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2022 (2) TMI 703 - AT - Income TaxIncome accrued or deemed received in India - Permanent Establishment in India - profits attributable to operation in India - income earned by the assessee from the business of money-transfer services in respect of remittances made to individuals in India is not liable to tax in India - India - USA DTAA - HELD THAT - As decided in own case 2021 (9) TMI 1169 - ITAT DELHI agents engaged by the assessee were independent agents under Article-5(4) of the India US-DTAA and they did not have the necessary authority to conclude the contracts of the assessee and, on that premise, it was held that there is no agency PE of the assessee in India. Under similar circumstances, the Co-ordinate Bench of the Tribunal held that though the assessee had business connection, it did not have any fixed placed PE nor agency placed PE in India, and, in the absence of any such PE in India, the profits, if any, attributable to India operations could not be assessed as business profits under Article-7 of the India US DTAA. - Decided against revenue.
Issues Involved:
1. Taxability of income from money-transfer services in India. 2. Existence of a Permanent Establishment (PE) in India. 3. Classification of software application as PE. 4. Classification of representatives as Dependent Agent PE. 5. Attribution of profits to India. Detailed Analysis: 1. Taxability of Income from Money-Transfer Services in India: The revenue contended that the income earned by the assessee from money-transfer services in respect of remittances made to individuals in India should be liable to tax in India. However, the CIT(A) held that such income is not taxable in India. The Tribunal upheld the CIT(A)'s decision, noting that this issue had been consistently decided in favor of the assessee in earlier assessment years. 2. Existence of a Permanent Establishment (PE) in India: The revenue argued that the assessee had a PE in India, making the profits attributable to operations in India taxable under Article 7 of the India-USA DTAA. The CIT(A) disagreed, stating that the assessee did not have a PE in India. The Tribunal supported this view, referencing past decisions where it was concluded that the assessee had neither a fixed place PE nor an agency PE in India. The agents were considered independent agents under Article 5(4) of the India-US DTAA, lacking the authority to conclude contracts on behalf of the assessee. 3. Classification of Software Application as PE: The revenue claimed that the software application installed on the agents' machines constituted a PE. The Tribunal, following earlier rulings, held that the software merely facilitated access to the assessee's mainframe computers in the USA and did not constitute a PE. The premises where the software was installed were not under the control of the assessee, and the software was not used for the exploration of natural resources, which is a requirement under Article 5.2(j) to qualify as a PE. 4. Classification of Representatives as Dependent Agent PE: The revenue's position was that the representatives of the assessee in India constituted a Dependent Agent PE. The Tribunal found that the agents were independent under Article 5.5, as they acted in the ordinary course of their business, were not economically dependent on the assessee, and the transactions were at arm's length. The agents did not have the authority to conclude contracts on behalf of the assessee, nor did they habitually exercise such authority. 5. Attribution of Profits to India: The revenue argued that profits should be attributed to India based on the business activities carried out through the PE. The Tribunal, referencing consistent past rulings, held that in the absence of a PE, no profits attributable to Indian operations could be assessed as business profits under Article 7 of the India-US DTAA. Consequently, the CIT(A)'s decision not to attribute any profits to India was upheld. Conclusion: The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s findings on all counts. The order was pronounced in the open court on 14.02.2022, in the presence of both rival representatives.
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