AID10431: The Assessing officer in the decided case (GE Energy Parts Inc vs. ADIT, ITAT Delhi) examined the taxability of income of GE Overseas under the Act as well as the Double Taxation Avoidance Agreement. He did not accept the contention of the assessee that the sale consideration was not taxable in India as the title in respect of the equipment’s was transferred outside India and the payments were also received outside India. He held that a lot of activities relating to marketing and sales took place in India. Further, the negotiations of prices also took place in India. These facts, in the opinion of the AO, were clear indicators of the GE India securing orders for GE Overseas. He further found that GE Overseas, by remotely sitting in foreign countries, could not make any sales, without the active involvement of GE India. This was held to be a business connection of GE Overseas in India in terms of section 9 of the Act. The AO, therefore, held that all the profits did not accrue or arise to the assessee in the foreign soil, but part of such profits arising in India, corresponding to the activities carried out in India, was chargeable to tax under the Act. Such income accruing or arising was held to be liable to tax as per the provisions of section 5(2) of the Act. Simply put, the AO has made out a case that the GE overseas entities were having business connection under the Act as well as permanent establishment under the DTAA in India in all the years under consideration

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Question: The Assessing officer in the decided case (GE Energy Parts Inc vs. ADIT, ITAT Delhi) examined the taxability of income of GE Overseas under the Act as well as the Double Taxation Avoidance Agreement. He did not accept the contention of the assessee that the sale consideration was not taxable in India as the title in respect of the equipment’s was transferred outside India and the payments were also received outside India. He held that a lot of activities relating to marketing and sales took place in India. Further, the negotiations of prices also took place in India. These facts, in the opinion of the AO, were clear indicators of the GE India securing orders for GE Overseas. He further found that GE Overseas, by remotely sitting in foreign countries, could not make any sales, without the active involvement of GE India. This was held to be a business connection of GE Overseas in India in terms of section 9 of the Act. The AO, therefore, held that all the profits did not accrue or arise to the assessee in the foreign soil, but part of such profits arising in India, corresponding to the activities carried out in India, was chargeable to tax under the Act. Such income accruing or arising was held to be liable to tax as per the provisions of section 5(2) of the Act. Simply put, the AO has made out a case that the GE overseas entities were having business connection under the Act as well as permanent establishment under the DTAA in India in all the years under consideration.

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http://itatonline.org/archives/ge-energy-parts-inc-vs-adit-itat-delhi-permanent-establishment-entire-law-explained-on-whether-the-deputation-of-personnel-by-a-foreign-company-to-assist-the-indian-subsidiaries-in-negotiations-mark/)

a) In the context of above mentioned cases, discuss what can be the objectives and importance of framing rules with respect to taxation of a business concern which operates in more than one nation from taxation perspective?


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