Chennai Tribunal Rules On Permanent Establishment

In the recent Redington Distribution Pte. Ltd case, the Chennai Bench of the Income-tax Appellate Tribunal (the "Chennai Tribunal) held that a subsidiary company based in Singapore (the "Singapore Subsidiary") of an Indian holding company ("Indian HoldCo") had a fixed place permanent establishment ("PE") as well as an agency PE in India, basis which, the attributable profits of the Singapore Subsidiary would be taxable in India.

This ruling can impact many multinational software companies, who sell their products in India from Singapore but rely extensively on their Indian sales and marketing arms to provide on the ground support in India.

Background

The Redington group is engaged in the business of providing end-to-end supply chain software solutions for personal computers, computer building blocks, networks, enterprises, consumer and lifestyle products. A tax withholding survey was conducted by the Indian tax authorities at the Indian HoldCo's premises.