Redington Distribution Pte Ltd. [1] (Taxpayer) , a tax resident of Singapore, is a subsidiary of a listed Indian company (I Co). The main business of the Taxpayer is providing end-to-end supply chain solutions for all categories of information technology (IT), consumer and lifestyle products. The Taxpayer follows a business-to-business (B2B) model, wherein the company purchases from vendors and sells to customers through channel partners/sub-distributors/multi brand retailers etc., who then sell to end users. The Taxpayer obtained support from I Co for rendering services to its customers in India.
Pursuant to a survey conducted at the premises of I Co, the Indian tax authority alleged that a specific team of employees of I Co (referred to as the “Dollars Team”) exclusively worked for the Taxpayer carrying out various pre and post sales activities from India on behalf of the Taxpayer. Due to such a feature, the Taxpayer had a fixed permanent establishment (PE), as well as dependent agent PE (DAPE) in India under the India-Singapore double taxation avoidance agreement (DTAA).
The Tribunal upheld the above view of the tax authority based on the following key observations/conclusions:
- The information gathered during the survey clearly indicated the existence of a fixed place of business i.e., premises of I Co from which the “Dollars Team” carried on business operations of the Taxpayer in India. Such premises were at the disposal of the Taxpayer.
- Except shipment, all other activities had been carried out by the “Dollars Team” from India. Right from seeking orders, requesting quotes from the customer, vendor discussions, negotiation and conclusion of terms of sales, sending proforma invoices, payment follow-up etc., were carried out by the “Dollars Team”. Such activities are not back-office support services, but core business of the Taxpayer conducted from India. This is also strengthened by the fact that the customers of Taxpayer and I Co were the same.
- The Supreme Court (SC) rulings in the case of E-funds IT Solution Inc. [2] and UAE Exchange Centre Ltd.[3] , as relied by the Taxpayer, were distinguished.
- Furthermore, the “Dollars Team” acted as an agent of the Taxpayer for Indian customers and habitually exercised authority to conclude contracts on behalf of the Taxpayer. Therefore, a DAPE was also created in India.
- The issue of attribution of profits of the Taxpayer to its Indian PE was remanded to the tax authority for fresh consideration.
