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