INCOME TAX ACT, 1961

Section 9(1)(i)

Income deemed to accrue or arise in India - Under section 9(1)(i) - PE in India - Non-resident assessee having fixed place PE, installation PE, service PE, service PE and dependent agent PE

Assessee based at China was engaged in sales of telecom equipments comprising of non-terminal products, i.e., advanced telecommunication network, namely, core and access network equipment, mobile network equipment and data communications equipments, etc. to customers in various countries, including India. Further, the assessee also provides technical consultancy services to its subsidiary in India, viz., Huawei 'Huawei India'. Huawei India was involved in the provision of integration installation and commissioning services in relation to telecom network equipment supply by the assessee from outside India. These services were provided to Indian telecom operators under independent contracts between Huawei Indian and Indian telecom operators. Assessee earned revenues from India on account of sale of non-terminal and terminal products, however, did not offer the same to tax. AO held that Huawei India constituted a fixed place PE, installation PE, service PE, dependent agent PE and therefore, entire revenue on account of supply of equipments and handsets was through business connection in India and having taken place through the PEs in India, was effectively connected to the PE. Having held so, AO proceeded to attribute profit to PE. Assessee contended that it did not have any PE in India.Held: The telecom equipment supplied by assessee were invariably installed and commissioned by its wholly owned subsidiary Huawei India and hence, it was clear that assessee had a business connection in India. Further, findings as a result of survey under section 133A revealed that the assessee's business was carried out in India with the help of its employees, who regularly worked from the premises of Huawei India, thus constituting Fixed Place PE. Assessee's employees also visited India to perform activities relating to installation projects lasting for more than 180 days, which constituted Installation PE. The statements recorded during survey also showed that employees rendered technical services continuing for more than 183 days, constituting Service PE. Further, process of joint bidding by the assessee and Huawei India constituted Dependent Agent PE. As such, AO was justified in holding that assessee had PE as well as business connection in India and its income was taxable both under the Act as well as the DTAA.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2018-19

INCOME TAX ACT, 1961

Section 9(1)(vi)

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