2011 (9) TMI 108 - AT - Income Tax

Rectification of certain apparent errors of Understanding - Agent acts independently in the ordinary course of his business, if they devote their activities wholly or mostly wholly on behalf of the foreign enterprise, they would be considered independent agents and would be PE of the foreign enterprise irrespective of whether they conclude contracts binding on their principal or not. Held that - Tribunal s conclusions are based on its opinion therefore dismissal miscellaneous application, it does not disclose any apparent error in the order of the Tribunal. decided against Assessee.

Summary

Issues Involved:
Taxability of payments under Distributor Agreement (DA) - Whether business profits or Fees for Technical Services (FTS)?
Existence of Permanent Establishment (PE) in India for the Assessee.

Analysis:
1. The Assessee filed a miscellaneous application under Section 254 of the Income Tax Act, 1961, seeking rectification of errors in the Tribunal's order related to the taxability of payments under the Distributor Agreement (DA).
2. The Assessee, a UK company, provides news and financial products globally through the Reuters Global Network. Payments under the DA were the main issue, with the Assessee contending they were business profits not taxable in India due to lack of PE as per the India-UK Treaty.
3. The Assessing Officer treated the distribution fee under the DA as Fees for Technical Services (FTS) and considered it taxable. He viewed the Assessee's Indian subsidiary as a dependent agent, constituting a PE in India.
4. The CIT(A) held that the distribution fee was business profits, not royalty or FTS. The Revenue challenged the lack of PE finding before the Tribunal.
5. The Tribunal directed a fresh examination by the AO regarding the existence of a Service PE under Article 5(2)(k) of the DTAA, as it was not previously explored.
6. The Tribunal disagreed with the CIT(A)'s findings on the conditions for an Agency PE under Article 5(4) and 5(5) of the DTAA, leading to a fresh examination request.
7. The Assessee alleged that the Tribunal misunderstood the CIT(A)'s findings on Agency PE and sought a rehearing, which the Tribunal rejected.
8. The Tribunal upheld its original decision, stating the Assessee's plea did not reveal any apparent mistake in the order, dismissing the miscellaneous application.

This detailed analysis covers the key issues of taxability under the DA and the presence of a PE in India, highlighting the arguments, decisions, and subsequent Tribunal rulings in the case.