No Virtual Service Permanent Establishment In India In The Absence Of A Specific Provision

The advent of the Digital economy has led to the introduction of various taxation issues. One such issue being creation of a virtual permanent establishment (PE) in a country, where the services are rendered without having any physical presence. The Income Tax Appellate Tribunal, Delhi (Tribunal), recently has dealt with the issue of creation of a virtual PE in India in the case of Clifford Chance Pte Ltd. v. ACITⁱ.

In this article, we have discussed the ruling of the Tribunal in the ensuing paragraphs:

Facts of the case

The taxpayer, a tax resident of Singapore, is engaged in providing legal advisory services to several international clients including those in India. The taxpayer filed its return of income for AY 2020-21 and 2021-22 declaring Nil income and claimed credit of taxes deducted. During the AY 2020-21, part of the advisory services was rendered by the taxpayer remotely (outside India) and part of it was rendered by visiting India. The aggregate