9911796707
TMI Blog2011 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The assessee is a company incorporated under the laws of the United Kingdom of Great Britain (UK) and is a tax resident of UK. The assessee is in the worldwide business of providing news and financial information products (Reuters Products). The news and financial information products are compiled and distributed by the assessee through the Reuters Global Network. The Reuters global network is a vast global communication network consisting of data storage facilities in three locations (i.e. London, New York and Singapore) linked by satellite links and terrestrial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business income. 5. According to the AO, the distribution fee is essentially a technical services provided by the assessee to Indian clients and rendered as 'on line computer services'. According to the Assessing Officer, the assessee's case is also covered by the Authority for Advance Ruling in the case of an American Co. (P. No. 30 of 1999, In re) [1999] 238 ITR 296/105 Taxman 240 (New Delhi). Based on this, the Assessing Officer held that the distribution fee under the DA is in effect a fee for transfer of electrical information and 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible to hold that RIPL was an independent agent of the assessee in India but as per the OECD commentary on Model Tax Convention on Income and Capital (April, 2000) a subsidiary company is a separate legal entity and therefore mere existence of a subsidiary company and the fact that its trade or business is managed by the parent company would alone not be sufficient to conclude that the subsidiary company is independent agent. The existence of the above fact should be coupled with power of the subsidiary company to habitually exercise authority 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. sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if the activities of such an agent are carried out wholly or almost wholly for the assessee then the agent shall be considered to be an agent of an independent status for the purposes of paragraph 5(5) of the DTAA. We are therefore unable to accept the plea in the miscellaneous application that the question of agency PE was never raised before the Bench at the time of hearing of the appeal. 14. The further plea of the assessee in the miscellaneous application is that the conclusion of the CIT(A) on the existence of Agency PE in the context of Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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