Few Points on Permanent Establishment.

Ø  The taxability of any entity depends on its residential status in India. The Indian Income Tax Act provides thata resident taxpayer is subject to tax in India with respect to its global income. Even if a company does not have a presence in India, but may potentially have some kind of activity or is present through an unincorporated structure like liaison or branch office, the notion of a business connection will assume significance. And, if income is derived from such a business connection in India, it will be liable to pay tax on "such part of the income as is reasonably attributable to the operations carried out in India." If transactions between a non-resident entity and the PE is at arm's length from the inception, no profits can be attributed to a PE from its work done on behalf of the non-resident entity.

Ø  Transaction between Indian company and PE is a domestic transaction and not a international transaction. Refer IJM Infrastructures Limited.

Ø  IT Enables customer services provided by foreign company result in PE and tax @ 15%. Refer, Convergys Customer Management.

Ø  As per CESTAT  the PE should be long term in nature.  Refer- SNC Lavalin Inc.

Ø   AAR on constitution of a permanent establishment on provision of technical personnel to an Indian affiliate . Refer, Booz & Co.   

Ø  Interest on tax refund effectively connected with the permanent establishment in India is not taxable as interest income under the India-France tax treaty.

Ø  Indian subsidiary providing back office services to foreign enterprise shallnot be deemed as its PE merely because it is being indirectly controlled by it -Employees of foreign enterprise working for domestic operation of and undercontrol and supervision of Indian subsidiary do not constitute service PE offoreign enterprise -Assets of Indian subsidiary cannot be deemed inevitably to beused by foreign enterprise for its business carried on in India to establish its fixed PE in India . Refer E Funds IT Solution.