India’s Delhi High Court has ruled that services provided remotely by a foreign enterprise to Indian clients do not create a taxable permanent establishment (PE) in India under the India-Singapore tax treaty.
In Commissioner of Income Tax vs. Clifford Chance Pte Ltd, the court dismissed appeals filed by the Income Tax Department and upheld the decision of the Income Tax Appellate Tribunal in favour of the Singapore-based law firm.
The court held that Article 5 of the tax treaty requires services to be furnished “within India” through employees or other personnel physically present in the country for a service PE to arise.
Rejecting the Revenue’s argument for recognising a “virtual service PE” in light of technological advances, the court observed that such a concept finds no support in the treaty text and cannot be read into the agreement by judicial interpretation.