Fixed place permanent establishment test failed where visits were for stewardship and training, not core software business.

Under the India-USA DTAA, a fixed place permanent establishment was not established because the Revenue did not prove that the foreign enterprise's visiting employees carried on core software licence business from the Indian associated entity's premises, or that those premises were at its disposal for business use. The visits were found to be for shareholder, stewardship, training and marketing purposes, while service receipts were separately taxed. As the Revenue failed to discharge the burden of showing that the software licence income was earned through a PE in India, no part of that income was attributable to a permanent establishment.

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Issues: Whether the assessee had a fixed place permanent establishment in India under Article 5(1) read with Article 5(2) of the India-USA DTAA, and whether any part of the software licence income could be attributed to such alleged permanent establishment.

Analysis: The Revenue relied on the visits of employees of the foreign enterprise to the premises of its Indian associated entity and sought to characterise the premises as a fixed place PE. The material on record, however, did not establish that the visiting employees carried on the core business of sale or development of software licences from those premises, or that the premises were at their disposal for business use in the manner required for a fixed place PE. The visits were found to be for shareholder, stewardship, training, marketing and similar purposes, while the receipts from services were already offered to tax separately. The Revenue failed to discharge the burden of proving that the licence income was earned through a PE in India.

Conclusion: No fixed place permanent establishment in India was established, and no part of the software licence income was attributable to a PE; the issue was decided in favour of the assessee.

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