| COURT: | Supreme Court |
| CORAM: | A. M. Khanwilkar J, Ajay Rastogi J |
| SECTION(S): | 2(24), 5, 9, India-UAE DTAA |
| GENRE: | International Tax |
| CATCH WORDS: | India-UAE DTAA, liaison office, Permanent Establishment |
| COUNSEL: | H. P. Ranina |
| DATE: | April 24, 2020 (Date of pronouncement) |
| DATE: | April 25, 2020 (Date of publication) |
| AY: | - |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| Taxability of Liaison Offices under DTAAs: The activities carried on by the liaison office of the non-resident in India as permitted by the RBI, demonstrate that the liaison office must steer away from engaging in any primary business activity and in establishing business connection as such. It can carry on activities of preparatory or auxiliary nature only. A liaison office which is only carrying on such activity of a "preparatory or auxiliary" character is not a PE in terms of Article 5 of the DTAA. The deeming provisions in Sections 5 and 9 of the 1961 Act can have no bearing whatsoever (all imp judgements referred) | |
The meaning of expressions “business connection” and “business activity” has been articulated. However, even if the stated activity(ies) of the liaison office of the respondent in India is regarded as business activity, as noted earlier, the same being “of preparatory or auxiliary character”; by virtue of Article 5(3)(e) of the DTAA, the fixed place of business (liaison office) of the respondent in India otherwise a PE, is deemed to be expressly excluded from being so. And since by a legal fiction it is deemed not to be a PE of the respondent in India, it is not amenable to tax liability in terms of Article 7 of the DTAA.
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