article 7, the decisive principle applied was that profits of the foreign enterprise are taxable in the source state only to the extent attributable to the permanent establishment, and where the Indian agent has been paid arm's length remuneration for the functions performed and risks assumed, nothing further remains to be attributed to the foreign enterprise. The request for remand to re-examine arm's length remuneration was declined because the record did not show any specific deficiency in the remuneration already paid to the agent.

Conclusion: Even assuming the existence of a dependent agent permanent establishment, the arrangement was tax-neutral and no additional income was taxable in the hands of the assessee.

Ratio Decidendi: A dependent agent permanent establishment does not lead to further taxable profits in India where the Indian agent has already been compensated at arm's length for the relevant functions, assets and risks, and no separate profit attribution survives beyond that remuneration.

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