Legal Wrangle - Episode 39 (International & Direct Tax)

CASE LAW

2016-TII-26-HC-DEL-INTL

NORTEL NETWORKS INDIA INTERNATIONAL INC Vs DIT : DELHI HIGH COURT (Dated: May 4, 2016)

Income tax - Sections 4, 5, 9(1)(i), 143(2) & (3), 144C, 147, 148 & 234B & Rule 10 - India-USA & India-Canada DTAAs - Articles 5 & 7.

Keywords: business connection, PE - Dependent Agency PE - Service PE - installation - LO - attribution of profits - GSM systems - principle of apportionment - piercing of corporate veil - shadow company - tax audit - turnkey contract & levy of interest.

Whether if a company is incorporated only after the award of contract becomes a certainty, such company can be construed as a mere shadow company - YES

Whether when the Services Contract clearly indicates taht the task of installation and commissioning was contracted to the Indian entity, the same can be said to have been performed on behalf of the non-resident Group Companies - NO: HC

Whether when no part of the assessee's income can be apportioned to operations carried on in India, the question whether the assessee had a PE or a dependent PE becomes immaterial - YES: HC

Whether when there is no material to suggest that Nortel LO or Nortel India acted on behalf of the assessee or Nortel Canada, it can still be concluded that the Indian entities concluded agreements on their behalf - NO: HC

Assessee's appeals allowed