India: Service permanent establishment found, despite no physical presence

Service permanent establishment in India

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

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  • Services provided without physical present constitutes a service permanent establishment: The Bengaluru Bench of the Income-tax Appellate Tribunal found there was a “service permanent establishment” (service PE) in India because the taxpayer had been furnishing services to the Indian company even without any physical presence of the taxpayer’s employees in India. The tribunal found that the rendering of services or activities through email, internet use, video conferencing, etc. for more than nine months established a service PE even though employees were not physically in India. In addition, the tribunal held that the services provided by the taxpayer were in the form of sharing or permitting to use the special knowledge, expertise, and experience of the taxpayer and can be taxed as royalty under the India-UAE income tax treaty. The case is: ABB FZ-LLC v. DCIT. Read a July 2017 report [PDF 434 KB]

  • Disallowance of expenditures, exempt income: The Chennai Bench of the Income-tax Appellate Tribunal held that even in instances when no expenditure has been incurred, the tax authority must disallow any expenditure in instances involving exempt income. The case is: M. A. Alagappan. Read a June 2017 report [PDF 363 KB]

  • Provident fund certificates, Indian workers working abroad: The Employees’ Provident Fund Organisation issued a circular addressing the revised “certificate of coverage” application for Indian workers (holding an Indian passport) going to work in countries with which India has a social security agreement. Read a July 2017 report [PDF 379 KB]

  • Clarification on definition of Indian international workers: The definition of Indian international workers has been clarified with respect to employee provident funds. Earlier amendments brought international workers under the purview of the Indian social security regime. Read a June 2017 report [PDF 337 KB]

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