Independent agent status under the India-Mauritius treaty prevented a permanent establishment finding and blocked Indian taxation.

Indian shipping agents were found to be agents of independent status under Article 5(5) of the India-Mauritius tax treaty because they served multiple shipping principals and earned only a small part of their business from the assessee. On those facts, they were not treated as a permanent establishment in India. As no PE existed, the assessee's business profits were not taxable in India under Article 7, and the addition was deleted.

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Issues: Whether the assessee's Indian shipping agents constituted a permanent establishment under Article 5 of the India-Mauritius tax treaty, and if not, whether the shipping income was taxable in India under Article 7.

Analysis: The assessee's challenge to denial of Article 8 benefit was not pressed, but the alternative issue of taxability under Article 7 survived. The determining question was whether the Indian agents were dependent agents or agents of independent status. The record showed that the agents rendered services to several shipping principals and that the commission received from the assessee formed only a small part of their total business. On those facts, the agents were found to be acting in the ordinary course of their business and not exclusively for the assessee. Accordingly, the exception in Article 5(5) applied and they could not be treated as a permanent establishment of the assessee in India.

Conclusion: The assessee did not have a permanent establishment in India, and its business profits were not taxable in India under Article 7. The addition was deleted.

Ratio Decidendi: Where an Indian agent provides services to multiple principals in the ordinary course of business and is not devoted exclusively to the foreign enterprise, the agent is of independent status under Article 5(5) and does not constitute a permanent establishment.

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