INCOME TAX ACT, 1961

--Double taxation relief--Agreement between India and Netherlands Permanent establishment--Assessee was awarded a dredging contract. Such contract was assigned by assessee to its fully owned Indian subsidiary. The subsidiary company did not have the technical, organization and managerial competence to carry out the work by itself. Assessee-company had undertaken to provide all sorts of services including technical logistic and co-ordinating services to its Indian subsidiary, wherever necessary, to execute the dredging contract. Assessing officer alleged that such Indian subsidiary would constitute dependent agent permanent establishment of assessee in India under article 5 of the Double Taxation Avoidance Agreement between India and Netherlands. Held: The assessee-company was carrying on contract work for and on behalf of the Indian subsidiary. There was interlacing of activities and interlocking of funds between assessee and Indian subsidiary in executing the dredging contract and relationship of agency was there and therefore, Indian subsidiary would constitute a dependent agent of the company and AO was justified in holding that assessee had permanent establishment in India.

Income Tax Act, 1961, Section 90

DTAA Between India and Netherlands, Article 5

INCOME TAX ACT, 1961

--Reassessment--Reason to believe Assessment under section 143(1)--Assessee's return was processed under section 143(1). Subsequently, AO passed order of reassessment holding that payment received by assessee from its Indian subsidiary in lieu of providing technical, logistic and co-ordinating facility in execution of a contract was to be considered as fee for technical service. Assessee contended that there was no new material in the hands of AO to hold on a reason to believe that income had escaped assessment. AO submitted that in case of intimation under section 143(1), it could not be said that an assessment under section 147 could be made only if new material had come to the knowledge of AO. It further submitted that when issue involves complicated matter then the material available on record alongwith return themselves constituted sufficient material in the hands of AO. Held: When the facts of the case were so complicated and cumbersome and when the return was only processed under section 143(1), the materials available on record alongwith the return filed by assessee themselves constituted sufficient materials in the hands of AO to hold a reason that income had escaped assessment.