The case of AB Sciex Pte Ltd, a Singapore-based company, versus the Assistant Commissioner of Income Tax (ACIT), Circle International Taxation 1(1)(1), Delhi, revolves around the complex issues of Permanent Establishment (PE) and the attribution of profits under Indian Tax Law for the assessment years 2018-19 and 2019-20.
AB Sciex Pte Ltd is engaged in the manufacture and sale of scientific research instruments, along with providing maintenance services. The company faced assessments suggesting that it had a PE in India, through which it conducted substantial business activities that were taxable in India.
The crux of the appeal dealt with whether AB Sciex had a PE in India. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) upheld a previous year’s decision that AB Sciex had a fixed place and dependent agent PE through an Indian company, DHR Holding Pvt. Ltd., affecting the taxability of income earned from Indian operations.
The Income Tax Appellate Tribunal, however, based on earlier tribunal decisions, concluded that DHR Holding Pvt. Ltd. did not constitute a fixed place PE or a dependent agent PE under both domestic and treaty provisions. Therefore, it was held that AB Sciex did not have a PE in India for the years in question and that no additional profits could be attributed to any such PE.
The tribunal’s decision emphasized the importance of adhering to established legal principles regarding the existence of PE and its implications for international taxation. This ruling has significant implications for multinational companies operating in India through intermediaries or subsidiaries, particularly regarding the structuring of their operations and tax liabilities.
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