The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench has
recently held in the case of DCIT, Hyderabad vs. M/s
IJM (India) Infrastructure Ltd, Hyderabad
(2014-TII-114-ITAT-HYD-TP) that a permanent
establishment (PE) of a foreign company has to be treated as
separate entity for the purpose of transfer pricing and that any
transaction entered by an Indian resident i.e. a company with such
a PE should not be treated as an international transaction. Which
means, such a transaction should be treated as a domestic
transaction and not as an international transaction under section
92B of the Income-tax Act, 1961 (the Act). One of the main reasons
for the ITAT to arrive at such a conclusion is for the fact that
there is no Indian base erosion in such a transaction. In the
sense, the transaction between the parties is tax neutral and even
if the payments between such a PE and the Indian company is not at
arm's length price (ALP), it will still not erode tax base in
India as
