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496/2008, 497/2008, 498/2008,498/2008 584/2008, 647/2008, 648/2008, 649/2008, 650/2008,663/2008

7. The Assessing Officer after holding that RRIL was PE of the assessee and there were business connection between the two as the marketing and sale of goods to Indian customer were carried out by the assessee through RRIL substituted in India. He was of the view that profits attributable from PE was liable to tax in India in terms of Article 7 of DTAA. The Assessing Officer accordingly invoked Rule 10 of the Income Tax Rules , 1962 and attributed 100% of profits earning from sale of goods from Indian customer in the assessment year 1997-98 to 2000-01 and 75% of profits in the assessment year 2002-03 and 2003-04.

13. With this, we revert back to the issue of PE on which questions of law no. 2 & 4 are framed. As already pointed out, there is no serious contest to the findings arrived at by the Tribunal touching various facets of the business relation between RRIL and the assessee on the basis of which RRIL, which is a 100% subsidiary setup in India is held to be as PE of the assessee. Only a limited challenge was laid to the impugned order was predicated on the objections which the assessee had filed to the Remand Report obtained by the CIT (A) from the Assessing Office. It was argued that the assessee had filed its objections which is duly acknowledged by the ITAT in para 19 of the impugned order. Alongwith objections, the assessee had filed various documents which fact is also acknowledged by the ITAT in the impugned order. The grievance is that the objections as well as those documents were not even considered properly. From these documents the assessee only wanted to show that the RRIL does not constitute its PE in India.

14. When we examine the discussion of the CIT (A) as well ITAT on the aspects of PE, we are convinced that for sufficient and adequate reasons, the authorities below have held that RRIL to be the PE of the assessee in 496/2008, 497/2008, 498/2008,498/2008 584/2008, 647/2008, 648/2008, 649/2008, 650/2008,663/2008 India and in the process, the objections of the assessee are duly met with and answered. Though, there is an elaborate discussion on this aspect, we may summarise the same by pointing out that the Tribunal delineated six questions which had arisen for consideration and those are stated in para-16 of the impugned order. Questions no. 2 and 3 were precisely on this very issue which are as under:

"23. It is also seen that the appellant has a dependent agent in India in the form of RRIL. The fact that RRIL is totally dependent upon the appellant is not denied. However, the contention of the appellant is that even though RRIL is a dependent agent and such agency is to be deemed as PE, so long such dependent agent has no authority to negotiate and enter into contracts, under Article 5 (4), there is no PE in India. It is to be noted that Article 5 (4) has three clauses, namely, a, b & c. Thus, even if one has to hold that the dependent agent has no authority to negotiate and enter into contracts for and on behalf of appellant, still as per clause (c) of sub Article (4), it is found that RRIL habitually secures orders in India for the appellant. It is a set practice that no customers in India are directly to send orders to the appellant in UK. Such orders are required to be routed only through RRIL. This fact is evident from the letter of Mr. L.M. Morgan to Mr. Prateek Dabral and Ms. Usha. In the said letter, it is made clear that even request for quotation/extension could not be communicated directly to the appellant but are to be routed through the office of RRIL. This is applicable even to the orders. The fact is not denied that the orders are firstly received by RRIL from the customers in India and only then communicated to the appellant. Thus, as per Para 4(c) of Article 5, the dependent agent habitually secures orders wholly for 496/2008, 497/2008, 498/2008,498/2008 584/2008, 647/2008, 648/2008, 649/2008, 650/2008,663/2008 the enterprise itself and hence, is deemed to be a permanent establishment of the appellant. The contention of appellant that the role of RRIL is merely of a post office is, therefore, unacceptable in view of the facts of the case as evidenced by various documents and correspondence found during the course of survey. It can, therefore be summarized that in the light of the facts as well as documents mentioned above, RRIL's presence n India is a permanent establishment of appellant because: