No permanent establishment in India meant no attribution of business profits under the India-US treaty framework.

No permanent establishment existed in India under Article 5 of the India-US DTAA because the Indian agents were independent, acted in the ordinary course of their business, were not wholly or almost wholly devoted to the assessee, and had no authority to conclude contracts on its behalf. The software used by the agents also did not create a fixed place PE. As a result, no business profits were attributable to Indian operations under Article 7, and the corresponding tax addition was unsustainable. The ground relating to interest under section 234B did not survive independently.

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Issues: Whether the assessee had a permanent establishment in India under Article 5 of the India-US Double Taxation Avoidance Agreement and, in the absence of such permanent establishment, whether the profits attributable to Indian operations and the corresponding tax demand could be brought to tax in India.

Analysis: The Tribunal followed its earlier co-ordinate bench decisions in the assessee's own case for prior assessment years and reiterated that the agents in India were independent agents. It held that the agents acted in the ordinary course of their business, their activities were not wholly or almost wholly devoted to the assessee, and the arrangements were at arm's length. The Tribunal further held that the agents did not have, and did not habitually exercise, any authority to conclude contracts on behalf of the assessee. The software used by the agents also did not create a fixed place permanent establishment. On these facts, the Tribunal found that there was no fixed place PE or dependent agent PE in India and, therefore, no basis to attribute business profits to Indian operations under Article 7. The related ground on interest under section 234B did not survive independently.

Conclusion: The permanent establishment contention failed and the addition based on attribution of profits in India was not sustainable; the assessee succeeded on the substantive taxability issue.

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