Profits earned by M/s ANR, who acted as a dependent agent for the non-resident assessee, are taxable in India, as held by DelHC in Rolls Royce Singapore Pvt Ltd v ADIT — In favour of: The revenue (partly).
To constitute a “Dependent Agent Permanent Establishment” under Art 5(9) of the India–Singapore DTAA, it has to be seen whether the activities of the agent are “devoted wholly or almost wholly on behalf of the assessee”.
Transfer pricing — Arm’s length principle — Since the assessee non-resident was in a position to dictate the terms, and in the absence of any Transfer Pricing Analysis by the Transfer Pricing Officer in the instant case, it cannot be said that such commission could fit the description of “reasonable profits” within the meaning of Art 7(2) of the DTAA.
To find out whether the agent is remunerative at arm’s length, it is necessary to take into account all the risk taking functions of the multinational enterprise.
Decided on: 30 August 2011.
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