Dependent agency PE and secondment reimbursements under the India-USA DTAA turned on treaty conditions and make available requirements.

A foreign enterprise cannot be treated as having a dependent agency permanent establishment in India under Article 5 of the India-USA DTAA unless the Indian entity habitually concludes contracts, secures orders, maintains stock for delivery, or is otherwise wholly or almost wholly devoted to the enterprise on non-arm's-length terms; on the facts, those treaty conditions were not shown and the PE allegation failed. Reimbursement of salary costs for seconded employees was also not accepted as Fees for Technical Services on the existing record because the India-USA DTAA requires technical, managerial or consultancy services that make available technical knowledge, skill or process, and the contractual material was insufficient; that issue was remitted for fresh examination.

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Issues: (i) Whether SanDisk India could be treated as a Dependent Agency Permanent Establishment of the assessee under Article 5 of the India-USA DTAA and whether the assessee's India-linked income was taxable on that basis; (ii) Whether reimbursement of salary expenses for seconded employees constituted Fees for Technical Services under Article 12 of the India-USA DTAA and attracted tax deduction obligations under the Act.

Issue (i): Whether SanDisk India could be treated as a Dependent Agency Permanent Establishment of the assessee under Article 5 of the India-USA DTAA and whether the assessee's India-linked income was taxable on that basis.

Analysis: A dependent agency permanent establishment arises only where the Indian entity habitually concludes contracts, maintains stock for delivery, secures orders wholly or almost wholly for the foreign enterprise, or is wholly or almost wholly devoted to that enterprise on non-arm's-length terms. The record did not show material transactions between the assessee and SanDisk India satisfying these treaty conditions. The survey material used by the Revenue was also relied upon in the case of the Irish group entity, where the activities of SanDisk India were found to relate to that entity and not to the assessee. On the facts, there was no basis to treat SanDisk India as the assessee's dependent agent.

Conclusion: The allegation of Dependent Agency Permanent Establishment was not sustainable against the assessee.

Issue (ii): Whether reimbursement of salary expenses for seconded employees constituted Fees for Technical Services under Article 12 of the India-USA DTAA and attracted tax deduction obligations under the Act.

Analysis: For a payment to qualify as Fees for Technical Services under the India-USA DTAA, the services must be of a technical, managerial, or consultancy nature and must also make available technical knowledge, skill, or process to the recipient. The Tribunal held that the reimbursement could not be classified as Fees for Technical Services on the material available, but noted that the relevant agreement was not before it in a form sufficient to conclusively verify the contractual terms. In the absence of that agreement, the matter required fresh examination by the Assessing Officer.

Conclusion: The payment was not accepted as Fees for Technical Services on the existing record, and the issue was remitted for fresh adjudication.

Final Conclusion: The assessee succeeded on the permanent establishment issue, while the secondment reimbursement issue was sent back for reconsideration, resulting in a partly favourable outcome overall.

Ratio Decidendi: A foreign enterprise cannot be fastened with a dependent agency permanent establishment in India without treaty-specified agency functions being shown on its behalf, and a secondment reimbursement is not taxable as Fees for Technical Services unless the treaty's make available requirement is satisfied on the contractual record.

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