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TMI Blog2017 (1) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... greements on behalf of the assessee; instead they merely signed them as witnesses. These could not per se or by themselves amount to a business connection as to create a PE in India. The DTAA clearly envisions that offices that perform auxiliary and preparatory services are not to be treated as business connection. In the present context, the expression means carrying on activities, other than the main business functions, that aid and support the assessee. In the context of the contracts in question, where the main business is insurance business - coverage of industries and others who are subject to general insurance policies by entering into contracts of insurance, collecting premia, setting up networks of distributors or offices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aratory in nature and, therefore, it did not constitute a permanent establishment (PE). The AO negatived this contention and held that the LO did constitute a business connection, leading to a PE which rendered the assessee liable to tax in India. The CIT(A), on appeal, reversed this finding, upon a factual analysis of the various circumstances. The Revenue s appeal to the Income Tax appellate Tribunal (ITAT) was rejected by the impugned order. 2. In the above circumstances, the questions of law formulated for these appeals at the time of admission- were firstly whether the said offices (LOs) could be regarded as PE and secondly whether its income from imports in India were not taxable by reason of the Indo-Japan Double Taxation Av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that four expatriate employees were there at the relevant time. The task of this office was to identify a proper JV partner; involve in the negotiation, identify and engage all manner of consultants, lawyers, accountants, etc. Its incurring expenditure (a factor taken into consideration by the Courts) did not ipso facto satisfy the requisite test. 5. The ratio of the judgments of the Supreme Court in Anglo French Textile Co Ltd v. Commissioner of Income Tax (1953) 23 ITR 101 and Commissioner of Income Tax, Punjab v. R.D. Aggarwal Co. (1965) 56 ITR 20 is that the non-resident entity could be taxed only if there was business connection between the business carried on by a non-resident which yields profits or gains and som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount to a business connection as to create a PE in India. 7. The DTAA clearly envisions that offices that perform auxiliary and preparatory services are not to be treated as business connection. Black's Law Dictionary defines the word 'auxiliary' to mean as aiding or supporting, subsidiary . The word 'auxiliary' owes its origin to the Latin word 'auxiliarius' (from auxilium meaning 'help'). The Oxford Dictionary defines the word 'auxiliary' to mean providing supplementary or additional help and support . In the present context, the expression means carrying on activities, other than the main business functions, that aid and support the assessee. In the context of the contracts in question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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