CASE LAW

2016-TII-30-HC-DEL-INTL

ADOBE SYSTEMS INCORPORATED Vs ADIT: DELHI HIGH COURT (Dated: May 16, 2016)

Income tax - Sections 115A(5), 142(1) & 148 - Indo USA DTAA - Articles 5(2)(i), 5(5), 7 & 11.

Keywords - ALP - AE - attributable profit - activities of subsidiary - dependent agent PE - escaped assessment - interest income - reassessment - reasons for reopening - service PE & TNMM.

Whether activities of a subsidiary company could by itself provide a reason to believe that any income relating thereto has escaped assessment in the hands of its foreign holding company, for purpose of initiating reassessment - NO: HC

Whether profits attributable to sale of goods or merchandise which are similar to those sold through the PE or other business activities which are similar to those effected through the PE, can also be taxed in the state where the PE is situated, in addition to the business profits attributable to a PE - YES: HC

Whether the fact that a holding company in another contracting state exercises certain control and management over a subsidiary, would render the said subsidiary as a PE of the holding company - NO: HC

Whether it is open to the AO to presume that the activities carried out by an Indian subsidiary are an integral part of the business of the US holding company and therefore, the offices of such subsidiary represents fixed place of business of its parent company, without satisfying the 'right to use test' or 'disposal test' as specifed under Article 5(1) of Indo-US DTAA - NO: HC

Whether it is open to the AO to conclude that a US company has a PE in India in terms of Article 5(2)(l) of the Indo-US DTAA, only on the basis that the US company has a right to audit its Indian subsidiary - NO: HC

Assessee's petition allowed