Article 5 of India-Japan DTAA – Presence of personnel of foreign parent in premises of Indian subsidiary to render services did not constitute, either fixed place PE, or Supervisory PE of foreign company

1 FCC Co. Ltd. vs. ACIT [2022] 136 taxmann.com 137 (Delhi - Trib.) ITA No: 54/Del/2019 A.Y.: 2015-16; Date of order: 9th March, 2022Article 5 of India-Japan DTAA – Presence of personnel of foreign parent in premises of Indian subsidiary to render services did not constitute, either fixed place PE, or Supervisory PE of foreign companyFACTS Assessee, a tax resident of Japan (FCO), received the following income from its wholly owned-subsidiary (ICO) in India:• Royalty and FTS income offered to tax at 10% under DTAA, and • Income from the supply of raw material, components and capital goods treated as not taxable in India in the absence of PE. AO considered that the premises of ICO was the office or branch of FCO in India. Accordingly, he taxed income from the supply of material by treating premises of ICO as fixed place PE of FCO in India. AO further held that FCO constituted supervisory PE as employees visited India to help ICO in setting up a new product line in India. DRP upheld AO’s order. Being aggrieved, the assessee appealed to ITAT. HELD Fixed place PE • To constitute a Fixed Place PE, it is a prerequisite that premises must be at the disposal of the enterprise. • Access to ICO’s premises to provide services by FCO would not amount to the place being at its disposal. Such access was for the limited purposes of rendering services to ICO without FCO having any control over the said prem