Friday, May 26, 2017

F1 Circuit—A Fixed Place PE!

Thanks to the burgeoning fan base of various sporting events globally. Now several sporting bodies are organising various series across borders. However, tax policies of the nations are not so sweet for the taxpayers. This is more so because of the current global wave of preventing the unintended application of the tax provisions. The Supreme Court of India's decision in the case of Formula One World Championship Ltd. v. CIT1 is a perfect illustration wherein the Apex Court has given a new dimension to the concept of permanent establishment ("PE").

Exposure of a foreign company (F Co.) having PE in the source country has always been a contentious issue. India follows "source based taxation". Under source based taxation principle, income earned by a non-resident is taxed in the country in which such income has accrued or arisen, even by way of a deeming fiction.

In this article we will dwell upon the Supreme Court's ruling and also other rulings on similar issue on the existence of Fixed Place PE in India, more particularly as to whether F Co.'s presence for a short duration in a source State/country can be considered to its PE?

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