Liaison office as Permanent Establishment fails where activities are confined to communication, information gathering and auxiliary support.

A liaison office in India was not a Permanent Establishment under Article 5 of the India-Korea tax convention because a fixed place qualifies only if the enterprise carries on business wholly or partly through it. The office was restricted by RBI approval to communication and support functions, and could not conduct trading, commercial or industrial activity, enter contracts, or render consultancy services. Its activities were limited to collecting information, market reporting, and other preparatory or auxiliary functions, so it did not amount to a Permanent Establishment.

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Issues: Whether the liaison office of the applicant in India constituted a Permanent Establishment under Article 5 of the India-Korea tax convention.

Analysis: The applicable treaty definition treats a fixed place of business as a permanent establishment only when the enterprise carries on its business wholly or partly through that place. The treaty also excludes a fixed place used solely for collecting information, advertising, supplying information, or other activities of a preparatory or auxiliary character. On the facts placed before the Authority, the liaison office was permitted by the RBI to function only as a communication channel and was restricted from undertaking trading, commercial, or industrial activities, entering contracts, or rendering consultancy services. The activities shown were confined to collecting information, market reporting, and other support functions that did not form the core business operations of the enterprise.

Conclusion: The liaison office did not constitute a Permanent Establishment.

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