The Tax Publishers2020 TaxPub(DT) 1788 (Del-Trib) : (2020) 082 ITR (Trib) 0338 INCOME TAX ACT, 1961
Section 9(1)(ii) Article 7
Where there was secondment agreement between assessee and expatriate exist but no employment agreement between expartiate and Indian company exist as the technical knowledge provided by Foreign Company (assessee) to Indian Company there was existence of fixed place PE and income was deemed to accrue under section 9(1) read with article 7 of DTAA, due to business connection.
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Income - Deemed to accrued arise under section 9(1)(ii) - Fixed place PE -
Assessee company was incorporated in and tax resident of the United States of America (USA) and a part of 'Teradata' group. The assessee was engaged in business of providing 'data warehousing services' in the form of their proprietary package called 'Teradata solution'. AO observed that in the instant case, secondment agreement regarding secondment of the employees between the foreign company (i.e., the assessee) and the Indian entity (i.e., Teradata India) and secondment/assignment agreement between the foreign company (i.e., the assessee) and the expatriate, exist but no employment agreement between the expatriate and the Indian company (i.e., Teradata India) existed. This fact was duly admitted by the assessee before the AO. AO held that the premises of Teradata India, where the seconded employee were stationed, remained at the disposal of the assessee throughout the duration of the stay of those employees and accordingly, he concluded existence of fixed place PE. AO held that the reimbursement in the hands of the assessee was a business income as those payments have been on account of services rendered by the assessee through its employees in India and, therefore, the profit generated on the amount of activities carried out by the employee in India was liable to tax in India as business income of foreign entity under article 7 of the DTAA read with section 9(1). Held: In the instant case the employees of the assessee had been deputed to manage the affairs of the Indian entity and provide technical knowledge. The employees though worked at the premises of the Terdata India but for all practical purposes they remained employees of the assessee company. The employees continued to make their social security contributions in USA and their salaries were also distributed to their bank accounts in USA. In the case of Centrica there was agreement between the Indian entity and expatriate, but in this case, even there was no such agreement also. In view of the above facts, respectfully following the finding of the High Court, the finding of the lower authorities on the issue of existence of PE of the assessee in India in terms of the DTAA was upheld.
Followed:Centrica India Offshore (P) Ltd. (2014) 44 Taxmann.com 300 (Del) : 2014 TaxPub(DT) 2335 (Del-HC).
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