|Rajendra Nayak||Aastha Jain|
It was held that the taxpayer would not constitute an agency PE in India as it performed only administrative support functions for the group companies. The taxpayer neither had any authority to conclude contracts or accept orders, nor did it assume any kind of risk on behalf of any of the group companies. Further, the taxpayer did not fulfil the twin cumulative conditions to be treated as a dependent agent under the tax treaties, that is, firstly, agent's activities should be devoted wholly or almost wholly for the enterprise and secondly, the transactions should not be made under the arm's-length conditions. Based on taxpayer's sales data for the past two years, it was observed that taxpayer is not devoted wholly or almost wholly on behalf of any one group company. It was compensated at an arm's-length price and this fact was not challenged by the tax authorities. Further, it was also held that a PE was not created merely because taxpayer was a wholly owned subsidiary of VIPL. In view of the above, an attribution of 10% profit margin by Indian tax authorities to taxpayer on the basis of global account of group companies was invalidated.
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