TaxTMI 
TaxTMI 
2025 (11) TMI 473
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....hment (PE) in India under the India-Netherlands DTAA and that income is attributable to its PE in India. 4. The AO/DRP erred in holding that a sum of Rs. 37.63 Lakhs claimed over and above the salary cost would constitute profits attributable to the Permanent Establishment (LO) as per paragraph 7(2) r.w. paragraph 7(3) of the India-Netherlands DTAA and that such, attribution amounting to about 12.27% is just and reasonable. 5. The order of the AO/DRP is bad in law inasmuch as the same has been passed on several factually incorrect findings which are perverse and contrary to the facts on record. The true facts are as submitted in the Statement of Facts annexed hereto. 6. The order of the AO/DRP is bad in law inasmuch as has been passed on several factually incorrect findings without giving an opportunity to the Assessee to rebut the same. 7. The assessment order is bad-in-law as being bared by limitation. 8. The Assessing Officer as well as the DRP erred in making assessment under the status of 'non-resident but applying the provisions pertaining to a resident entity 9. The case was selected for scrutiny for wrong reasons and....
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....le in Oxbow's decision making and have no authority to sign any business documents such as contract or agreements. The liaison office maintains duly audited annual accounts and files income tax returns and is compliant with the local regulations. The liaison office or Oxbow Group do not have any agents in India. It does not hold any stocks or inventory and do not provide any service to customers." 3. The assessee also submitted that information is gathered from cement manufactures and publications with regard to petroleum-coke and the details of information sought by the LO are: (i) Rendered view of the Indian economy (ii) What opportunities and threats do they see (iii) There annual plan- how they see the revenue growth (iv) Impact on cost- particularlyfuel cost, any anticipated changes in fuel mix (v) Balance between domestic and imported fuels 4. The AO did not accept the submissions of the assessee with regard to existence of PE in India for the reason that the assessee is employed highly qualified people in India and the services cannot be held as merely auxiliary and preparatory work.The AO further held that the assessee ....
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....f LO i.e. gathering of information and sending reports to parent company, although permitted by RBI, are integral to the trade which is carried out by the parent company and cannot be characterized as being merely 'preparatory or auxiliary' in nature due to which Article 5(4)(e) and 5(4) )f) of DTAA with Netherland are not applicable and LO becomes a fixed place to PE of the foreign company. The ld DR further submitted that the assessee has a business connection in the form of a fixed base that is provided by LO in India, because LO has continued its operations in India for a long period of time. The ld DR also submitted that the operation of LO i.e. gathering of information and sending reports to parent company, is covered under "Business Analytics and Market Research" and hence safe harbour rules prescribed for the said activity can be used to estimate the profit attributable to the PE using Rule 10. Accordingly the ld DR supported the orders of the lower authorities. 7. We heard the parties and perused the material on record. The assessee is part of the Oxbow group which is engaged in international trade mainly of petroleum-coke but occasionally also of coal and metal....
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....ated as PE we will examine what activities would be considered as preparatory or auxiliary. As per the Article 5(1) of DTAA between India and Netherlands "permanent establishment" means a fixed place of business through which the business of the enterprise is wholly or partly carried on. Further Article 5(4) read with Paragraph 2 of Article 13 of MLI provides that the term "permanent establishment" shall be deemed not to include the maintenance of fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for other activities which had preparatory or auxiliary character, for the enterprise. 9. The OECD BEPS project included Action 7 which recommended the development of changes to the PE definition in Article 5 of the OECD Model Tax Convention (MTC) and these changes were applied under a new treaty or through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), potentially under an existing treaty. The changes aimed to prevent the artificial avoidance of PE status, including through the specific activity exemptions of Article 5(4) in certain circumstances. The OECD specifically w....
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.... a complimentary function that are part of a cohesive business operation in India, the activities of the LO would fall within the exception as provided in Article 5(4) read with the MLI would apply to assessee's case. We also notice that the revenue has held the activities of the assessee as not preparatory or auxiliary on the ground that the LO has been carrying its activities for a long time and that LO is not merely gathering information. This contention in our considered view is not tenable, since neither the LO nor the subsidiary is concluding any business activity in India using the information collected. Further the employees of the LO are not authorised to conclude any business contracts nor have any signing authority. We also notice that the lower authorities have recorded a finding that the assessee failed to furnish details of parties with which business has been conducted in India without considering the submission that the assessee has not conducted any business in India. The requirement as demanded by the revenue would mean substantiating a negative fact which cannot be done and accordingly the conclusion drawn based on the said finding cannot be sustained. 11.....