Karnataka High Court rules that Liaison Office engaged in certain commercial activities would constitute a Permanent Establishment in India under the India-Korea tax treaty

       Recently, the Karnataka High Court (High Court) in the case of Jebon Corporation India1 (the taxpayer) held that a Liaison Office (LO) engaged in commercial activities like identifying buyers, negotiating/ agreeing pricing and procuring purchase orders would constitute a Permanent Establishment (PE) of the Head Office (HO) under the India-Korea tax treaty (tax treaty).

Further, the High Court held that merely because the buyers placed orders and made payments directly to the HO would not be sufficient to hold that the work done by the LO was limited to liaisoning.