TaxBuzz... November 2017

Supreme Court holds that outsourcing services provided by E-Funds Corporation, USA to its Indian affiliate does not constitute Permanent Establishment under the India-USA Tax Treaty

Facts and background of the case

• E-Funds Corporation ("E-Funds US")and E-Funds IT Solution Group Inc. ("E-Funds IT USA") [Jointly referred to as Taxpayers] are companies incorporated under the laws of the USA and are part of group engaged in the business of (i) ATM Management Services, (ii) Electronic Payment Management, (iii) Decision Support and Risk Management and (iv) Global Outsourcing and Professional Services.
• E-Funds International India Private Limited ("E-Funds India") is an Indian company and a step down wholly owned subsidiary of E Funds US. E-funds India was involved purely in back-office/auxiliary services. For provision of aforesaid services, the taxpayers provided access to database stored on servers located outside India to EFunds India and compensated the Indian