TaxTMI 
TaxTMI 
2020 (3) TMI 500
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....nce, facts of Income Tax Appeal No.1984 of 2017 which pertains to earlier assessment year i.e., assessment year 2004-05 are being considered. 6. This appeal has been preferred by the Revenue under Section 260A of the Income Tax Act, 1961 (briefly 'the Act' hereinafter). 7. Though three questions have been proposed in the appeal, Mr. Singh fairly submits that appellant would press the third question i.e. question No.(c), which reads as under: "(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in holding that there was no agency Permanent Establishment in the form of Taj India without appreciating that the transaction between the assessee and Taj India could not be said to be on principle to principle basis?" 8. To appreciate the controversy in question, a brief recital of the facts is considered necessary. 9. Respondent - assessee is a registered company in Mauritius and is a tax resident of that country. Assessee is engaged in telecasting the sports channel called "Ten Sports". Assessee has appointed Taj Television (India) Private Limited, referred to hereinafter as 'Taj India', as its advertising sales agent in India....
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....Taj India had the exclusive right to represent the assessee before the distribution systems / cable operators and to negotiate and procure cable distribution licence agreement for the service as authorized by the assessee. Distribution revenue collected by Taj India was shared in the ratio of 60:40 by the assessee and Taj India. Therefore, assessing officer held that the assessee had a Permanent Establishment in India and the subscription revenue was taxable as business income. 13. Aggrieved by the above, assessee preferred appeal before the Commissioner of Income Tax (Appeals)-XXXI, Mumbai, referred to hereinafter as the 'first appellate authority'. In the appellate proceedings, the first appellate authority considered the two aspects i.e., collection of advertisement revenue and revenue earned from distribution of pay channel. 13.1. Regarding collection of advertisement revenue, the first appellate authority considered the agreement dated 08.05.2002 as well as findings returned by the assessing officer. Thereafter, it was held that Taj India was fully dependent on the assessee for its business. Taj India was therefore, a dependent agent. Consequently, after considering ....
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....dently qua its distribution rights and the entire agreement was on principal to principal basis. Therefore, the distribution income by the assessee could not be taxed in India because Taj India did not constitute an agency Permanent Establishment under the terms of the said Article. This finding of the first appellate authority was upheld and the challenge made thereto by the Revenue was dismissed. 15.1. Hence, the Revenue is before us in appeal. Assessee has not preferred further appeal against dismissal of its appeal. 16. Learned counsel for the parties have made detailed submissions and have taken us to the orders passed by the authorities below. They have also referred to the various provisions of the DTAA, more particularly clause 5 thereof. 17. Submissions made by learned counsel for the parties have been considered; also perused the materials on record. 18. At the outset, we may advert to the DTAA entered into between India and Mauritius. The said agreement was entered into between the two countries for avoidance of double taxation and for prevention of fiscal evasion with respect to taxes on income and capital gains and also to encourage mutual trade and investment. The....
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....in a contracting State for or on behalf of an enterprise of the other contracting State shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if the two conditions are fulfilled. Firstly, he has and habitually exercises in the first-mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise. Secondly, he habitually maintains in that first mentioned State, a stock of goods or merchandise belonging to the enterprise from which he regularly fulfills orders on behalf of the enterprise. Thus, the sum and substance of clause 4 of Article 5 is that a person acting in a contracting State on behalf of an enterprise of the other contracting State shall be deemed to be a permanent establishment of that enterprise in the first-mentioned contracting State if he habitually exercises in the first contracting State an authority to conclude contracts in the name of the enterprise and he habitually maintains in the first contracting State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfills orders on beh....
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....tained right of distribution of TV channel for itself and subsequently it is entering into contract with other parties in its own name. This fact is proved by the cable sub-distribution agreement dated 11.03.2002 entered into between Taj India and HMA Udyog Ltd., which has appointed HMA Udyog Ltd. as sub-distributor in India. As per the agreement, 75% of the revenue would be the income of Taj India and balance 25% would be the income of HMA Udyog Ltd. In this agreement appellant does not figure anywhere. Agreement is entered into between Taj India and HMA Udyog for distribution of TV channel 'Ten Sports' in India. Subsequently, agreement is entered into between cable operators and sub-distributor. A sample copy has been filed of agreement dated 12.10.2002 between Agny Associates and Mr. Prakash S. for the distribution of TV channel on the cable network. Neither the appellant nor Taj India appear anywhere in the agreement. Therefore, from the perusal of the distribution agreement, sub-distribution agreement and the cable operator agreement, it becomes very clear that appellant has given the distribution rights to Taj India for promoting and distributing the TV channel in India on pr....
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....r was set aside. 23. In further appeal before the Tribunal, it was held as under: "17. We have carefully considered the entire gamut of facts as discussed in the impugned orders, rival submissions made before us, materials relied upon and the decisions relied upon. The assessee company is incorporated and registered under the Mauritius Law and is also the Tax Resident of Mauritius, therefore, qua its various streams of income, India-Mauritius DTAA has to be seen. The assesee is engaged in the business of telecasting sports channel called "Ten Sports" and for generating revenue, it has been collecting advertisement revenue and distribution of channel in India. It has appointed Taj India as its advertising sales agent to sell commercial slot / spot to the prospective advertisers and other parties in India in connection with the business of programming and telecasting of 'Ten Sports' Channel. As per the agreement, commission @ 10% of the advertisement revenue was paid to Taj India. The assessee has claimed that, such an income is not taxable in India, because there is no PE in India as Taj India is not a dependent agent of the assessee within the terms of Article 5(4). This content....
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.... and habitually exercises in that first-mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (ii) he habitually maintains in that first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfills orders on behalf of the enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted exclusively or almost exclusively on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 6. The fact that a company, which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Contracting State ....