Delhi High Court Rejects ‘Virtual Service PE’ in Clifford Chance Ruling

In a significant ruling today, the Delhi High Court in Clifford Chance PTE Ltd rejected the Revenue’s theory of a “Virtual Service Permanent Establishment” under the India-Singapore DTAA.

The Department argued that physical employee presence is no longer essential for a Service PE, citing Hyatt, Verizon, and ABB FZ LLC. The Court, however, held that Article 5(6)(a) explicitly requires services to be furnished “within a Contracting State… through employees or other personnel.” The words “within” and “through personnel” mandate a physical footprint in India.

Observing that the DTAA must be interpreted strictly, the Court refused to read in a virtual PE concept where the treaty conspicuously omits it. The cited precedents were held factually distinguishable. Consequently, the argument for a virtual service PE was dismissed