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July 2026

Article 5 of India-Denmark DTAA – Software sold through a distributor’s channel on a principal-to-principal basis cannot constitute a dependent agent permanent establishment.

By Geeta Jani | Dhishat B Mehta | K. Prasanna, Chartered Accountants
Reading Time 3 mins

8. [2026] 184 taxmann.com 194 (Delhi - Trib.)

Milestone Systems A/S vs. ACIT(IT)

A.Y.: 2022-23 Dated: 06 March 2026

Article 5 of India-Denmark DTAA – Software sold through a distributor’s channel on a principal-to-principal basis cannot constitute a dependent agent permanent establishment.

FACTS:

The Assessee, a Danish company, was engaged in the business of distributing video management and surveillance software through its distributor channel in India. It contended that the receipts constituted business income and, in the absence of a Permanent Establishment ("PE") in India, were not taxable in India. Accordingly, it claimed a refund of taxes withheld by distributors.

The AO observed that the Assessee sold customised software and exercised significant control over the distributors' operations, including the price at which the software could be sold to customers. The AO noted that resellers in the distribution channel were approved by the Assessee. The AO held that the distributors constituted dependent agents and triggered dependent agency PE (“DAPE”) for the Assessee.The AO attributed 50% of receipts from distribution of software as

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