Indian Project Office of Foreign Company Not Engaged In Core Business Activities Not a Permanent Establishment (PE): Supreme Court India

 

By Mr. Shahid Khan, Senior Partner, and Department Head, Taxation Practice, Kochhar & Co.

NEW DELHI: Double Tax Avoidance Agreements (Tax Treaties) signed by India with various countries provide that business income of an enterprise, which is tax resident of a foreign country would be taxable in India only if it has or is deemed to have a Permanent Establishment (PE) in India.

The term PE is defined in Article 5 of the respective Tax Treaties. Although there are minor variations in the definition of PE in the Tax Treaties signed by India with different countries, Article 5(1) of the Tax Treaties is common and defines the term PE to mean a ‘fixed place of business through which the business of an enterprise is wholly or partly carried on’.

This general definition is thereafter supplemented by providing in Article 5(2) that if the foreign enterprise has a place of management or a branch, or an office, or a factory, or a workshop, or a mine or quarry, etc., or a construction or installation project, in India then also it will be deemed to have a PE in India. Read more...