Fixed place permanent establishment not made out where secondees only supported subsidiary operations; estimated attribution deleted.

Expatriate employees seconded to an Indian subsidiary did not create a fixed place permanent establishment under Article 5 of the India-Korea DTAA because their activities were confined to the subsidiary's operations, coordination, and reporting, with no proof that the assessee's own core business decisions were carried on in India. The estimated attribution based on 10% of the seconded employees' remuneration cost therefore lacked any surviving basis and was deleted. The claim for tax deducted at source credit was not decided finally and was remanded to the Assessing Officer for verification and consequential grant in accordance with law.

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Issues: (i) Whether expatriate employees seconded to the Indian subsidiary constituted a fixed place permanent establishment of the assessee in India under Article 5 of the India Korea DTAA; (ii) Whether the estimated addition based on 10% of the remuneration cost of the seconded employees could survive; (iii) Whether credit for tax deducted at source required verification and grant.

Issue (i): Whether expatriate employees seconded to the Indian subsidiary constituted a fixed place permanent establishment of the assessee in India under Article 5 of the India Korea DTAA.

Analysis: The material showed information exchange and coordination between the assessee and the subsidiary, but the activities performed by the seconded employees related to the subsidiary's business operations, market understanding, product preferences, logistics, and related reporting functions. There was no proof that any core management activity of the assessee was carried on in India, or that business decisions of the assessee regarding product manufacture, pricing, or launch were taken in India through those employees. A fixed place permanent establishment requires a place of business through which the assessee's own business is wholly or partly carried on, which was not established on the facts.

Conclusion: No fixed place permanent establishment was constituted through the seconded expatriate employees, and this issue was decided in favour of the assessee.

Issue (ii): Whether the estimated addition based on 10% of the remuneration cost of the seconded employees could survive.

Analysis: The estimated attribution was made only on the premise that a permanent establishment existed and that income could be determined by applying a 10% mark-up on the remuneration cost of the seconded employees. Once the finding on permanent establishment failed, there remained no basis for estimating any income attributable to such alleged establishment.

Conclusion: The estimated addition did not survive and was deleted, in favour of the assessee.

Issue (iii): Whether credit for tax deducted at source required verification and grant.

Analysis: The claim for tax deducted at source credit was not finally adjudicated on merits but was directed to be verified by the Assessing Officer in accordance with law.

Conclusion: The issue was restored to the Assessing Officer for verification and consequential credit, and the assessee obtained a limited remand relief.

Final Conclusion: The appeal succeeded on the core permanent establishment and profit attribution controversy, while the tax credit claim was sent back for verification; the matter was accordingly disposed of partly in favour of the assessee.

Ratio Decidendi: For a fixed place permanent establishment to exist, the non-resident's own business must be carried on through a place of business in India, and activities confined to the subsidiary's business or internal coordination do not establish such a permanent establishment.

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