Income Tax : xplains how the functions performed by an Indian subsidiary are tested under Article 5 to determine whether a foreign company form...
Income Tax : The analysis explains how activities of a liaison office can trigger PE exposure despite regulatory approval. Taxability depends o...
Income Tax : Highlights how the Court ruled that consistent operational control and strategic oversight in India can establish a Fixed Place PE...
Income Tax : Supreme Court rules that foreign taxpayers without current projects or PE in India can still set off expenses and depreciation aga...
Goods and Services Tax : A practical guide on how India taxes imported digital services, explaining GST under RCM and when TDS applies. Key takeaway: Buyer...
Income Tax : The OECD Committee on Fiscal Affairs has proposed important and far-reaching changes to the Commentary on Article 5 (Permanent Est...
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 dispu...
Income Tax : A Double Taxation Avoidance Agreement was signed between India and Tajikistan today, i.e. 20th November, 2008. The Agreement was s...
Income Tax : The Supreme Court declined to condone delay, thereby upholding the High Court’s conclusion that the liaison office did not const...
Income Tax : The judgment confirms that income from offshore equipment supply is not taxable where transactions occur outside India. The liaiso...
Income Tax : The Court set aside Section 148 notices after finding no tangible evidence supporting the existence of a Permanent Establishment. ...
Income Tax : The Tribunal ruled that a Dependent Agent PE arises only if agents habitually conclude contracts or secure orders on behalf of the...
Income Tax : The Supreme Court declined to interfere where courts below found no permanent establishment in India due to offshore execution of ...
Income Tax : 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...
Income Tax : Public Consultation on the proposal for amendment of Rules for Profit attribution to Permanent (PE) Establishment invited by CBDT....
The general principle of taxation is that a person, who is resident of a country, would normally be taxable on his/its global income. However, as a rule of exception to this general principle, a person may also be taxed in the country of source i.e., the place where the business of a person is carried on, though he may be a resident of another country.
Whether the Indian subsidiary of the assessee constitutes Permanent Establishment (PE) of the assessee in India on account of ‘signing, networking, planning and negotiation of offshore supply contracts in India’? If yes, whether any profit is attributable to the same, and the quantum thereof?
To create a PE, one has to pass the three tests of: permanency, a fixed place and disposal. All the three tests are satisfied and hence MIPs act as PE of the applicant. We hold that significant activities relating to clearance and settlement take place in India. Detailed analysis of Galileo judgement and application of the rationale held in Galileo case to the present case. Automatic equipment like server can also create PE and there is no requirement of human intervention. MasterCard network also creates a PE of the applicant in India.
It has been widely reported that multinational corporations resort to base erosion and profit sharing (BEPS) techniques to shift their profit to tax havens or nations with lower tax incidence.
India, amongst various countries, participated in the signing of the Multilateral Instrument (MLI) on 7 June 2017, to implement tax treaty related measures as a part of the various Base Erosion and Profit Shifting (BEPS) related Action Plans.
India is one of the first movers of such digital PE taxation and is setting up precedence in the International Taxation. It might be a rightful move for the Indian Government to capitalize on the consumer base and get a share of the profits swept by the non-resident players exploiting the huge consumption market base.
The Income Tax Act, in particular Section 90 thereof, does not speak of the concept of a PE. This is a creation only of the DTAA. By virtue of Article 7(1) of the DTAA, the business income of companies which are incorporated in the US will be taxable only in the US, unless it is found that they were PEs in India
In brief, the learned Judges of the Supreme Court held that FOWC carried on business in India for the duration of the race (and for two weeks before the race and a week thereafter). A PE must have three characteristics: stability, productivity and dependence.
Permanent Establishment (PE) is the fundamental criterion under the tax treaties for taxation of foreign company’s business income in India. A permanent establishment of a foreign company is typically regarded as a virtual extension or taxable presence of such foreign company in the host country, similar to that of an independent legal entity in such country. A PE of a foreign company is required to maintain books of accounts as per the normal accounting principles in the host country, besides undertaking tax compliances alike an independent legal entity.
You would be aware that, recently Supreme Court upheld the decision of Delhi High Court in the case of Fomrula One that it does have Permanent Establishment [PE] in India.
