INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and Mauritius - Agency Permanent Establishment (PE) in terms of article 5(4) - Indian distributor was acting independently qua its distribution rights and entire agreement was on principal to principal basis

Assessee based at Mauritius, was engaged in telecasting of sports channel called 'Ten Sports'. It appointed Taj Television (India) Private Limited, (Taj India) as its distributor to distribute Channel Ten Sports' to cable systems for exhibition to subscribers in India. AO held that distribution revenue was collected through Taj India on behalf of assessee and Taj India had the exclusive right to represent assessee before distribution systems/cable operators and to negotiate and procure cable distribution licence agreement for the service as authorized by assessee. As Distribution revenue collected by Taj India was shared in the ratio of 60:40 by assessee and Taj India, AO held that assessee had a Permanent Establishment (PE) in India and subscription revenue was taxable as business income. Held: Taj India was not acting as agent of assessee but it had obtained the right of distribution of channel for itself and subsequently, it had entered into contracts with other parties in its own name in which assessee was not a party. Distribution of revenue between assessee and Taj India was in the ratio of 60:40 and entire relationship was on principal to principal basis. Thus, In terms of article 5 of Indo-Mauritian DTAA to constitute agency (PE), none of the conditions as stipulated in article 5(4) was applicable because Taj India was acting independently qua its distribution rights and entire agreement was on principal to principal basis. Therefore, distribution income earned by assessee could not be taxed in India because Taj India did not constitute an agency (PE).

REFERRED :

FAVOUR : in assessee's favour

A.Y. :

SUBSCRIBE FOR FULL CONTENT