SONY NOT LIABLE FOR TAX IN INDIA ON ADVT. REVENUE.

Foreign companies having their operations in India would not have to be taxed in the country if their Indian activities have been adequately remunerated in the hands of the Indian entity. In a landmark judgment, the Bombay High court overturned the earlier order of Income Tax Appellate Tribunal Mumbai in a case involving Sony Entertainment Television (SET) Satellite, Singapore and its Indian agent SET Satellite India, and said there is no tax liability on its income generated in the country but relayed abroad. The ruling would imply that foreign companies remunerating their dependent agents in India on an arm’s length basis will not be liable to pay tax in the country. This is because although the agents will constitute a permanent establishment (PE), no profits can be attributed to them. Arms
length price means a price, which is applied or proposed to be applied in such transactions between persons other than, associated enterprises, in uncontrolled conditions.