Our Indian group company only markets and supports. Can the department call it our dependent agent PE?
Yes, on these facts. Where the personnel working out of the Indian premises do more than liaise — where they take part in technical and financial negotiation and in price negotiation with the customer — the Tribunal's finding of both a fixed place permanent establishment and a dependent agent permanent establishment stands. The Delhi High Court affirmed the Tribunal and dismissed the appeals.
Decided by the High Court (High Court of Delhi — S. Ravindra Bhat and A.K. Chawla, JJ. (judgment delivered by S. Ravindra Bhat, J.); IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others) on 2018-12-21, reported as (2019) 411 ITR 243 / [2019] 101 taxmann.com 142 (Delhi)(HC); neutral citation 2018 SCC OnLine Del 13256; IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others; assessment year 2001-02, on appeal from the Tribunal's order of 27 January 2017 in ITA No. 67/Del/2011. The further citations (2019) 306 CTR 417 and 174 DTR 25 do not appear on the report's citation line and are unverified.. It bears on section 9, section 9(1)(i), section 90, section DTAA art 5(1), section DTAA art 5(3), section DTAA art 5(4)(a), section DTAA art 5(5) of the Income Tax Act 1961, in Assessment & Scrutiny and Residence & Treaty Benefit matters.
This is the Indian decision the department reaches for on the agency limb of Article 5, and it is the counterweight to E-Funds and Nokia Networks, which the taxpayer reaches for. The department's argument is always the same: the marketing team's emails show negotiation, not liaison. Two further points give the case its weight. The Court held that 'authority to conclude' does not require authority over all the elements and details of a contract, only that the activity be core in nature, so the absence of signing authority is not an answer. And it did not stop at existence: it upheld the attribution, taking 10 per cent of Indian sales as the profit base because year-wise and entity-wise accounts had not been furnished, and 35 per cent of that as attributable to marketing in India, giving 3.5 per cent of the value of supplies — a figure that sits oddly with the Tribunal's own reduction of the marketing share to 26 per cent, and a point to check before the percentages are argued either way.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A group of General Electric entities incorporated outside India sold equipment to Indian customers and had expatriate personnel, and employees of the Indian group company, working from liaison-office premises in India. The department said those personnel did more than liaison work and that the overseas entities were taxable here on business profits. On the material before it, including email traffic with Indian customers, the Tribunal found that the personnel were not merely liaising with clients and the headquarters office but were engaged in substantive work on the contracts, including technical and financial terms and price negotiation, and held that there was both a fixed place permanent establishment and a dependent agent permanent establishment. The Tribunal had reduced the marketing attribution from the 35 per cent adopted by the Assessing Officer to 26 per cent. The lead appeal is against the Tribunal's order of 27 January 2017 for assessment year 2001-02; the connected appeals arose out of reassessments for assessment years 2001-02 to 2008-09.
The appeals were dismissed and the Tribunal's order affirmed. All three questions of law were answered against the assessees: the India premises were a fixed place permanent establishment under Article 5 of the Double Taxation Avoidance Agreement between India and the United States — the only treaty the judgment applies — and the activities carried on there were not preparatory or auxiliary; the same activities gave rise to a dependent agent permanent establishment; and the attribution was not disturbed. On attribution the Court upheld the two-stage exercise of taking 10 per cent of Indian sales as the profit base, guided by ss.44BB and 44BBB because the assessees had not furnished year-wise and entity-wise accounts, and attributing 35 per cent of that profit to marketing activity in India, producing 3.5 per cent of the value of supplies as income attributable to the permanent establishment.
On the fixed place limb, a place of business under Article 5(1) needs no exclusive use and no legal right to the space; continuous usage indicating that the space is at the enterprise's disposal is enough, and the Court accepted the Tribunal's finding that the liaison-office premises satisfied that test. It rejected the argument that the presence of expatriates and Indian group employees at the premises did not show that sales were made from there: if the premises were not where the relevant business activity happened, the place where it did happen would itself be the fixed place (paragraphs 40 to 44). Whether an activity is preparatory or auxiliary is tested by asking whether it is an essential and significant part of the activity of the enterprise as a whole, and the Court expressly rejected the submission that activities escape that label only if they include authority to conclude contracts — Article 5(3) contains no such language, which appears only in Article 5(4)(a), and equating the two would erode the distinction between a fixed place and an agency permanent establishment (paragraphs 47 and 51). On the facts, because the goods were highly customised, the core activity of identifying and developing the customer, communicating options, discussing technical and financial terms and negotiating price had to be done collaboratively in India; that the India office could not take the final decision and awaited headquarters did not reduce its role to mute data collection and information dissemination, and its discharge of vital responsibilities in the finalisation of commercial terms showed that business was carried on in India through the fixed place (paragraphs 56 to 60). On the agency limb, an agent of a foreign company is of dependent status even where it serves more than one company within the same related group, the 'wholly or almost wholly' exclusion in the second part of Article 5(5) being directed at an agent serving a single enterprise; and whether the dealings between the agent and the related enterprises are at arm's length is irrelevant at the stage of establishing a dependent agent permanent establishment, which arises from the nature of the agent's activities (paragraph 63). On the OECD Commentary, the Court held that paragraph 32.1 runs contrary to the paragraph 33 relied on, so an assessee cannot selectively quote parts of the Commentary but must read the spirit of the whole; and, adopting the reasoning of the Italian Supreme Court in Philip Morris, that participation of a resident company's employees in a phase of the conclusion of a contract can fall within the concept of authority to conclude contracts even without a formal power of representation (paragraphs 64 to 66 and 70). The Court accepted that the case sits at the intersection of the fixed place and agency provisions, observing that enterprises do not organise themselves into the neat pigeon-holes a treaty envisages (paragraphs 73 to 75). On attribution it relied on Galileo International and Hukum Chand v. UOI [1976] 103 ITR 548 (SC): apportionment in the absence of a statutory framework necessarily involves approximation and should not be disturbed so long as it rests on relevant material (paragraphs 77 to 80).
The term “authority to conclude” does not mean all elements and details, since that would make other portion of the clause redundant – therefore only means that the activity needs to be core in nature.
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Handle my notice → Ask a CA on WhatsAppYes, on these facts. Where the personnel working out of the Indian premises do more than liaise — where they take part in technical and financial negotiation and in price negotiation with the customer — the Tribunal's finding of both a fixed place permanent establishment and a dependent agent permanent establishment stands. The Delhi High Court affirmed the Tribunal and dismissed the appeals. This was decided by the High Court (High Court of Delhi — S. Ravindra Bhat and A.K. Chawla, JJ. (judgment delivered by S. Ravindra Bhat, J.); IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others) and bears on section 9, section 9(1)(i), section 90, section DTAA art 5(1), section DTAA art 5(3), section DTAA art 5(4)(a), section DTAA art 5(5) of the Income Tax Act 1961. It is reported as (2019) 411 ITR 243 / [2019] 101 taxmann.com 142 (Delhi)(HC); neutral citation 2018 SCC OnLine Del 13256; IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others; assessment year 2001-02, on appeal from the Tribunal's order of 27 January 2017 in ITA No. 67/Del/2011. The further citations (2019) 306 CTR 417 and 174 DTR 25 do not appear on the report's citation line and are unverified.. This is the Indian decision the department reaches for on the agency limb of Article 5, and it is the counterweight to E-Funds and Nokia Networks, which the taxpayer reaches for. The department's argument is always the same: the marketing team's emails show negotiation, not liaison. Two further points give the case its weight. The Court held that 'authority to conclude' does not require authority over all the elements and details of a contract, only that the activity be core in nature, so the absence of signing authority is not an answer. And it did not stop at existence: it upheld the attribution, taking 10 per cent of Indian sales as the profit base because year-wise and entity-wise accounts had not been furnished, and 35 per cent of that as attributable to marketing in India, giving 3.5 per cent of the value of supplies — a figure that sits oddly with the Tribunal's own reduction of the marketing share to 26 per cent, and a point to check before the percentages are argued either way. If it applies to you, the first step is this: Read the email traffic between the Indian personnel and the customer before arguing liaison, because that is the record the Tribunal decided on.
A group of General Electric entities incorporated outside India sold equipment to Indian customers and had expatriate personnel, and employees of the Indian group company, working from liaison-office premises in India. The department said those personnel did more than liaison work and that the overseas entities were taxable here on business profits. On the material before it, including email traffic with Indian customers, the Tribunal found that the personnel were not merely liaising with clients and the headquarters office but were engaged in substantive work on the contracts, including technical and financial terms and price negotiation, and held that there was both a fixed place permanent establishment and a dependent agent permanent establishment. The Tribunal had reduced the marketing attribution from the 35 per cent adopted by the Assessing Officer to 26 per cent. The lead appeal is against the Tribunal's order of 27 January 2017 for assessment year 2001-02; the connected appeals arose out of reassessments for assessment years 2001-02 to 2008-09. The matter was decided on 2018-12-21 by the High Court (High Court of Delhi — S. Ravindra Bhat and A.K. Chawla, JJ. (judgment delivered by S. Ravindra Bhat, J.); IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others). On those facts the High Court held as follows. The appeals were dismissed and the Tribunal's order affirmed. All three questions of law were answered against the assessees: the India premises were a fixed place permanent establishment under Article 5 of the Double Taxation Avoidance Agreement between India and the United States — the only treaty the judgment applies — and the activities carried on there were not preparatory or auxiliary; the same activities gave rise to a dependent agent permanent establishment; and the attribution was not disturbed. On attribution the Court upheld the two-stage exercise of taking 10 per cent of Indian sales as the profit base, guided by ss.44BB and 44BBB because the assessees had not furnished year-wise and entity-wise accounts, and attributing 35 per cent of that profit to marketing activity in India, producing 3.5 per cent of the value of supplies as income attributable to the permanent establishment.
On the fixed place limb, a place of business under Article 5(1) needs no exclusive use and no legal right to the space; continuous usage indicating that the space is at the enterprise's disposal is enough, and the Court accepted the Tribunal's finding that the liaison-office premises satisfied that test. It rejected the argument that the presence of expatriates and Indian group employees at the premises did not show that sales were made from there: if the premises were not where the relevant business activity happened, the place where it did happen would itself be the fixed place (paragraphs 40 to 44). Whether an activity is preparatory or auxiliary is tested by asking whether it is an essential and significant part of the activity of the enterprise as a whole, and the Court expressly rejected the submission that activities escape that label only if they include authority to conclude contracts — Article 5(3) contains no such language, which appears only in Article 5(4)(a), and equating the two would erode the distinction between a fixed place and an agency permanent establishment (paragraphs 47 and 51). On the facts, because the goods were highly customised, the core activity of identifying and developing the customer, communicating options, discussing technical and financial terms and negotiating price had to be done collaboratively in India; that the India office could not take the final decision and awaited headquarters did not reduce its role to mute data collection and information dissemination, and its discharge of vital responsibilities in the finalisation of commercial terms showed that business was carried on in India through the fixed place (paragraphs 56 to 60). On the agency limb, an agent of a foreign company is of dependent status even where it serves more than one company within the same related group, the 'wholly or almost wholly' exclusion in the second part of Article 5(5) being directed at an agent serving a single enterprise; and whether the dealings between the agent and the related enterprises are at arm's length is irrelevant at the stage of establishing a dependent agent permanent establishment, which arises from the nature of the agent's activities (paragraph 63). On the OECD Commentary, the Court held that paragraph 32.1 runs contrary to the paragraph 33 relied on, so an assessee cannot selectively quote parts of the Commentary but must read the spirit of the whole; and, adopting the reasoning of the Italian Supreme Court in Philip Morris, that participation of a resident company's employees in a phase of the conclusion of a contract can fall within the concept of authority to conclude contracts even without a formal power of representation (paragraphs 64 to 66 and 70). The Court accepted that the case sits at the intersection of the fixed place and agency provisions, observing that enterprises do not organise themselves into the neat pigeon-holes a treaty envisages (paragraphs 73 to 75). On attribution it relied on Galileo International and Hukum Chand v. UOI [1976] 103 ITR 548 (SC): apportionment in the absence of a statutory framework necessarily involves approximation and should not be disturbed so long as it rests on relevant material (paragraphs 77 to 80). In the words reproduced by the source cited on this page: "The term “authority to conclude” does not mean all elements and details, since that would make other portion of the clause redundant – therefore only means that the activity needs to be core in nature."
It was decided by the High Court on 2018-12-21 and is reported as (2019) 411 ITR 243 / [2019] 101 taxmann.com 142 (Delhi)(HC); neutral citation 2018 SCC OnLine Del 13256; IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others; assessment year 2001-02, on appeal from the Tribunal's order of 27 January 2017 in ITA No. 67/Del/2011. The further citations (2019) 306 CTR 417 and 174 DTR 25 do not appear on the report's citation line and are unverified.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 9, section 9(1)(i), section 90, section DTAA art 5(1), section DTAA art 5(3), section DTAA art 5(4)(a), section DTAA art 5(5), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeals were dismissed and the Tribunal's order affirmed. All three questions of law were answered against the assessees: the India premises were a fixed place permanent establishment under Article 5 of the Double Taxation Avoidance Agreement between India and the United States — the only treaty the judgment applies — and the activities carried on there were not preparatory or auxiliary; the same activities gave rise to a dependent agent permanent establishment; and the attribution was not disturbed. On attribution the Court upheld the two-stage exercise of taking 10 per cent of Indian sales as the profit base, guided by ss.44BB and 44BBB because the assessees had not furnished year-wise and entity-wise accounts, and attributing 35 per cent of that profit to marketing activity in India, producing 3.5 per cent of the value of supplies as income attributable to the permanent establishment. It arises in Assessment & Scrutiny and Residence & Treaty Benefit matters, on section 9, section 9(1)(i), section 90, section DTAA art 5(1), section DTAA art 5(3), section DTAA art 5(4)(a), section DTAA art 5(5) of the Income Tax Act 1961, and was decided by High Court of Delhi — S. Ravindra Bhat and A.K. Chawla, JJ. (judgment delivered by S. Ravindra Bhat, J.); IT Appeal Nos. 621 of 2017 and others, with CM Appl. No. 29470 of 2017 and others. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Separate, in the secondment and role documents, market intelligence and support from participation in technical, financial and price negotiation. Do not argue the agency limb by pointing only to the absence of a signed contract, since the finding here rested on the conduct of negotiation rather than on formal authority to conclude. Where a PE is found, prepare the attribution case separately, and expect the department to run a marketing-share percentage rather than a functional study. Do not lift one sentence from the OECD Commentary; the Court said the assessee cannot selectively quote parts of it.
Still good law. Applied and treated as settled by a later Division Bench of the same Court. In GE Nuovo Pignone S.P.A v. CIT (International Taxation) [2024] 167 taxmann.com 351 / (2025) 477 ITR 659 (Delhi), decided 19 September 2024, the Court held at paragraph 22 that on fixed place and dependent agent permanent establishment it had, in the previous round of litigation, by a detailed determination come to hold against the appellant and that the decision had undoubtedly attained finality, and at paragraph 28 that the Tribunal's conclusions were unexceptionable bearing in mind the findings rendered in that earlier judgment. On the Supreme Court question, a correction. Special leave petitions were filed against this judgment; they were withdrawn, not decided. Petitions for Special Leave to Appeal (C) Nos. 13880-13953 of 2019 came before S.A. Bobde and B.R. Gavai, JJ. on 4 July 2019 and were adjourned. On 5 March 2021 Dinesh Maheshwari, J. permitted the withdrawal of SLP (C) Nos. 13947 and 13948 of 2019, with liberty to seek revival, so that the petitioners could pursue settlement under the Direct Tax Vivad Se Vishwas Act, 2020. On 6 August 2021 V. Ramasubramanian, J. recorded that the petitioners had filed a declaration for settlement under that Act and dismissed the special leave petitions as withdrawn. The judgment therefore stands undisturbed because it was never tested on the merits in the Supreme Court, not because leave was refused, and that is what the Delhi High Court's statement in September 2024 that the decision has attained finality amounts to. One caveat on scope. In Grid Solutions OY (Ltd.) v. ACIT [2025] 170 taxmann.com 498 / (2025) 303 Taxman 288 (Delhi), 17 January 2025, reassessment for assessment years 2013-14 to 2017-18 founded on this judgment together with a later survey was set aside, the Court holding at paragraphs 24 and 25 that the officer had recorded no finding that the facts of those years were identical to those found in the surveys. The judgment is good law on its own year and facts but cannot be carried forward to other assessment years without a year-specific finding. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The full text of the judgment has been read, so the account here no longer rests on a digest. The coram is confirmed as S. Ravindra Bhat and A.K. Chawla, JJ., and the earlier caveat about it can be dropped; the reservation date of 24 May 2018 does not appear on the report and has been removed. The appellants named in the judgment are GE Energy Parts Inc., General Electric International Operations Company Inc. and GE India Industrial Pvt. Ltd.; the other GE entities the entry previously listed are not named in the report and have been removed. The agency limb rests on Article 5(4)(a) read with Article 5(5), and the Court's own reasoning on it is at paragraphs 62 to 75, with the holding on 'authority to conclude' at paragraph 70. On attribution, note an inconsistency worth checking against the record before percentages are argued: paragraph 13 records that the Tribunal had reduced the marketing attribution from 35 per cent to 26 per cent, while paragraph 80 upholds 35 per cent of a 10 per cent profit base, that is 3.5 per cent of the value of supplies. The CTR and DTR citations previously carried do not appear on the report's citation line. The treaty applied is the India-United States DTAA and no other: paragraph 38 records that "The relevant provision of the DTAA, i.e the Indo-US DTAA reads as follows", and paragraph 39 that fixed place permanent establishments "are governed by Articles 5(1) to 5(3) of the U.S. - India Double Taxation Avoidance Agreement". The judgment is numbered continuously and the quoted holding has been re-checked against the text: it is at paragraph 70, in the Court's own voice, and the judgment prints a hyphen where this entry prints an en-dash. The special leave petitions against the judgment were dismissed as withdrawn on 6 August 2021 after the assessees filed declarations under the Direct Tax Vivad Se Vishwas Act, 2020, so it was never tested on the merits in the Supreme Court. The entry does not tell you what the arm's length remuneration of the Indian affiliate was, or how the attribution was reconciled with Morgan Stanley, which is cited in the judgment but not worked through on that point. The apparent gap between the Tribunal's reduction of the marketing share to 26 per cent and the 35 per cent upheld at paragraph 80 is not explained in the judgment. And the decision turns on findings of fact for assessment year 2001-02: a later Division Bench has held that those findings cannot be carried into other years without a year-specific finding that the facts are identical. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed and the Tribunal's order affirmed. All three questions of law were answered against the assessees: the India premises were a fixed place permanent establishment under Article 5 of the Double Taxation Avoidance Agreement between India and the United States — the only treaty the judgment applies — and the activities carried on there were not preparatory or auxiliary; the same activities gave rise to a dependent agent permanent establishment; and the attribution was not disturbed. On attribution the Court upheld the two-stage exercise of taking 10 per cent of Indian sales as the profit base, guided by ss.44BB and 44BBB because the assessees had not furnished year-wise and entity-wise accounts, and attributing 35 per cent of that profit to marketing activity in India, producing 3.5 per cent of the value of supplies as income attributable to the permanent establishment.
TaxSphere, “GE Energy Parts Inc v CIT”, https://taxnotice.vittsphere.com/caselaw/case/ge-energy-parts-v-cit-dependent-agent-pe/ (validity last checked 2026-08-23)
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