Based on the facts of the case, the AAR observed that the activities of the LO are not used solely for purchasing goods, but it is practically involved in all the activities connected with the business of the US Co. The worldwide outdoor apparel business of the US Co broadly covered: designing; purchasing of raw material; getting goods manufactured; selling the goods. Other than the actual function of sale, all the other activities of US Co are conducted by the LO. Further, the LO is also engaged in carrying out similar activities for US Co in other countries. Since the LOs activities are not limited to the purchase of goods in India for the purpose of export, the purchase exclusion would not apply under the ITL. Under the treaty, the activity profile of the LO cannot be termed as preparatory or auxiliary to US Co's business, nor can the LO be a place of business solely for the purpose of purchasing goods. Therefore, the LO would create a PE in India for US Co. Accordingly, the income attributable to US Co's operations in India from the business of designing, manufacturing and selling the products imported, would be taxable in India in accordance with the provisions of the tax treaty.
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