Permanent establishment test: seconded expatriates at an Indian subsidiary did not create a PE where they supported the subsidiary, not the foreign enterprise.
A foreign enterprise does not obtain a fixed place permanent establishment in India merely because expatriate employees are seconded to an Indian subsidiary and interact at its premises. A fixed place PE requires the foreign enterprise's own business to be carried on through a place at its disposal and under its control in a meaningful sense; here, the secondees were found to be supporting the subsidiary, not conducting the assessee's core business. The same reasoning defeated the claim of a deemed PE, because the personnel were engaged in reporting, coordination, and support functions for the subsidiary rather than in carrying on the foreign enterprise's business in India. The tribunal's rejection of taxability on that basis was sustained.
Issues: (i) Whether the assessee had a fixed place permanent establishment in India under Article 5 of the India-Korea Double Taxation Avoidance Treaty on account of the activities and presence of expatriate employees at the Indian subsidiary's premises. (ii) Whether the secondment and interaction of expatriate employees with the Indian subsidiary showed that the assessee's global business was being carried on in India or that a deemed permanent establishment had otherwise come into existence.
Issue (i): Whether the assessee had a fixed place permanent establishment in India under Article 5 of the India-Korea Double Taxation Avoidance Treaty on account of the activities and presence of expatriate employees at the Indian subsidiary's premises.
Analysis: A fixed place permanent establishment requires a place of business through which the enterprise's own business is carried on, and the place must be at the enterprise's disposal and under its control in a meaningful sense. Mere presence of expatriate personnel, exchange of information, and discussion of product preferences, marketing plans, stock status, or market strategy does not by itself establish that the foreign enterprise is carrying on its business from the Indian premises. The record showed that the secondees were placed in India to support the Indian subsidiary, not to conduct the assessee's core business in India.
Conclusion: The fixed place permanent establishment was not established against the assessee.
Issue (ii): Whether the secondment and interaction of expatriate employees with the Indian subsidiary showed that the assessee's global business was being carried on in India or that a deemed permanent establishment had otherwise come into existence.
Analysis: Secondment in a multinational group is not enough unless the deployed personnel are shown to be performing the foreign enterprise's own business activities in the source State. The statements and surrounding material showed that the employees were engaged in facilitating the business of the Indian subsidiary, with communications relating to consumer preferences, product development, sales strategy, and logistics. The activities were treated as reporting and coordination in aid of the subsidiary's functions, not as conduct of the assessee's business in India. The treaty's deeming provisions were therefore not attracted on the facts found.
Conclusion: No deemed permanent establishment arose from the secondment arrangement.
Final Conclusion: The treaty-based permanent establishment case set up by the Revenue failed on facts and law, and the Tribunal's view rejecting taxability on that basis was sustained.
Ratio Decidendi: A foreign enterprise does not acquire a permanent establishment merely because secondee employees or group personnel work at an Indian subsidiary's premises; the Revenue must show that the foreign enterprise's own business is carried on through a fixed place at its disposal or through personnel acting for it in a manner that satisfies Article 5.
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