Palak Rastogi & Kriti Kumaria
The application of BEPS principles and the MLI framework in defining Permanent Establishment status: India’s Double Taxation Avoidance Agreements
In an era of globalization, double taxation has been a longstanding concern, the initial resolution of the Double Taxation Avoidance Agreements (DTAAs) allowed multinational corporations to exploit the domestic tax planning strategies by shifting to low-tax jurisdictions and by making the profit ‘disappear’ for tax purposes, taking advantage of mismatch in the existing tax rules specifically the meaning and scope of the term “Permanent Establishment.” The effectiveness of anti-abuse provisions in the bilateral treaties varied widely between different tax treaties leading to increasing inconsistencies in the common key components related to defining Permanent Establishments and Limitations of Benefits (LOB), as well as prevention of Treaty Shopping.
This paper focuses on tracing the Indian government’s efforts in combating inconsistency of treaty provisions through a detailed analysis of the India- Singapore DTAA. Taking into account, the existing tax treaties that have been amended to implement the provisions of the recently ratified Multilateral Convention to Implement Tax Treaty-Related Measures aimed at preventing Base Erosion and Profit Shifting (MLI BEPS), an initiative by the OECD to navigate increasingly complex global tax environment. In this regard, as India’s tax treaties rely on a blend of the OECD and UN Model where Article 5 defines the expression of Permanent Establishment, this paper examines Action Plan 7 of the BEPS project concerning the issue of cross-border income going untaxed or being taxed at low rates due to unclear definition of Permanent Establishment.
Keywords: Double Taxation Avoidance Agreements, Base Erosion and Profit Shifting, Multilateral Instrument, OECD Action Plans, and Permanent Establishment.
In a typical tax treaty, the two willing nations agree on how to regulate the taxing jurisdiction for different types of income. Here, income generated from business activities can be taxed by the source countries without restriction provided that the activities of the Multinational Enterprise (MNE) trigger a Permanent Establishment (“PE”).3 If, however, no such PE exists, the source will usually cede taxing jurisdiction to the residence country of the taxable entity (i.e, to the place of which it is a tax resident in the normal course). A tax treaty that grants both countries the right to tax one or more types of income often includes a mechanism for avoiding double taxation and thus, relief to the taxpayer. The UN4 and OECD5 Model Tax Conventions, for example, recommend offering either a credit given by the resident country for taxes paid in the source country (the mechanism more commonly opted for by contracting countries) or an exemption by the resident country for income taxed by the source country. When an exemption is chosen as the double-taxation avoidance mechanism in a treaty, this has usually been based on the premise that the source country will tax the exempt income.
Before determining the amount of profits attributed to different kinds of income generated is to establish the tax residency status of the entity. Therefore, the basic principle that governs a Double Taxation Avoidance Agreement (DTAA) is that the business profits of a foreign enterprise are taxable in a State in which such foreign enterprise has a Permanent Establishment.
DTAAs being bilateral agreements although tailored to adjust the domestic policies of the contacting nations, may lose sight of the big picture, when DTAAs vary it gives MNEs opportunities for treaty abuse and hence, upset the intent of the law. The OECD and UN Models had to be updated6 as globalization created the need for a multinational standard of taxation. The Base Erosion and Profit Shifting7 (BEPS) project represents the single most important initiative in the field of international taxation. The objective of this project has been to revise the prevailing international tax principles to eliminate gaps and mismatches in law that allowed the MNEs an opportunity to shift profits to no-tax or low-tax jurisdictions and escape` liability.
The BEPS report includes changes to the definition of PE in the OECD Model Tax Convention (Art. 5), the OECD 2015 Final Report on Action Plan 7 (AP-7 Report) makes various recommendations for strengthening the provisions of Article 5 by lowering the bar to trigger a PE.8 In Furtherance, Action Plan 15 of BEPS created the Multilateral Framework (MLI) for implementing the changes to the convention in accordance with each AP, which has been ratified by India.9
The problems addressed by BEPS are exacerbated in an Indian context due to India’s heavy reliance on foreign capital and revenues from corporations (MNEs),10 which structure their business models upon international tax rules. Therefore, the need for effective DTAAs is necessary for the proper allocation of business profits to developing nations including India. In this regard, a DTAA can broadly be of two kinds (i) Comprehensive DTAA, that covers almost all types of incomes covered by any model convention. eg., gift tax, surtax, etc. (ii) Limited DTAAs which are limited to certain types of incomes only, e.g. only income from shipping and aircraft profits. This paper highlights one of the comprehensive DTAAs of India i.e. India-Singapore11 in the preliminary context of the clause of ‘Permanent Establishment.’
The signing of the MLI is the initial step in expressing consent to be bound by the framework, which includes mandatory provisions and an improved dispute-resolution mechanism. Countries can apply alternative mechanisms for non-mandatory provisions. India has adopted Option A, which applies to Covered Tax Agreements only if another partner has chosen the same option. However, as of right now, only PPT is applicable to Singapore; neither SLOB nor Broader agency PE have been chosen through reservation by Singapore. Thus, it becomes more crucial to do what is known as a functional and factual examination of each activity carried out by an institution in order to determine what would qualify as a “PE” under Article 5(1).
A “Fixed Place” is essential in determining whether a PE exists is generally a physical location, from where an enterprise conducts its business activities. Because a foreign corporation operating in another nation (the source country) forms a PE in that country, the commercial earnings of an enterprise of a Resident State may be subject to taxation if the enterprise enters the Source State through a PE.12. A taxpayer is normally taxed on their worldwide income in the nation in which they reside, but they may also be taxed in another country if they have a recognised source of income there. This has long been a contentious issue for both the tax authorities and the taxpayers. The concept of defining ‘PE’ is particularly important to prevent double taxation and facilitate cross-border trade and investment. Similarly, when specifically looking into India-Singapore DTAA13 which sets certain criteria for it as seen under para- 1 Article 5. Common elements that can lead to the creation of a PE include (i) the presence of a physical location and (ii) the duration of activities in the foreign country.
Nonetheless, whereas the second portion of Art. 5(1) assumes that the business is conducted through a permanent location, the first part of the article assumes the presence of a fixed place of business. According to the ruling of the Supreme Court in the case of Director of Income-tax (international taxes) against Morgan Stanley and Company Inc.14, if the second half is not attracted, there is no PE.
The enterprise must have an established place of business where it conducts necessary business activities that generate revenue. Three requirements are posited by the term “fixed place of business through which the business is carried on” in the framework of international taxation.15 for determining whether a place of business qualifies as PE:
This test, although helps in determining whether the non-resident has a PE and creates a taxable presence in the states, if the answer to this is affirmative, the presence of a PE triggers the obligation to pay taxes in these states. However, what is included in Article 5(2) automatically triggers the PE even though the Para 1 definition with the expression “means” defines it rather than fails. In order to avoid falling even under Art 5(2) taxpayers try to avail exemptions mentioned in para 7 of Art 5 of India-Singapore DTAA which are sometimes likely to favour them due to a lack of proper Factual and functional study of every activity the institution has been involved in.
Fitting within the exemption of the ‘preparatory or auxiliary’ clause: Scope of avoiding Fixed Place PE
It specifies that exemptions are for the purpose that not all business activities conducted in a foreign country should trigger taxation in that country. It typically applies to activities that are considered ‘preparatory or auxiliary’ in nature. Still, this is a point mostly where the tax conflict stems from as the tax authorities often fail to determine what can be considered preparatory or auxiliary in nature. The terms ‘preparatory16‘ and ‘auxiliary17‘ have not been defined in the Convention. Even while a company’s operations could increase productivity, it is challenging to assign any revenues from these activities since the services they provide are so disconnected from actual profit realisation The key thing to consider in this analysis is if the activities being performed are generating revenue or whether they are only preparatory, basic, or instructional, or if they are only supporting the participative or contributing activities.
Although BEPS Action Plan 7 recommended changes to the definition of PE in tax treaties while addressing the issue of “Preparatory and auxiliary activities” by introducing the ‘Significance the Presence Test’ which focuses on preventing the artificial avoidance of PE status by enterprises operating in a foreign country. In the absence of clear criteria, some businesses might engage in activities that, individually or collectively, fall short of creating a PE but are significant enough to warrant taxation. BEPS aims to reduce such ambiguity and ensure that the tax treatment of such activities is aligned with the underlying economic substance and the intent of tax treaties. Even then, there is still a substantial amount of uncertainty around the use of “Preparatory and auxiliary activities”—a primary means of tax evasion. Reading between the lines of the India-Singapore DTAA indicates that little has changed in terms of PE but in an insignificant amount —as shown by subsequent case laws.
Multinational Enterprises can set up their offices in India subject to. the relevant regulations in the form of a liaison office. There is also a diversion view regarding liaison constituting a PE:
In the case of Hitachi High Technologies v. DCIT,18 Hitachi Singapore’s Liaison office in India is a Pre-Exclusionary (PE) with a more restrictive scope of exclusion under the India-Singapore treaty compared to the India-US and India-Canada treaties. The Tribunal distinguished the PE exclusion clause in the India-Singapore treaty from the clauses in the India-US19 and India-Canada20 treaties. The ‘similar activities’ phrasing will be interpreted as a very restricted PE exclusion clause, requiring assessment based on preceding specified activities wherein, in the case of the India-Singapore treaty, the exclusion for “preparatory and auxiliary activities” will have to be evaluated in light of the previously specified activities, such as advertising, information supply, and scientific research, using the interpretation tool known as Ejusdem Generis. The broad PE exclusion clause is still there in the 2017 OECD Model and calls into question the rationale of applying the word “similar activities” to interpret a treaty’s restricted interpretation. Time will tell whether this view of the Tribunal gains traction in decisions to follow and is upheld by higher authorities21.
Nonetheless, it provides us with a different perspective in addition to examining comparable situations in India’s DTAA with other nations. In the case, Union of India v. U.A.E. Exchange Centre22, the Supreme Court held that an Indian liaison office of a United Arab Emirates (‘UAE’) company engaged in fund remittance services performed an essential activity and thus fall outside the scope of Article 5(4)(e) when such liaison office download information (such as name and address of beneficiaries, amount to be remitted, etc.) prints cheques/draft and dispatches them to addresses of beneficiaries through courier23. The Supreme Court further noted that although the LOs in India would be covered by the term PE in Article 5(2) of the India-UAE DTAA24, one has to undertake what is called a functional and factual analysis of each of the activities undertaken by an establishment in order to be liable to be taxed in India. In a case wherein such FRS activities would be ‘preparatory and auxiliary’ in nature, such a fixed place would not be considered to be a PE, in line with Article 5(4)(e) of the India-UAE DTAA.
However, in the case of Commissioner Of Income-Tax, V. Visakhapatnam Port Trust25, it was held that the liaison/representative office was not a PE where no violation was reported by the RBI, the activities of the liaison office were presumed of preparatory and auxiliary character. The fact of whether a liaison office26 constitutes a PE will thus have to be examined based on the facts and circumstances of each case and it cannot be presumed that a liaison office will always be excluded from the purview of Article 5. The above decisions are obviously welcome in International Tax Law, along with providing varied interpretations on the term ‘preparatory or auxiliary characters’ has not been defined anywhere in the DTAAs, and neither has it been defined in the OECD Model Double Tax Convention27.
In Director of Income Tax (international taxation) versus Morgan Stanley and Company INC.28Morgan Stanley and Company filed a special leave motion with the SC in opposition to the AAR’s decision. Regarding the back-office activities that MSCo had outsourced to Morgan Stanley Advantage Services (MSAS) in India, the AAR Ruling addressed whether MSCo had a PE in that country. The Supreme Court noted that MSCo was not conducting any business in India. MSAS was providing back-office services in India; according to the Treaty, these services were “preparatory or auxiliary” in character. Therefore, in India, there was no established location of business required to get PE status. On the other hand, the Formula One World Championship Ltd. Versus Commissioner Of Income Tax29 The Supreme Court ruled that Formula One World Championship Limited (FOWC), a UK tax resident, had a PE in India, even though the event was limited to three days. The court concluded that FOWC had exclusive access to the circuit and engaged in commercial rights exploitation in India through the F1 championship. Therefore, FOWC was taxable on receipts in India through PE.
Changes that are recognized in Indian Domestic Tax Law in determining the PE: Post-BEPS Amendments
In India, the concept of PE is parallel to ‘Business Connection’ as provided in the Income Tax Act. Section 9 which deals with “income deemed to accrue or arise in India.”30 Per the original OECD Model, the concept of ‘business connection’ relied heavily on physical presence. However, keeping abreast with growing digital business models and the OECD BEPS, Finance Act, of 2018 to tax digital transactions expanded the definition of business connection. ‘Significant Economic Presence’ of a non-resident in India31 will also constitute a ‘business connection’ and hence, and hence such economic activities will make India the source country as well. The scope of the significant economic presence of a non-resident in India has been further expanded through inserted Explanation 3A in clause (i) of sub-section (1) of section 9 by the Finance Act, 202032 which clarifies the scope of “business connection” in light of the BEPS Action Plan 7, which addresses the artificial avoidance of PE status if:
Either that person regularly plays a major part in the conclusion of contracts that are routinely concluded without the non-resident making important modifications, or that person can conclude contracts on behalf of the non-resident.
Further, the concept of business connection was discussed by the Supreme Court in Commissioner Of Income-Tax, Punjab Versus Rd. Aggarwal And Company And Anr33. A business connection in India involves a relationship between a non-resident’s business and taxable activity in taxable territories. This concept aligns with Action 7 guidelines, but the Supreme Court in the case of Union Of India And Another Versus Azadi Bachao Andolan And Anr34. prefers the DTAA over the Income Tax Act due to its bilateral nature. The India-Singapore DTAA does not incorporate BEPS Action 7, but domestic tax law can determine PE presence. If DTAA is applied, issues must be answered based on DTAA stipulations.
The commissionaire structure is an operating model designed for its tax planning features, it allows for an entity to accrue profits despite the absence of a fixed place of business in the source nation. MNEs engaged in the business of selling and distributing tangible goods since the late 1980s have led to the rise of a PE based on dependent agency created through contractual or other legal relationships.35 A commissionaire distributor in description is a combination of a traditional distributor and an agent. However, for consumers, the commissionaire’s operations are like that of any distributor— in its own name. In the bigger picture, when seen in relation to a foreign group company, the commissionaire operates on its behalf, like an agent, not taking title to the goods sold.
Article 5 para 8 and 9 of the India-Singapore DTAA define Agency PE, to be triggered when an agent (other than an independent agent) (i) “habitually exercises in the contracting state an authority to conclude contracts on behalf of the enterprise”36 with the exception of mere purchase of goods and merchandise. Or When (ii) without express authority “maintains in the Contracting state stocks of goods or merchandise from which he regularly delivers such on behalf of the enterprise.”37 Or when, (iii) “he habitually secures orders in the Contracting State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise.”38 Para 9 differentiates such agents from an “independent agent who is a broker, general commission agent or any other agent of an independent status acting in the ordinary course of their business”39 an enterprise acting via such agents are not deemed to have a PE. Further, Para 10 also sheds light on the fact that mere control of one company over another is not indicative of the PE of each other.
In the case of Rolls Royce Singapore Pvt Ltd. v. A DIT,40 the contentions of the AO and CIT(A) that due to the relationship of Rolls Royce Singapore Pvt. Ltd. (Assessee-company) with ANR Associates, a company within the domain of the Rolls Royce Group of Companies and by way of rendering services to its clients using the office of ANR, it constituted a PE through the dependent agency (DAPE) but was rejected by the Delhi High Court. The issue of whether Assessee Company was hit by Article 5(8) of the DTAA between India and Singapore was remanded back to the AO on the relevant factor of “work wholly or almost wholly for the Assessee-company” was reiterated as the test for an independent agency. In the given case, services of sale of spare parts for pieces of equipment and repair and maintenance services were rendered by the Assessee-company, although the returns were filed and tax thereon paid for the maintenance services as the fee for technical services (FTS), no income from supply of types of equipment (incidental to the supply of original equipment made by ANR) was declared since there was no PE and any business income was therefore not taxable. The High Court took into consideration the extent of ANR’s total income derived from other clients by its income tax returns and on grounds of careful examination of the overall business of the alleged agent concluded that it was not devoted wholly to the Assessee company as per Article 5(8) of the DTAA.
To determine what does constitute a DAPE in M/s.Redington Distribution Pte. Ltd. vs The Dy. Commissioner of Income Tax41, ITAT Chennai attached an agency PE to the assessee M/s. Redington Distribution Pte. Ltd. (RDPL), a tax resident of Singapore and subsidiary of M/s. Redington (India) Ltd. (REDIL). RDPL by not filing returns for the relevant assessment year faced scrutiny proceedings, on evidence factors of communications between M/s. RDPL and its parent company accompanied by oral statements from the employees of ‘Dollar Team’ who were wholly in charge of the entire business model of the assessee (selection of Indian customers, price determination, submission of quotes for various equipment, and collection of receivables from the parties.) Moreover, out of the net profits of the assessee, Rs.19,64,44,881, 89.65% of profits could be attributed to its Indian operations. The ITAT relied on the Supreme Court’s judgement on ADIT v. E-Funds IT Solution Inc.42 and held that the ratio laid down by the Hon’ble Supreme Court on the issue of fixed place PE in India and as per said judgement is clear and in order to constitute such, the premise of the Indian agency must be at the disposal of the foreign company and the business activities belonging to the foreign company carried on through those premises. The appeal went partly in favour of the assessee with regards to the exact attribution of profit, however, the court in the matter of Agency PE upheld the findings of the AO and concluded the existence of the dependent agency PE since they seem to be engaged not just in back-office support services but core income generating functions for the Singapore Subsidiary. This ruling can impact many MNEs engaged in the software business, who sell their products in India from Singapore but rely extensively on their Indian counterpart’s ground support in India for sales and marketing.
In AB Sciex Pte Ltd. v ACIT43 the tax resident of Singapore engaged in the business of manufacturing and sale of scientific research instruments declared NIL income in the relevant assessment year, however, the AO in the audit held that the company business of maintenance servicing, repairing and supply of spares, these services were provided by its Indian associated enterprise (AE). The AE had 3 contracts – the Sales Commission Agreement, Distribution Agreement, and the Marketing Support Services Agreement with the taxpayer and received revenue from the same. On evidence acquired by statements of employees of AB Sciex Pte Ltd, the AO found AE to exercise a predominant role in India for concluding contracts on behalf of the taxpayer and also for regular maintenance in India of stock of goods, from which it was on behalf of the taxpayer. From the invoices, it was clear that sales to Indian customers were directly made by the taxpayer from Singapore. Moreover, the Indian AE had been appointed only on a non-exclusive basis for sales, installation, and warranty-related services. Thus, a reading of the Distribution Agreement as a whole, showed purchases by Indian AE for the resales in India to be on a principal-to-principal basis only and no agency relationship to exist between the parties. Further, it was explicitly provided that Indian AE shall never be a legal representative of the taxpayer. Nothing gave the parties the power to direct or control the daily activities of the other. For all services, the remuneration for the taxpayer was to be at cost plus markup on an arm’s length basis. Therefore, the three agreements read together or standalone did not in any manner give the impression that Indian AE was habitually concluding contracts on behalf of the taxpayer so as to trigger the PE under Article 5(8) of the treaty. The Indian AE was not acting as an agent wholly and exclusively for the taxpayer to make it a PE under Article 5(9) of the tax treaty either.
Permanent Establishment clauses whether fixed place or commissionaire have traditionally determined whether foreign entities should pay taxes in a given jurisdiction based on physical presence. However, the digital economy’s rise has necessitated redefining PE to include digital presence. The digital realm defies traditional PE definitions, allowing MNEs to amass profits without a physical footprint. The interpretation and application of PE clauses vary from country to country, fostering inconsistency and uncertainty. This divergence creates opportunities for MNEs to exploit tax arbitrage, contributing to tax avoidance and consequently triggering white-collar crimes. Even countries that have ratified the MLI but made reservations on non-mandatory articles are exempt from its seamless and automatic application on its DTAA, such as Singapore, to which none of the BEPS measures regarding PE apply although BEPS guidelines exist, but their enforcement relies on individual countries’ commitment and capacity. Not all nations allocate sufficient resources to enforce BEPS recommendations, resulting in gaps. India must continue to honour its commitments to the BEPS principles.
MNEs exploit disparities in legal and compliance frameworks across jurisdictions. In this regard, the burden of proof is somewhat less even sometimes completely on the revenue department. The onus of demonstrating that a foreign enterprise has a PE in India pushes taxpayers one step closer to using the specific Activity exemption. In the further case of DIT-II (International Taxation), New Delhi v. Samsung Heavy Industries Co. Ltd,44 ruled that the responsibility for establishing a fixed place PE of a foreign enterprise in India lies with the Tax Authorities, not the taxpayer. The Indian Revenue had to prove that this PO was a fixed location PE of SHI before it could begin charging taxes. Then and only then could the issues of whether the enterprise’s profits be attributed to the PE and whether those profits would be subject to taxation under Indian Domestic Tax law. It referred to the case of Assistant Director Of Income Tax, New Delhi Versus M/S E-Funds It Solution Inc.45 wherein the court said,
“…The burden ofproving the fact that a foreign assessee has a PE in India and must, therefore, suffer tax from the business generated from such PE is initially on the Revenue…”.
The case helps to highlight the relevance of the burden of proof in International Tax law. This decision gives relief for the taxpayers and gives a two-pronged reiteration firstly, the compulsion of thorough examination for establishment of a PE of the enterprise as interpreted by the specific DTAA. Secondly, before moving further to determine the tax liability, the onus lies on the respective Revenue Authority to establish the PE and not the assessee. Since the burden lies on the revenue authorities as well, the inadequate enforcement of domestic PE clauses and BEPS measures in DTAAs even after their adoption can lead to foreign enterprises without checks from both resident and source countries practising tax evasion, transfer pricing manipulation, shell company schemes, and money laundering by way of gaps not in law but in enforcement.
The complex landscape of international taxation, especially in the context of Permanent Establishment, poses significant challenges for governments and multinational enterprises (MNEs) alike. The ongoing evolution of tax laws and international agreements, such as the Base Erosion and Profit Shifting project and the amendments to the Multilateral Conventions, reflects the concerted efforts to bridge gaps and create a more equitable global tax environment. India’s journey in navigating these challenges of tax attribution while solving the business models tailored to evade the laws highlights the intricate balance between attracting foreign investments and ensuring that profits are appropriately taxed within its borders. The shifting paradigms of PE, from traditional fixed places to digital and commissionaire structures, demand constant vigilance and adaptation from tax authorities on a domestic level.
While international efforts like BEPS aim to standardise and streamline tax regulations, the nuances of domestic enforcement and interpretation remain critical. As demonstrated in recent legal cases, the burden of proof often falls on revenue authorities, necessitating rigorous scrutiny and factual analysis. Looking ahead, it is imperative for countries like India to continue enhancing their enforcement mechanisms; transparency, clear definitions, and consistent application of PE concepts are essential to curbing tax evasion and ensuring a level playing field for businesses worldwide. As the world continues to grapple with the complexities of global taxation, collaborative efforts, informed decisions, and adaptive policies will be instrumental in shaping a more equitable and accountable future for international taxation.
1 Undergraduate students of Law, NMIMS School of Law, Navi Mumbai.
2 Undergraduate students of Law, NMIMS School of Law, Navi Mumbai.
3 JONATHAN SCHWARZ, SCHWARZ ON TAX TREATIES (Fifth edition ed. 2018).
4 UN Model Convention Financing for Sustainable Development Office, https://financing.desa.un.org/un-model-convention (last visited Oct 16, 2023)
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6 Ashish Goel & Shilpa Goel, Has the Permanent Establishment Rule Outlived Its Utility in a Digitalized World?, (2018), https://papers.ssrn.com/abstract=3202309 (last visited Oct 16, 2023).
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9 Indian Government ratifies Multilateral Instrument, https://www.ey.com/en_gl/tax-alerts/indian-government-ratifies-multilateral-instrument (last visited Oct 16, 2023).
10 Dhruva Advisors, FINAL PACKAGE OF MEASURES UNDER THE BASE EROSION AND PROFIT SHIFTING (‘BEPS’) PROJECT An Indian Perspective, https://www.dhruvaadvisors.com/insights/files/DhruvaBEPS_Oct2016.pdf
11 Agreement For The Avoidance Of Double Taxation And Prevention Of Fiscal Evasion With Foreign Countries – Singapore (2017) Singapore Comprehensive Agreements. Available At: Https://Incometaxindia.Gov.In/Dtaa/108690000000000077.Htm (Accessed: 16 October 2023).
12 Tax hotline: Permanent establishment : SCOPE OF PRELIMINARY and Auxiliary Activities explained by Supreme Court (no date) Nishith TV. Available at: https://www.nishith.tv/tax-hotline-permanent-establishment-scope-of-preliminary-and-auxiliary-activities-explained-by-supreme-court/ (Accessed: 16 October 2023).
14 Morgan Stanley and Co. 2006 ITR (284) 260.
15 Admin (2023) Application of GAAR provisions cannot be a ground for denial of tax benefit under India-Singapore DTAA: A2Z Taxcorp LLP, A2Z Taxcorp LLP |. Available at: https://www.a2ztaxcorp.com/application-of-gaar-provisions-cannot-be-a-ground-for-denial-of-tax-benefit-under-india-Singapore-data/ (Accessed: 16 October 2023).
16 ‘Preparatory’ means carrying out the preliminary activities
17 The term ‘auxiliary’ implies supplementary or additional help and support in the main activities of earning income. OECD BEPS Action Plan 7 provides that auxiliary activity generally corresponds to an activity that is carried on to support, without being part of, the essential and significant part of the activity of the enterprise as a whole.
18 Hitachi High Technologies v. DCITAIR 1971 SC 862
19 Agreement for the avoidance of double taxation of income with the USA Pages – home – Central Board of Direct Taxes, Government of India. Available at: https://incometaxindia.gov.in/dtaa/108690000000000099.htm (Accessed: 16 October 2023).
20 Agreement For Avoidance Of Double Taxation Of Income And The Prevention Of Fiscal Evasion With Canada (No Date) Canada Comprehensive Agreements. Available At: Https://Incometaxindia.Gov.In/Dtaa/108690000000000016.Htm (Accessed: 16 October 2023).
21 Bharucha, P. (2019) Research and articles, DELHI TRIBUNAL: HITACHI SINGAPORE’S LIAISON OFFICE IN INDIA IS A PERMANENT ESTABLISHMENT, SCOPE OF EXCLUSION UNDER SINGAPORE TREATY RESTRICTIVE. Available at: https://www.nishithdesai.com/SectionCategory/33/Tax-Hotline/12/53/TaxHotline/4568/3.html (Accessed: 16 October 2023).
22 Union of India v. U.A.E. Exchange Centre (2007) 7 SCC 1
23 Western Union Financial Services, 16 101 TTJ 506
24 See generally Arvid Skaar, Permanent Establishment: Erosion Of A Tax Treaty Principle (1992). 23 Arthur Cockfield, Reforming the Permanent Establishm
25 Commissioner Of Income-Tax, V. Visakhapatnam Port Trust F.No.CIT-. 1/VSP/12AA/VPT/12
26 The activities allowed to be conducted by the liaison offices were (i) responding quickly and economically to enquiries from correspondent banks regarding suspected fraudulent drafts, (ii) undertaking the reconciliation of bank accounts held in India, (iii) acting as a communication centre receiving computer (via modem) advice of mail transfer T.T. stop payments messages, payment details etc., originating from respondent’s several branches in UAE and transmitting to its Indian correspondent banks; (iv) printing Indian Rupee drafts with facsimile signature from the Head Office and counter signature by the authorised signatory of the Office at Cochin; and (v) following up with the Indian correspondent banks.
27 Sharma, S. (2022) Landmark Indian cases on the scope of preparatory and auxiliary activities, ITR. Available at: https://www.internationaltaxreview.com/article/2a6a66eh04saxabvjb8qq/landmark-indian-cases-on-the-scope-of-pre paratory-and-auxiliary-activities (Accessed: 16 October 2023).
28 Director of Income Tax (international taxation) versus Morgan Stanley and Company INC. 2007 (Z) TMI 201 SUPREME COURT
29 Formula One World Championship Ltd. Versus Commissioner Of Income Tax (4)TMI 1109 SUPREME COURT
30 Goel, A. (March 2018) Has the ‘Has the ‘permanent establishment Rule’ outlived its utility in a digitalized world? – NUJS law review. Available at: http://nujslawreview.org/wp-content/uploads/2018/03/11-1-Ashish-Goel-Shilpa-Goel.pdf (Accessed: 16 October 2023).
31 Singh, S.Bird s-Eye View of the Concept of Permanent Establishment, Tax Management India. Available at: https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=11461 (Accessed: 16 October 2023).
32 The Finance Act 2020, Act No. 26 of 2020
33 Commissioner of Income Tax, Punjab vs. R.D. Aggarwal & Company & Anr. (AIR 1965 SC 1526)
34 Union of India vs. Azadi Bachao Andolan and Ors – 263 ITR 706 (SC)
35 JONATHAN SCHWARZ, SCHWARZ ON TAX TREATIES (Fifth edition ed. 2018).
36 AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN COUNTRIES Central Board of Direct Taxes, Government of India. Available at: https://incometaxindia.gov.in/DTAA/108690000000000077.htm (Accessed: 16 October 2023).
40 Rolls Royce, Singapore Pvt. Ltd. v. Assistant Director of Income Tax [TS-515-HC-2011(DEL)]
41 M/s.Redington Distribution Pte. Ltd. vs The Dy. Commissioner of Income Tax IT (TP) A No. 14/Chny/2020
42 ADIT v. E-Funds IT Solution Inc. [Civil Appeal No. 6082 of 2015] (SC)
43 AB Sciex Pte. Ltd. vs. ACIT (2022) (ITA 514/Del/21)
44 DIT-II (International Taxation), New Delhi v. Samsung Heavy Industries Co. Ltd Civil Appeal No. 12183 of 2016
45 Assistant Director of Income Tax v. M/s. E-Funds IT Solution Inc.,  86 taxmann.com 240.