Profit attribution must reflect actual branch participation; MAT credit claim required factual verification and remand.

Profit attribution to an Indian Permanent Establishment must follow the actual functional role in each transaction and the supporting evidence. On the disputed merger and acquisition executions, the record showed material involvement of the UK office, including email communications and the location of counterparties, and the attribution pattern in other transactions supported shared allocation where a branch played a significant role; the proposed addition was therefore deleted. The MAT credit claim was treated as a computational matter requiring factual verification, so the issue was restored to the assessing authority for examination and grant in accordance with law.

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Issues: (i) Whether the addition of profit attributable to the Indian Permanent Establishment on account of the execution component in two merger and acquisition transactions was sustainable; (ii) whether the assessee was entitled to grant of MAT credit.

Issue (i): Whether the addition of profit attributable to the Indian Permanent Establishment on account of the execution component in two merger and acquisition transactions was sustainable.

Analysis: The revenue attribution model adopted by the assessee allocated receipts between origination and execution functions and further apportioned them between branches based on actual participation. For the two disputed transactions, the record showed material involvement of the UK office, supported by email communications and the location of the counterparties. The pattern of attribution in other transactions also indicated that where a branch played a significant role, the revenue was shared accordingly. The departmental authorities were therefore not justified in treating the entire execution component as attributable only to India.

Conclusion: The addition on account of attribution of profit to the Indian Permanent Establishment was deleted.

Issue (ii): Whether the assessee was entitled to grant of MAT credit.

Analysis: The claim was raised as a computational issue arising from non-grant of credit under the minimum alternate tax provisions and required factual verification by the assessing authority.

Conclusion: The matter was restored to the assessing authority for factual verification and grant of MAT credit in accordance with law.

Final Conclusion: The appeal succeeded on the substantive attribution dispute, while the MAT credit claim was directed to be examined and allowed subject to verification, resulting in a partial relief to the assessee.

Ratio Decidendi: Profit attribution to a branch must follow the actual functional role and supporting evidence for each transaction, and an addition cannot be sustained where the record shows substantive participation by another branch in the disputed activity.

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