April 2019

Article 7 of India-Singapore DTAA Ė No further profit attribution to an Indian agency PE where the commission is paid at armís length.

Geeta Jani | Dhishat B. Mehta
Chartered Accountants

4.       TS-74-ITAT-2019(Mum) Hempel Singapore Pte Ltd. vs. DCIT A.Y.: 2014-15 Date of Order: 8th February, 2019

 

Article 7 of India-Singapore DTAA Ė No further profit attribution to an Indian agency PE where the commission is paid at armís length.

 

FACTS


Taxpayer, a foreign company incorporated in Singapore, was engaged in the business of selling protective coating/paints for marine industry. Taxpayer had appointed its wholly owned subsidiary in India (I Co) as a sales agent for rendering sales support services in India. For such services I Co was remunerated at cost plus mark-up as commission on sales effected in India. There was no dispute on the ground that I Co constituted dependent agency PE (DAPE) for the Taxpayer in India under Article 5(4) of India-Singapore DTAA.

 

Taxpayer contended that the cost plus mark up to I Co was at armís length. Further, since the income attributable to the DAPE in India was equal to the commission paid to I Co, the resultant income in India was NIL.

 

AO, however computed an ad hoc amount of 25 percent of sales in India as the income attributable to the DAPE in India. Thus, the difference between such income and commission paid to ICo was held as taxable in India.

 

The DRP affirmed the order of the AO.

 

Aggrieved, Taxpayer appealed before

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