| COURT: | Supreme Court |
| CORAM: | Rohinton Fali Nariman J., Sanjay Kishan Kaul J |
| SECTION(S): | Article 5 |
| GENRE: | International Tax |
| CATCH WORDS: | Dependent Agent Permanent Establishment, Permanent Establishment, Service PE |
| COUNSEL: | S. Ganesh |
| DATE: | October 24, 2017 (Date of pronouncement) |
| DATE: | October 25, 2017 (Date of publication) |
| AY: | - |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| Permanent Establishment (PE) under Article 5 of DTAA: Entire law on concept of “fixed place of business”, “service PE” and “agency PE” explained. The fact that there is close association and dependence between the US company and the Indian companies is irrelevant. The functions performed, assets used and risk assumed, is not a proper and appropriate test to determine whether there is a location PE | |
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 which event their business income, to the extent to which it is attributable to such PEs, would be taxable in India. Article 5 of the DTAA set out hereinabove provides for three distinct types of PEs with which we are concerned in the present case: fixed place of business PE under Articles 5(1) and 5(2)(a) to 5(2)(k); service PE under Article 5(2)(l) and agency PE under Article 5(4). Specific and detailed criteria are set out in the aforesaid provisions in order to fulfill the conditions of these PEs existing in India. The burden of proving 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
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