Dependent agent PE requires real contract-concluding authority; marketing support alone is insufficient, so Indian tax attribution failed.

A dependent agent permanent establishment under Article 5(4) of the India-USA DTAA requires cogent evidence that the Indian entity habitually concludes contracts, secures orders, or otherwise acts as a real agent of the foreign enterprise; mere marketing support and back-end services on a principal-to-principal basis are insufficient. On the recorded agreements and facts, the Indian subsidiary had no authority to conclude contracts, did not maintain stock, and did not habitually secure orders, so the Revenue failed to discharge its initial burden to prove a PE. As the PE was not established, attribution of Indian business profits could not stand, and the consequential equalisation levy objection also fell away.

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Issues: Whether the Indian subsidiary constituted a dependent agent permanent establishment of the non-resident assessee under Article 5(4) of the India-USA DTAA and whether the receipts from software-based solutions were taxable in India as business profits.

Analysis: The agreements placed on record showed that the Indian entity provided only marketing support and back-end services and did not act as an agent authorised to conclude contracts on behalf of the foreign enterprise. The relationship was on a principal-to-principal basis, and the record did not show authority to conclude contracts, maintenance of stock, or habitual securing of orders by the Indian entity. The burden to establish a permanent establishment lay initially on the Revenue, and that burden was not discharged on the contractual and factual material examined. Since the alleged PE was not established, the attribution of Indian business profits to the assessee could not stand. The equalisation levy objection was also treated as consequential to the finding on permanent establishment.

Conclusion: The Indian subsidiary was not a dependent agent permanent establishment of the assessee, and the receipts were not chargeable to tax in India on that basis.

Final Conclusion: The additions made by treating the receipts as taxable business profits in India were unsustainable, and the appeals succeeded.

Ratio Decidendi: A dependent agent permanent establishment arises only where the Indian entity is shown, on cogent material, to habitually conclude contracts, secure orders, or otherwise act as a real agent of the foreign enterprise; mere marketing or support functions on a principal-to-principal arrangement are insufficient.

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