Permanent establishment

A non-resident holding company (A) has an Indian subsidiary company (B). This company also has another non-resident subsidiary (C).

At times C, which does not have any office in India but has clients in India, instructs B (not as per any agreement) to perform services (such as meeting with clients etc) on its behalf. For these services rendered, A (not C)  reimburses B at cost.

My quieries are:

1) Since A is reimbursing C at cost and no mark-up is made, would there be any TP impact?

2) Would B or any employee of B constitute a Permanenet Establishment of C in India, making C liable to tax in India?

3) If yes in 2 above, is there any provision under the Income Tax Act which would consider the PE as liable to tax of foreign company?

Thanks .

Replies (1)

1) Transaction between A & C (Non Residents) Wil have no impact on TP

2) No, it will not amount to permanent establishment but there remails business connection

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