Dependent agent permanent establishment not found where distributors acted in their own name and lacked authority to bind the enterprise.

Whether a Denmark-resident software vendor had a dependent agent permanent establishment under Article 5(4) was decided by applying the Article's three alternative tests: habitual authority to conclude contracts, stock maintained for regular delivery, or habitually securing orders. The distributor agreements showed non-exclusive distributors purchasing and selling in their own name, acting as independent contractors, permitted to sell competitors' products, and allowed pricing within statutory MRP limits. Absent evidence that distributors habitually concluded contracts, held stock for the vendor, or secured orders substantially for the vendor, Article 5(4) conditions were not met and no PE was found.

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Issues: Whether the assessee, a Denmark resident selling software via Indian distributors and resellers, had a dependent agent permanent establishment (DAPE) in India under Article 5(4) of the India Denmark DTAA for AY 2022 23.

Analysis: Article 5(4) requires that a person acting in the State on behalf of the enterprise habitually exercises authority to conclude contracts on behalf of the enterprise, or satisfies the other alternative conditions (stock of goods for regular delivery; habitually secures orders). The distributor agreements on record grant non exclusive distribution rights, state that distributors purchase and sell in their own name and for their own account, and explicitly describe the parties as independent contractors not authorised to bind one another absent written authorisation. The agreement permits distributors to sell competitors' products and contains a reseller certification program limited to ensuring technical competence; the certification does not restrict distributors' freedom to select resellers. Price provisions permit distributors to set resale prices subject only to a lawful maximum retail price; this reflects statutory MRP requirements rather than supplier control over pricing. The assessing officer relied on website language suggesting software configurability and on asserted controls, but no material shows that distributors habitually concluded contracts on behalf of the assessee, maintained stock for regular delivery on the assessee's behalf, or habitually secured orders wholly or almost wholly for the assessee. Consequently, none of the conditions in Article 5(4)(a)-(c) are established on the factual record.

Conclusion: The assessee did not have a dependent agent permanent establishment in India under Article 5(4) of the India Denmark DTAA; therefore, no profits are attributable to a PE and the impugned assessment disallowance is set aside in favour of the assessee.

Ratio Decidendi: A non exclusive distributor arrangement where distributors purchase and sell in their own name and for their own account, may include reseller certification and a lawful maximum retail price clause, but absent evidence that distributors habitually conclude contracts on behalf of the foreign enterprise, maintain stock for regular delivery on its behalf, or habitually secure orders for it, the conditions of Article 5(4) for deeming a dependent agent permanent establishment are not satisfied.

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