TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 108
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....errestrial lines. It is one of the world's largest privately owned electronic networks of its kind. The assessee uses this network to receive information, to transmit information and provide access to subscribers of the Reuters products. The assessee provides Reuters Products to its Indian subsidiary, Reuters India Limited (RIL) under certain specified agreements, as explained below. RIL then distributes the Reuters products to Indian subscribers independently in its own name. Contractual Agreements with RIL : 1. Distributor Agreement (DA) : The assessee entered into a DA, dated 6.9.1995, with RIL under which, RIL has been appointed to sell designated Reuters products to subscribers in India, using the Reuters global network. Under the DA, inter alia, the assessee provides RIL a connection to the Reuters global network whereby Reuters products are made available to RIL, which are then distributed by RIL to various subscribers in India. In consideration for the same, RIL pays to the assessee distribution fees of 65% of the subscription revenues derived by RIL from the Indian subscribers. 2. Product Distribution Agreement (PDA) and:- In addition to the DA, the as....
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.... accordingly is taxable as per Article 13 of the India-UK Treaty at the rate of 20% on a gross basis. Further the Assessing Officer proceeded to treat RIL as a dependent agent of the assessee on the basis that RIL has conducted business only for the assessee in India. In his order, the Assessing Officer has further held that RIL has all authority to make the assessee's product in India and can execute contracts with Indian clients and render them services. Based on this, the Assessing Officer held that RIL is to be considered a dependent agent of the assessee and hence constitute assessee's PE. Accordingly, the Assessing Officer applying the decision in the case of Bechtel Finance, AAR 213 of 1995 to the assessee's case held that the distribution fee received by the assessee is essentially FTS received by it through a PE (i.e. through dependant agent, RIL). Accordingly, such FTS are to be computed in accordance with section 44D of the Act and the entire receipt would be taxed on gross basis at the rate of 20% under section 115A of the Act. 6. Before CIT(A), the Assessee raised two issues viz., (i) Whether RIPL can be treated as deemed PE of the assessee in India. If the answer is ....
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....y to conclude contracts in the name of or on behalf of the parent company. He held that the second condition viz., power of the subsidiary company (RPIL) to habitually exercise authority to conclude contracts in the name of or on behalf of the parent company (assessee). In other words, he held that Article 5(4) will govern Article 5(5) also and that they are not both separate clauses. This conclusion is based on the OECD commentaries as already stated. 9. On revenue's appeal before the Tribunal, the only question was whether the conclusions of the CIT(A) that there was no PE of the assessee in India is correct or not. 10. The Lr.D.R. submitted that in AY 98-99 in the case of the assessee it was held that there was a Service PE within the meaning of Article 5 (2)(k) of the DTAA. Since neither the AO or the CIT(A) had examined the issue in the light of Article 5(2)(k) of the DTAA, it was submitted that the matter should be directed to be examined by the AO afresh. This request was accepted by the Tribunal. Against this part of the Tribunal, the assessee is in appeal before the Hon'ble Bombay High Court. 11. With regard to existence of Agency PE, the Tribunal held that the findings....
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....le 5(5) of the DTAA are correct and the Tribunal erroneously assumed that there was a contradiction in the findings of the CIT(A). The tribunal erred in giving its conclusion that there was no definite finding on the issue of existence of Agency PE in the context of Article 5(5) of the DTAA either by the AO or the CIT(A). It has further been reiterated that Article 5(4) will govern Article 5(5) also and that they are not both separate clauses. It has also been stated that the Tribunal failed to note this finding of the CIT(A) in giving its conclusion that there is a contradiction in the findings of the CIT(A) regarding existence of a PE under Article 5(5) of the DTAA. 15. We have considered the submission of the learned counsel for the assessee who reiterated the plea of the assessee as put forth in the miscellaneous application. His plea was that the part of the order which deals with the existence of agency PE in terms of Article 5(5) of the DTAA should be recalled and heard afresh as it suffers from an incorrect assumption that there was no definite finding on the issue of existence of Agency PE in the context of Article 5(5) of the DTAA by the CIT(A). 16. The learned D.R. sub....