Permanent establishment attribution governs whether BPO activities in India generate taxable profits, depending on activity nature and arm's length pricing. Where an IT enabled entity in India performs incidental functions (procurement of orders, concluding contracts, call centre services) for a non resident principal, the insignificant profit attributable to those functions may be treated as part of the permanent establishment's income in India if charges are at arm's length; no separate income accrues to the non resident apart from the PE income. If the Indian entity performs core revenue generating activities, substantial profits attributable to those activities are taxable in India in accordance with the relevant tax treaty and domestic law.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Permanent establishment attribution governs whether BPO activities in India generate taxable profits, depending on activity nature and arm's length pricing.
Where an IT enabled entity in India performs incidental functions (procurement of orders, concluding contracts, call centre services) for a non resident principal, the insignificant profit attributable to those functions may be treated as part of the permanent establishment's income in India if charges are at arm's length; no separate income accrues to the non resident apart from the PE income. If the Indian entity performs core revenue generating activities, substantial profits attributable to those activities are taxable in India in accordance with the relevant tax treaty and domestic law.
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