Thursday, April 27, 2017

SC upholds HC’s ruling on Formula One Championship; Budh International Circuit treated as PE

Facts:

a) Formula One World Championship Limited (FOWC) granted Jaypee Sports International Ltd. (Jaypee) right to host, stage and promote F-1 Grand Prix of India event for a consideration of US$ 40 millions.

b) Authority for Advance Ruling (AAR) held that consideration paid to FOWC wasn’t taxable in India as FOWC did not have any PE in India. However, High Court of Delhi reversed the findings of AAR and treated Buddh International Circuit as PE for FOWC. 

The issue before the Supreme Court was as under:

Whether FOWC was having any 'Permanent Establishment' (PE) in India in terms of Article 5 of DTAA?

The Supreme Court held as under:

1) As per Article 5 of the DTAA, the PE has to be a fixed place of business ‘through’ which business of an enterprise is wholly or partly carried on.

2) During the event and as well as two weeks prior to it and a week succeeding it, FOWC had full access through its personnel to the Buddh International Circuit.

3) Such access or right to access was not permanent but was for a period up to six weeks at a time during the F-1 Championship season. Further, as the tenure of contract was for five years, it meant that such an access for the period in question was of repetitive nature.

4) Since FOWC carried on business in India through a fixed place of business, namely, the Buddh International Circuit, It couldn’t be denied that Buddh International Circuit was not a PE for FOWC. - [2017] 80 taxmann.com 347 (SC)
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