January 2023
Article 5 of India-Singapore DTAA; Section 9(1) of the IT Act – (i) Since the Indian parent company of Singapore subsidiary (Sing Sub) carried on all material activities, and since the Singapore subsidiary was merely shipping goods to Indian customers, fixed place PE of Sing Sub was constituted as what is relevant to be seen is the scope of activities carried out; (ii) on facts, dependent agent PE was constituted; (iii) the AO was directed to compute profit and attribute the same to PE as per directions given and various decisions on the issue.
Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
Chartered Accountants
Redington Distribution Pte. Ltd. vs. The DCIT
TS-908-ITAT-2022-Chny
ITA No: 14/Chny/2020
A.Y..: 2011-12
Date of order: 16th November, 2022
Article 5 of India-Singapore DTAA; Section 9(1) of the IT Act – (i) Since the Indian parent company of Singapore subsidiary (Sing Sub) carried on all material activities, and since the Singapore subsidiary was merely shipping goods to Indian customers, fixed place PE of Sing Sub was constituted as what is relevant to be seen is the scope of activities carried out; (ii) on facts, dependent agent PE was constituted; (iii) the AO was directed to compute profit and attribute the same to PE as per directions given and various decisions on the issue.
FACTS
Sing Sub, a Singapore entity is a tax resident of Singapore. It is a subsidiary of I Co, a listed Indian company and a leading supply chain solutions provider worldwide. Sing Sub was also engaged in the same business.
In the course of survey conducted at the premises of I Co, the tax authority found certain evidences, such as, emails, correspondence between I Co and Sing Sub, documents, etc. It also recorded statements of certain employees of I Co who were providing certain services to Sing Sub. In the process, it identified employees involved in sales function, who comprised a team called ‘Dollar Business’. It was found that ‘Dollar Business’ pertained to the USD business of Indian customers. Factually, the ‘Dollar Business’ was the same business with the the only difference being that based on request of customers (usually, those having Units in SEZ, etc.). its billing was done in USD instead of INR.
Analysis of the statements and documentary evidences showed that entire ‘Dollar Business’ beginning with the identification of customers, submitting quotes for various equipment, fixing price, granting of credit and ending with collection of receivables was performed by the ‘Dollar Team’. Thus, except for shipping of the equipment from Singapore, all other functions were undertaken by the ‘Dollar Team’ in India. Further, ‘Dollar Team’ directly reported to Singapore office. It was also noted that in Singapore, Sing Sub had employed very few employees because the only operation carried out in Singapore was shipping of goods.
Accordingly, with regards to Explanation 2 to Section 9(1) (i) of the Act, and Article 5 of India-Singapore DTAA, the AO concluded that Sing Sub had a PE in India. Further, in addition to all the aforementioned functions, I Co also appointed staff for activity of Sing Sub. Therefore, the AO further concluded that Sing Sub also had a dependent agent PE in India.
The DRP held that since entire sales function was habitually performed in India through ‘Dollar Team’, all the conditions of PE were satisfied and further, the ‘Dollar Team’ also constituted dependent agent PE of Sing Sub in India.
Before the Tribunal, Sing Sub contended as follows.
TS-908-ITAT-2022-Chny
ITA No: 14/Chny/2020
A.Y..: 2011-12
Date of order: 16th November, 2022
Article 5 of India-Singapore DTAA; Section 9(1) of the IT Act – (i) Since the Indian parent company of Singapore subsidiary (Sing Sub) carried on all material activities, and since the Singapore subsidiary was merely shipping goods to Indian customers, fixed place PE of Sing Sub was constituted as what is relevant to be seen is the scope of activities carried out; (ii) on facts, dependent agent PE was constituted; (iii) the AO was directed to compute profit and attribute the same to PE as per directions given and various decisions on the issue.
FACTS
Sing Sub, a Singapore entity is a tax resident of Singapore. It is a subsidiary of I Co, a listed Indian company and a leading supply chain solutions provider worldwide. Sing Sub was also engaged in the same business.
In the course of survey conducted at the premises of I Co, the tax authority found certain evidences, such as, emails, correspondence between I Co and Sing Sub, documents, etc. It also recorded statements of certain employees of I Co who were providing certain services to Sing Sub. In the process, it identified employees involved in sales function, who comprised a team called ‘Dollar Business’. It was found that ‘Dollar Business’ pertained to the USD business of Indian customers. Factually, the ‘Dollar Business’ was the same business with the the only difference being that based on request of customers (usually, those having Units in SEZ, etc.). its billing was done in USD instead of INR.
Analysis of the statements and documentary evidences showed that entire ‘Dollar Business’ beginning with the identification of customers, submitting quotes for various equipment, fixing price, granting of credit and ending with collection of receivables was performed by the ‘Dollar Team’. Thus, except for shipping of the equipment from Singapore, all other functions were undertaken by the ‘Dollar Team’ in India. Further, ‘Dollar Team’ directly reported to Singapore office. It was also noted that in Singapore, Sing Sub had employed very few employees because the only operation carried out in Singapore was shipping of goods.
Accordingly, with regards to Explanation 2 to Section 9(1) (i) of the Act, and Article 5 of India-Singapore DTAA, the AO concluded that Sing Sub had a PE in India. Further, in addition to all the aforementioned functions, I Co also appointed staff for activity of Sing Sub. Therefore, the AO further concluded that Sing Sub also had a dependent agent PE in India.
The DRP held that since entire sales function was habitually performed in India through ‘Dollar Team’, all the conditions of PE were satisfied and further, the ‘Dollar Team’ also constituted dependent agent PE of Sing Sub in India.
Before the Tribunal, Sing Sub contended as follows.
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