eBay India is a dependent agent of eBay International AG but not a “dependent agent PE” so business profits cannot be taxed in India.

Case: eBay International AG vs Dy DIT (Mumbai – Trib)

 

Facts:  The assessee, eBay International AG, was incorporated in Switzerland. It operated specific websites in India that provided an online platform for facilitating the purchase and sale of goods and services to users based in India.

 

The assessee had entered into marketing support agreements with eBay India and eBay motors, for availing of certain support services in connection with its business in India.

 

The AO concluded that the payments received by the assessee from operations of websites were mainly in the nature of FTS. Further, it also held that the assessee had a PE in India in the form of its entities namely, eBay India and eBay motor. On appeal by the assessee, the DRP upheld the order of AO. Aggrieved-assessee filed the instant appeal.

 

 

HELD by the Tribunal in favour of assessee:

 

·         Fees accruing to assessee on successful completion of the transactions between the buyer and seller could not be described as FTS, as the assessee had no role to play in effecting sales and these were in nature of business profits;

·         The existence of PE as per Article 5 of India-Singapore DTAA (‘treaty’) is a must for bringing to charge any business profits as per Article 7 of treaty. The eBay India and eBay motors were dependent agents of assessee, as they were assisting it in carrying on business in India and if any of the conditions given in para 5 of Article 5 of treaty was satisfied, then they would constitute dependent agent PE of the assessee in India

·         First condition: "has and habitually exercises in that State, an authority to negotiate and enter into contracts for or on behalf of the enterprise”. By performing the activities as narrated in the agreement, it was seen that eBay India had at no stage negotiated or entered into contract for or on behalf of the assessee

·         Second condition: “dependent agent habitually maintaining a stock of goods for or on behalf of the enterprise”. This condition was not satisfied as eBay India didn’t maintain any stock of goods for delivery for or on behalf of the assessee

·         Third condition: “dependent agent manufactures or processes the goods or merchandize in that State for the enterprise”. Obviously, this clause was also not applicable because eBay Motors was not required to manufacture or process the goods or merchandise on behalf of the assessee;

·         Thus, the eBay India and eBay motors were dependent agents of assessee but they did not constitute dependent agent PE and, thus, profits earned by assessee could not be taxed as per Article 7 of treaty

 

CA Rahul Jain

rahuljain@rpmd.in