Role Of Permanent Establishment Vis-A-Vis Indian Laws

India's position w.r.t Permanent Establishment

i. Section 92F of the Income Tax Act

One of the most important aspects of a treaty-based law or Double Taxation Avoidance Agreement (DTAA) is the existence of a Permanent Establishment (PE). As per general parlance, a non-resident taxpayer is not required to pay income tax on its business profits unless it has a Permanent Establishment in the source country and the profits are attributing from such PE. Usually, as per Section 90(2) of the Income Tax Act, while ascertaining the tax liability of a non-resident, the provisions of the Income Tax Act and the DTAA are taken into consideration and whichever is more beneficial shall apply. The term Permanent Establishment can be defined by making reference to Section 92F(iiia) read along with Section 92F(iii) of the Income Tax Act. Section 92F(iii) defines enterprise which includes the definition of PE and the same is explained further by Section 92F(iiia)¹ which substantiates