International Taxation Whether Income Arising to a NonResident can be Taxed as Business Income in India without a PE?

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The Tax Publishers International Taxation--Business Income Whether Income Arising to a Non-Resident can be Taxed as Business Income in India without a PE? Akhilesh Kumar Sah In this short write-up, the learned author examines an issue related to existence of PE in respect of assessee, a Non-resident earning income from distribution and exhibition of films in India in the context of taxability of royalty under Section 9(1) of the Income Tax Act. The question of law involved is whether income accrued in India under Section 5(2) of the Act or not. He sums up that since the Tribunal, as the final fact finding had been consistently holding that assessee had no PE in India and as such assessee had no business connection in India within the meaning of Section 9(1) of the Act hence income arising to non-resident outside Indian territories cannot be brought to tax as Business income in India, without a PE. He however points out the only moot reason for not following the decision of Tribunal by Revenue authorities being Bombay High Court having admitted similar question of law in appeal by revenue, the decision thereon is yet to come in due course of time, notwithstanding the on-going litigation prevailing for each completed assessment year till the matter is put to rest by High Court. 1. Introduction A large number of questions are being raised on the issue whether in come arising to a in respect of taxability of income Non-Resident can be taxed as business income in India without a permanent establishment (for short, 'PE'). In Turbo Energy Pvt. Ltd. v. DCIT (ITA Nos. 2901 & 2902/Chny/2019) and ACIT v. Turbo Energy Pvt. Ltd. (ITA Nos. 3043 & 3044/Chny/2019) (A.Y. 2015-16 & 2016-17) decided on 02-12-2022 (vice-versa), ITAT, Chennai held that the profits of the services rendered outside India cannot be taxed in India unless the non-resident has permanent establishment/or business connection in India as envisaged in Section 9(1) of the Income Tax Act, 1961 (for short, 'the Act'). It was observed that CIT(A) deleted the addition relying on the decision of the Apex Court in the case of GE Technological Centre Pvt. Ltd. v. CIT 327 ITR 456. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

International Taxation--Business Income

Whether Income Arising to a Non-Resident can be Taxed as Business Income in India without a PE?

Akhilesh Kumar Sah

In this short write-up, the learned author examines an issue related to existence of PE in respect of assessee, a Non-resident earning income from distribution and exhibition of films in India in the context of taxability of royalty under Section 9(1) of the Income Tax Act. The question of law involved is whether income accrued in India under Section 5(2) of the Act or not. He sums up that since the Tribunal, as the final fact finding had been consistently holding that assessee had no PE in India and as such assessee had no business connection in India within the meaning of Section 9(1) of the Act hence income arising to non-resident outside Indian territories cannot be brought to tax as Business income in India, without a PE. He however points out the only moot reason for not following the decision of Tribunal by Revenue authorities being Bombay High Court having admitted similar question of law in appeal by revenue, the decision thereon is yet to come in due course of time, notwithstanding the on-going litigation prevailing for each completed assessment year till the matter is put to rest by High Court.

1. Introduction

A large number of questions are being raised on the issue whether in come arising to a in respect of taxability of income Non-Resident can be taxed as business income in India without a permanent establishment (for short, 'PE').

In Turbo Energy Pvt. Ltd. v. DCIT (ITA Nos. 2901 & 2902/Chny/2019) and ACIT v. Turbo Energy Pvt. Ltd. (ITA Nos. 3043 & 3044/Chny/2019) (A.Y. 2015-16 & 2016-17) decided on 02-12-2022 (vice-versa), ITAT, Chennai held that the profits of the services rendered outside India cannot be taxed in India unless the non-resident has permanent establishment/or business connection in India as envisaged in Section 9(1) of the Income Tax Act, 1961 (for short, 'the Act'). It was observed that CIT(A) deleted the addition relying on the decision of the Apex Court in the case of GE Technological Centre Pvt. Ltd. v. CIT 327 ITR 456.