permanent establishment

PE or Business Connection – Tax on Income of non-resident in India

Income Tax - Whether incomes of a non-resident are taxable in India, regardless of whether the non-resident assessee has PE or Business Connection in India? There is misconception in the minds of few non-resident assessees that their income are not taxable in India if they have neither business connection nor permanent establishment in India but there...

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Concept of Service PE and Key Judgements

Income Tax - 1. Concept of PE – Introduction 1. PE is primarily a concept relevant from tax treaty perspective. Under a treaty regime, business profits are ordinarily taxable in the country of residence except when there exists a PE in source country. 2. Article 5(1) U.N. Model Tax Convention and OECD Model Convention– Basic rule PE “a [&hel...

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Has the AAAR fixed the ‘fixed establishment’ under GST?

Income Tax - The ‘fixed establishment’ could pose yet another challenge to the ‘One nation One tax’ theory unless more clarity is brought to the definition similar to (or even better than) ‘Permanent Establishment’ defined under the Income Tax Act, 1961 read with DTAAs entered into with various countries....

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Common strategies used to avoid Permanent Establishment status

Income Tax - Avoidance of Permanent Establishment (PE) status of Non-Residents are made through various arrangements. Company structures their business in way that status of PE can artificially be avoided. The definition of permanent establishment included in tax treaties is therefore crucial in determining whether a non-resident enterprise must pay i...

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Preparatory & Auxiliary activities in Permanent Establishment: How does India cope with the dearth in determining provisions?

Income Tax - With the incessant global growth, the relevance of Permanent Establishment (PE) in international taxation has become paramount. In simpler terms, the expression ‘Permanent Establishment’ means a fixed place of business through which the business of an enterprise is wholly or partly carried on....

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OECD releases a discussion draft on the definition of 'permanent establishment' in the OECD Model Tax Convention; CBDT invite Comments

Income Tax - The OECD Committee on Fiscal Affairs has proposed important and far-reaching changes to the Commentary on Article 5 (Permanent Establishment) of the OECD Model Tax Convention. As these changes will have an impact on India, the CBDT has, vide letter dated 8.11.2011, invited comments on the proposals before finalizing its view and sending ...

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MNC preferring dispute resolution panel to settle their disputes with Income tax department

Income Tax - A host of companies from Mumbai, said to be 367 in number and mostly multinational in nature, have moved the recently set up dispute resolution panel (DRP) to resolve issues related to cross-border taxation. An official in the I-T department said except two, all of the companies have chosen DRP instead of the conventional channel of appea...

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Double Taxation Avoidance Agreement Signed Between India and Tajikistan

Income Tax - A Double Taxation Avoidance Agreement was signed between India and Tajikistan today, i.e. 20th November, 2008. The Agreement was signed by Mr. Narendra Bahadur Singh,Chairman, Central Board of Direct Taxes on behalf of Government of India and by Mr. Norinov Jamshed Nurmahmadovich, Deputy Minister of Finance of the Republic of Tajikistan o...

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Article 7 cannot come into play unless interest income is directly or indirectly attributable to PE

DCIT Vs Marubeni Corporation (ITAT Mumbai) - DCIT Vs Marubeni Corporation (ITAT Mumbai) On the facts of this case, however, all that the Assessing Officer has indicated is that the assessee had a permanent establishment (PE) in India during the relevant period and that there was presumably some connection between the interest income of the ass...

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ITAT explains impact on taxability when treaty not contains FTS clause

DCIT Vs Michelin ROH Co. Ltd. (ITAT Delhi) - DCIT Vs Michelin ROH Co. Ltd. (ITAT Delhi) Brief facts of the case are that the assessee has a company incorporated in Thailand and offers a number of services, such as, business planning and coordination, engineering services, product research and development etc. to its Indian subsidiary. On offer...

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TDS not deductible on business profit of non-resident in absence of PE in India

Apurva Goswami Vs DDIT (International Taxation) (ITAT Delhi) - Merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making a remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when recipient has a tax liability in In...

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TDS not deductible on Payment to Facebook Ireland for Advertisement

Addl. CIT Vs Lenskart Solution (P) Ltd. (ITAT Delhi) - Addl. CIT Vs Lenskart Solution (P) Ltd. (ITAT Delhi) It was claimed by the Assessee that as the Assessee had made the payment to Facebook Ireland Inc. (FII), which admittedly did not have any permanent establishment (PE) in India and, therefore, the payments made to it for advertisement services wer...

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No Supervisory PE established merely from visit of employees of Foreign Company in India for certain technical services

FCC Co. Ltd. Vs ACIT (ITAT Delhi) - FCC Co. Ltd. Vs ACIT (ITAT Delhi) ITAT had directed the assessee to file the description of services rendered by the employees of the assessee on their visit to India and the corresponding clause under the Agreement for Dispatch of Engineers under which such services would fall. In response, the ass...

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Non residents having no PE in India exempted from section 206C(1G) TCS

Notification No. 99/2022-Income Tax [S.O. 3878(E).] - (17/08/2022) - CBDT notifies Section 206C (1G) of Income Tax Act shall not apply to a person (being a buyer) who is a non-resident & who does not have a PE in India. Notification No. 99/2022-Income Tax | Dated: 17th August, 2022...

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Amendment of Rules for Profit attribution to PE: CBDT invites comment

F. No. 500/33/2017-FTD.I - (18/04/2019) - Public Consultation on the proposal for amendment of Rules for Profit attribution to Permanent (PE) Establishment invited by CBDT. Under Article 7 in the Indian treaties, profits are to be attributed to the PE as if it were a distinct and separate entity on the basis of the accounts of the PE and wh...

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Recent Posts in "permanent establishment"

Non residents having no PE in India exempted from section 206C(1G) TCS

Notification No. 99/2022-Income Tax [S.O. 3878(E).] 17/08/2022

CBDT notifies Section 206C (1G) of Income Tax Act shall not apply to a person (being a buyer) who is a non-resident & who does not have a PE in India. Notification No. 99/2022-Income Tax | Dated: 17th August, 2022...

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Article 7 cannot come into play unless interest income is directly or indirectly attributable to PE

DCIT Vs Marubeni Corporation (ITAT Mumbai)

DCIT Vs Marubeni Corporation (ITAT Mumbai) On the facts of this case, however, all that the Assessing Officer has indicated is that the assessee had a permanent establishment (PE) in India during the relevant period and that there was presumably some connection between the interest income of the assessee and the existence of the permanent...

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ITAT explains impact on taxability when treaty not contains FTS clause

DCIT Vs Michelin ROH Co. Ltd. (ITAT Delhi)

DCIT Vs Michelin ROH Co. Ltd. (ITAT Delhi) Brief facts of the case are that the assessee has a company incorporated in Thailand and offers a number of services, such as, business planning and coordination, engineering services, product research and development etc. to its Indian subsidiary. On offering these engineering services, the asse...

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TDS not deductible on business profit of non-resident in absence of PE in India

Apurva Goswami Vs DDIT (International Taxation) (ITAT Delhi)

Merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making a remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when recipient has a tax liability in India....

Read More

PE or Business Connection – Tax on Income of non-resident in India

Whether incomes of a non-resident are taxable in India, regardless of whether the non-resident assessee has PE or Business Connection in India? There is misconception in the minds of few non-resident assessees that their income are not taxable in India if they have neither business connection nor permanent establishment in India but there...

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TDS not deductible on Payment to Facebook Ireland for Advertisement

Addl. CIT Vs Lenskart Solution (P) Ltd. (ITAT Delhi)

Addl. CIT Vs Lenskart Solution (P) Ltd. (ITAT Delhi) It was claimed by the Assessee that as the Assessee had made the payment to Facebook Ireland Inc. (FII), which admittedly did not have any permanent establishment (PE) in India and, therefore, the payments made to it for advertisement services were not chargeable to tax in […]...

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No Supervisory PE established merely from visit of employees of Foreign Company in India for certain technical services

FCC Co. Ltd. Vs ACIT (ITAT Delhi)

FCC Co. Ltd. Vs ACIT (ITAT Delhi) ITAT had directed the assessee to file the description of services rendered by the employees of the assessee on their visit to India and the corresponding clause under the Agreement for Dispatch of Engineers under which such services would fall. In response, the assessee furnished Annexure 1 for […...

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Interest on income tax refund received by non-resident companies is taxable irrespective of PE

Transocean Offshore International Ventures Ltd. Vs DCIT (ITAT Delhi)

Interest on income tax refund received by the non-resident companies shall be taxable as per the provision of Tax Treaty irrespective of the fact that whether the assessee has PE in India or not....

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No income of assessee-company taxable in India in absence of PE in India

Gemological Institute of America Inc. Vs ACIT (ITAT Mumbai)

Since Indian subsidiary of assessee-company was operating in an independent manner and there was nothing to show that factually speaking the Indian subsidiary constituted a PE of assessee in India, therefore, AO had erred in invoking section 9 of the Act and/or Article 5 of the India-USA DTAA in order to say that the assessee company had ...

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Income of ‘Sabre Asia Pacific’ from computerized Air ticket reservation taxable in India

Sabre Asia Pacific Pte Ltd Vs ACIT (ITAT Mumbai)

Sabre Asia Pacific Pte Ltd Vs ACIT (ITAT Mumbai) The first issue that needs to be decided is whether the assessee has a permanent establishment in India or not? This is challenged as per ground 2 of the appeal. We find that this issue is squarely covered against the assessee by the decision of the […]...

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