The Income Tax Appellate Tribunal, Mumbai Bench “I”, in Bloomberg LP v. Addl DIT IT (IT) RG 3, examined whether Bloomberg LP had a Permanent Establishment in India under Article 5 of the India-USA Double Taxation Avoidance Agreement and whether profits could consequently be attributed to such PE. The Tribunal ultimately held that Bloomberg LP did not have a PE in India through its Indian subsidiary, Bloomberg Data Service Private Limited.
Background of the Case
Bloomberg LP is a non-resident corporate entity incorporated in the United States and engaged in providing financial information, business and market information, news and media reports through its web-based product known as Bloomberg Professional Services (BPS).
Bloomberg had an Indian subsidiary, Bloomberg Data Service Private Limited (BDS), which acted as a distributor of BPS under a distribution agreement. According to the agreement, Bloomberg sold its products/services to BDS, and BDS in turn sold them to Indian end-users/customers on a principal-to-principal basis.
For Assessment Years 2008-09 and 2009-10, Bloomberg received ₹122,59,10,894 and ₹198,85,65,732 respectively from BDS towards licence fee for sale and distribution of BPS. Bloomberg offered these receipts as royalty income under Section 115A of the Income-tax Act, taxable at the applicable rate of 10%.
Assessing Officer Treated Indian Subsidiary as PE
The Assessing Officer took the view that Bloomberg exercised control over BDS and that the Indian subsidiary was dependent upon Bloomberg. On this basis, the AO treated BDS as a Dependent Agent Permanent Establishment (DAPE) of Bloomberg in India.
The AO further observed that Bloomberg provided services in India through the personnel of BDS and therefore also treated BDS as constituting a Service PE. Having held that a PE existed, the AO attributed profits to such PE by allowing 10% deduction towards expenses from the total receipts and treating the balance amount as income attributable to the PE.
The additions were subsequently sustained by the first appellate authority.
ITAT Examines the Distribution Arrangement
The Tribunal closely examined the distribution agreement between Bloomberg and BDS. It noted that BDS independently entered into contracts with Indian customers, raised its own invoices and was responsible for execution and enforcement of contracts with end-users.
The Tribunal also noted that BDS appointed its own employees and contractors at its own expense and had indemnified Bloomberg against liabilities arising out of distribution of products and services.
These facts showed that the Indian subsidiary sold Bloomberg’s products and services to Indian customers on a principal-to-principal basis and not as an agent acting for and on behalf of Bloomberg.
No Service PE Under Article 5(2)(l)
On the allegation of Service PE, the Tribunal examined Article 5(2)(l) of the India-USA DTAA.
Bloomberg’s employees had visited India for activities such as overseeing the operations of BDS, training its employees, providing administrative support, assisting in gathering news and information, and providing support relating to Bloomberg Professional Services.
The Tribunal held that overseeing the operations of the Indian subsidiary was clearly in the nature of auxiliary or stewardship activity. It further observed that the Revenue authorities had failed to properly establish that the other services were beyond stewardship or auxiliary activities or that they fell outside the ambit of services covered under Article 12.
Accordingly, without first determining the actual nature of the services, the Revenue could not conclude that Bloomberg had a Service PE in India.
Indian Subsidiary Was Not a Dependent Agent PE
The Tribunal then examined the conditions for a DAPE under Article 5(4) of the India-USA DTAA.
It noted that a dependent agent may constitute a PE where, inter alia, it habitually exercises authority to conclude contracts, habitually maintains stock for delivery on behalf of the foreign enterprise, or habitually secures orders wholly or almost wholly for such enterprise.
In Bloomberg’s case, BDS had not been given authority to enter into contracts on behalf of Bloomberg. The contracts with Indian customers were entered into independently by BDS, and there was no privity of contract between Bloomberg and those customers.
The Tribunal further observed that some degree of control by a parent company over its subsidiary is a normal commercial feature and, by itself, does not convert the subsidiary into a dependent agent.
No Further Profit Attribution Even Assuming DAPE
The Tribunal additionally observed that even if BDS were assumed to constitute a DAPE, there would still be no question of further profit attribution, because the transactions between Bloomberg and BDS had already been found to be at arm’s length by the Transfer Pricing Officer in an order passed under Section 92CA(3) of the Income-tax Act.
Therefore, further attribution of profits to a hypothetical PE was not warranted.
Final Decision
On an overall consideration of the facts and the distribution arrangement, the Mumbai ITAT concluded that Bloomberg LP did not have any Permanent Establishment in India in the form of BDS.
Consequently, further attribution of profit to a non-existent PE was held to be untenable. The Assessing Officer was directed to accept the income declared by Bloomberg in its returns for both assessment years.
The appeals were partly allowed.
Key Legal Takeaway
A subsidiary does not automatically become a Dependent Agent PE merely because it exclusively distributes the products of its foreign parent or because the parent exercises commercial oversight over the subsidiary. The decisive factors remain whether the subsidiary acts for and on behalf of the foreign enterprise, concludes contracts for it, or otherwise satisfies the specific conditions under Article 5 of the applicable DTAA.
Further, where the transactions between the foreign enterprise and the alleged PE have already been accepted as being at arm’s length, additional profit attribution may not arise.
Case Details
Case: Bloomberg LP v. Addl DIT IT (IT) RG 3
Tribunal: Income Tax Appellate Tribunal, Mumbai Bench “I”
Bench: Saktijit Dey, Vice President and Arun Khodpia, Accountant Member
Appeal Nos.: ITA Nos. 5529/MUM/2014 & 5530/MUM/2014
Assessment Years: 2008-09 & 2009-10
Date of Hearing: 18 May 2026
Date of Pronouncement: 14 August 2026
Treaty Involved: India-USA DTAA
Key Provisions: Article 5(2)(l), Article 5(4), Article 12, Sections 115A and 92CA(3) of the Income-tax Act
Result: Appeals Partly Allowed.
