Business profits under the India-USA DTAA cannot be taxed in India without a permanent establishment.

Receipts from talent-booking and coordination services were held to be business profits arising from the assessee's ordinary branding and talent-booking business, not "other income" under the treaty. Because the income was covered by the business profits article of the India-USA DTAA, the residuary article could not be used to recharacterise it merely because the Assessing Officer disputed the transaction's attributes. In the absence of a permanent establishment in India, the profits were not taxable in India, and the addition treating the receipts as other income under the Act and treaty was unsustainable.

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Issues: Whether the receipts from talent-booking and coordination services constituted business profits or other income, and whether such receipts were taxable in India in the absence of a permanent establishment.

Analysis: The assessee was engaged in an established business of branding and talent-booking agency services and had no permanent establishment in India. The transaction with the Indian customer was found to be part of that business activity. Article 7 of the India-USA DTAA governs business profits and taxes such profits only in the source State when the enterprise carries on business there through a permanent establishment. Article 23 is residuary and applies only to income not dealt with by other treaty articles. Since the receipts were not fees for technical or included services and were derived from the assessee's business, they could not be shifted to the residuary head of other income merely because the particular transaction lacked the attributes relied upon by the Assessing Officer.

Conclusion: The receipts were business profits and were not taxable in India in the absence of a permanent establishment; the issue was decided in favour of the assessee.

Final Conclusion: The addition treating the receipts as other income under the treaty and the Act could not be sustained, and the assessee was entitled to relief.

Ratio Decidendi: Where a non-resident's receipts arise from its ordinary business of furnishing services and the income is covered by the business profits article of the applicable treaty, the residuary other-income article cannot be invoked, and taxation in the source State requires the existence of a permanent establishment.

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