New Dimension To The Concept Of "Permanent Establishment

Introduction:

One of the most important and widely debated concept of Double Taxation Agreements is that of "Permanent Establishment"[hereinafter referred as PE]. Time and again courts have given interpretations and clarifications on its multi aspects. Recently the Delhi High Court in the case of DIT v. E Funds Corporation and DIT v. E Funds IT Solutions¹ has held that Indian Subsidiary of a foreign company providing back office support operations does not constitute a PE in India. The High court has rightly observed that a wholly owned Indian company of a foreign company would not create a permanent establishment for the Assessee, despite of the MAP [Mutual Agreement Procedure] finding to the contrary. There was no authority with the Indian Subsidiary to take any decisions or conclude contracts, etc. on behalf of its Foreign Holding Company and hence such Indian subsidiary cannot be termed as agency PE of its Foreign Holding Company.