Fixed place permanent establishment requires core business activity, while auxiliary liaison functions do not create taxability.

A foreign enterprise has a permanent establishment in India under the India-Korea tax treaty only if it carries on its core business through a fixed place of business; activities that are merely preparatory, auxiliary, or liaison-based fall outside that definition. On the facts discussed, the Mumbai Project Office was used for coordination and execution-related documentation rather than for conducting the enterprise's substantive business in India, and the Revenue did not discharge the burden of proving a taxable permanent establishment. The office was therefore treated as an auxiliary presence, with no income attributable on that basis.

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Issues: Whether the Mumbai Project Office constituted a fixed place permanent establishment under Article 5(1) of the India-Korea tax treaty and, if not, whether its activities were only preparatory or auxiliary so as to fall outside the definition of permanent establishment.

Analysis: The relevant treaty provisions required the foreign enterprise to carry on its business, wholly or partly, through a fixed place of business in India for a permanent establishment to exist, while activities of a preparatory or auxiliary character were excluded. On the facts, the Project Office was found to have been opened for coordination and execution-related documentation, not for carrying on the core business of the enterprise in India. The material relied upon below was held to have been read selectively, and the finding that the office was engaged in the execution of the project itself was found unsustainable. The burden to establish a taxable permanent establishment remained on the Revenue, and that burden was not discharged. In these circumstances, the office was held to be no more than a liaison or auxiliary office.

Conclusion: The Mumbai Project Office was not a fixed place permanent establishment in India, and no income could be attributed to it on that basis. The issue was decided in favour of the assessee.

Ratio Decidendi: For treaty taxation, a foreign enterprise's Indian presence is a permanent establishment only if it is a fixed place through which the enterprise's core business is actually carried on; an office confined to auxiliary or liaison functions does not qualify, and the Revenue bears the burden of proving otherwise.

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