Law:

Section:

[2009] 176 Taxman 344 (AAR - NewDelhi)/[2009] 308 ITR 422 (AAR - NewDelhi)/[2009] 221 CTR 201 (AAR - NewDelhi) [2009] 176 TAXMAN 344 (AAR - NEW DELHI) AUTHORITY FOR ADVANCE RULINGS (INCOME-TAX), NEW DELHI Ikea Trading (Hong Kong) Ltd., In re* P.V. REDDI, CHAIRMAN A.K. SINHA AND RAO RANVIJAY SINGH, MEMBER A.A.R. NO. 771 OF 2008 DECEMBER 19, 2008 Section 9, read with section 5, of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India - Applicant is a company incorporated in Hong-Kong and is tax resident of Hong Kong - It purchases products from India and in turn sells them to [Ikea], wholesale companies outside India - It has established a liaison office in India for purpose of undertaking liaisoning activities in connection with purchase of goods from India - Said liaison office does not buy or sell goods itself but only facilitates purchase of goods by applicant at Hong Kong from Indian suppliers - Purchased items are invoiced by Indian suppliers directly to applicant who, in turn, sells same to wholesale companies outside India and sale price is received by applicant outside India - Whether looking at nature of activities carried on or to be carried on by liaison office of applicant in India, any income would accrue or arise or deemed to accrue or arise in India to applicant in terms of section 5(2)(b) - Held, no - Whether since activities of applicant are confined to purchase of goods meant for export, they fall within clause (b) of Explanation 1 to section 9(1)(i) and, therefore, no income can be attributed or apportioned on account of purchase operations - Held, yes - Whether, thus, either from standpoint of section 5(2) or section 9(1)(i), read with Explanation 1(b), applicant cannot be brought within net of taxation under Act - Held, yes FACTS The Ikea Group ('Ikea') is a multi-national retailer of furniture and home furnishing products under the brand name IKEA. It purchases its products from suppliers worldwide including India. Ikea trading companies through-out the world have been granted the right to purchase products in the IKEA range from the suppliers in different geographic markets. For India, this right is vested in the…

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