Permanent Establishment - CTC--9789390128853

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VISION STATEMENT

Vision Statement
“The Chamber of Tax Consultants (The Chamber) shall be a power-
house of knowledge in the field of fiscal laws in the global economy.”
The Chamber shall contribute to the development of law and the
profession through research, analysis and dissemination of knowledge.
The Chamber shall be a voice which is heard and recognized by
all Government and Regulatory agencies through effective repre-
sentations.
The Chamber shall be pre-eminent in laying down and upholding,
among the professionals, the tradition of excellence in service,
principled conduct and social responsibility.

I-3



ABOUT THE CHAMBER OF TAX
CONSULTANTS

The Chamber of Tax Consultants (The Chamber) was established in
the year 1926 and is one of the oldest voluntary non-profit making
professional organisations formed.

The Chamber is into its 95th year and is a dynamic organisation
which has a glorious past and undisputedly ambitious future.
The Chamber has about 4,000 members pan India, which com-
prise Chartered Accountants, Lawyers, Company Secretaries, Cost
A­ ccountants, Income-tax Practitioners, Students, etc.

The Chamber acts as powerhouse of knowledge in the field of fiscal
law, contributes to the development of law and profession through
research, analysis and dissemination of knowledge. The Chamber
shall be pre-eminent in upholding among the professional, tradition
of excellence in service, principle conduct, and social responsibility.

The Chamber is an institution with a tradition of high integrity,
independence and professionalism. Renowned professionals like
Dr. Y.P. Trivedi, Shri Sohrab E. Dastur, Shri V.H. Patil, Shri S.N.
Inamdar, Shri Narayan Varma and Shri Pradip Kapasi have served
as the Chamber’s Presidents.

The Chamber disseminates knowledge by holding Workshops,
­Seminars, Lecture Meetings, Study Circle and Study Group Meetings,
Outstation Residential Conferences, etc. for the benefit of members
which keep them up-to-date with the latest developments in the
field of Law. Keeping in pace with the technology, the Chamber has
also successfully conducted around a century of webinars in the
“lockdown” period on various professional subjects, especially for
members from distant places. Through its various orientation and
advance courses dedicated to new areas of expertise it empowers
young professionals to build their careers in unconventional ­practice

I-5

About the Chamber of Tax Consultants

areas. It functions through various 14 effective sub-committees
comprising above 300 core committee members.

‘The Chamber’s Journal’ which is its mouthpiece, is very popular
amongst the professionals and Corporates as well, mainly because
of in-depth analysis on topical issues (theme based). The C­ hamber’s
Journal has found a permanent place in libraries of leading tax
professionals.

In addition, the Chamber also comes out with a quarterly ‘In-
ternational Tax Journal’, a journal for advanced cross border tax
practitioners, and ‘Jignyasa’, ‘Learning today-Leading Tomorrow’,
a quarterly ‘E-Journal’ for students.

The Chamber has always stood up for professionals, people by
making effective representations before the Government and Regu-
latory authorities. It has its echoes in Govt. and ministries as well.
Professional’s look upon Chamber as an institution which can take
its voice to the court of law, whenever required.

The Chamber is instrumental in filing Public Interest Litigation
against the Regulatory authorities, it represents pre and post ­budget
memorandum and making representation on various Tax Allied
and Corporate Laws to the Government and regulatory authorities.

The Chamber organises many events for the knowledge of S­ tudents.
The Dastur Essay Competition, which is an Annual feature, is
one of such activities where students across India and even from
outside India participate with great enthusiasm. This competition
serves the purpose of developing the habit of developing writing
skills amongst the students who are the future of the profession.
The committee also organises a debate competition and a tax moot
court competition for the students.

The Chamber manages two libraries at prominent places like
­Aayakar Bhavan and Pratyakshakar Bhavan, Mumbai which are
widely used by the professionals.

For more information, please visit the Chamber’s website
www.ctconline.org.

I-6

PRESIDENT MESSAGE

“Sometimes, Hem, things change, and they are never the same again.
This looks like one of those times. That’s life! Life moves on. And so

should we.”

―  Spencer Johnson, in ‘Who Moved My Cheese?’

Dear Readers,

Truer words were possibly never spoken, and these now seem to
resonate with us in more ways than one. The COVID-19 Pandem-
ic is threatening to permanently change of way of our living and
working. Parallelly, the mushrooming of e-commerce transactions
and doing business through the digital world is threatening to
change the way in which the world looks at taxing cross border
transactions.

The root of the taxation of income in the state of source is ‘Perma-
nent Establishment’, a concept dissected and debated at many fora
and the analysis of which is one would believe, the cornerstone
of the practice of a tax professional who looks to advise clients on
cross border tax issues. ‘Permanent Establishment, or ‘PE’ as it is
commonly referred to, was a concept thought through and devel-
oped in the times of physical movement of goods and services.
And, it did work very well till not so long ago, when the world
wide web became the trading platform courtesy the development
of sophisticated technology and the widespread use of the inter-
net. As the concept of ‘establishment’ assumed different contours,
and the ‘permanence’ became less of a determinative factor, it is
being increasingly felt that the old order has ‘changeth and hath
giveth way’ to a new order, the order of a ‘digital tax’, completely
divorced from the concept of PE.

This may probably not be absolutely true. The world is still struggling
to come up with a consistently acceptable and universally applica-
ble manner of taxing of digital transactions. Also, it is equally trite

I-7

President Message

that physical movement of goods and services can never be done
away with completely. The concept of PE will therefore never be
completely redundant to the student of cross border taxation. Also,
it is always better to know the history to be able to appreciate fully
what has changed and why did it need to change.

It is therefore the pleasure and privilege of the Chamber of Tax
Consultants, (‘The Chamber’), that I convey to you, through this
communication, in placing this excellently written, and meticulously
researched book, before you. I am sure that as I found, you will
find too, that this book is ‘unputdownable and you all will read
it at one go and also keep on coming back to it, as a reference for
all things related to any insights on PE that you would want to
seek in your day to day work.

On behalf of the Chamber, I express deep gratitude to Shri H.
Padamchand Khincha, the mentor of this book and one of its
­authors, and to his very young and knowledgeable team of s/Shri
Bhaumik Goda, Narendra Jain, P. Shivanand Nayak and Bibhuti
Ram Krishna, all of whom I am sure will rise to great success in
the tax advisors’ world, for taking the time and effort to make this
excellent book available to the world at large through the Chamber’s
banner. Such munificence is rare these days.

I also express my sincere thanks to Immediate Past President, Shri
Vipul K Choksi, Past President, Shri Paras K Savla, Past President,
Shri Yatin Desai, Treasurer, Shri Parag Ved, and the two Rajesh’s
of the Chamber’s Managing Council, Shri Rajesh L Shah, Chairman,
International Tax Committee and Rajesh P. Shah, Chairman, Research
and Publications Committee, for the critical role they have played
in the publication and release of this book.

J. K. Rowling, the creator of the famous Harry Potter series, has
said, ‘I do believe something very magical can happen when you read a
good book’. This book is indeed a very good book and I wish the
readers a very educational and engrossing experience when they
read and refer to the book and hope this will add value to their
professional experience and journey.

Anish Thacker

President (2020-21)

I-8

FOREWORD

W. B. Yeats has said that “Education is not the filing of a pail, but
the lighting of a fire”. Continuous Education is the need of the day
as one cannot stop learning each and every moment of the life as
it is the premise of growth and progress.

In the words of John Holt, “Learning is not the product of teaching.
Learning is the product of the activity of learners”.

Following this analogy, International Taxation Committee and
Research and Publication Committee of The Chamber of Tax Con-
sultants have always been in the fore front in the field of dissemi-
nating education and regularly encourage learning with the mixed
blend of guidance from seniors and enthusiasm of the youngsters.

It gives me immense pleasure to place before you book dealing with
the ever-evolving subject in International Taxation - “Permanent
Establishment - Emerging trends”. Permanent Establishment as a
concept remained static but business evolved over the year and so
is judicial interpretation dealing with the Permanent Establishment.

With the onset of Base Erosion Profit Shifiting (BEPS) initiatives,
the concept of Permanent Establishment received spotlight and
consensus was built on the short coming of the Permanent
­Establishment a concept and redressal recommendations were
also made at the G20 level. This led to the amendment of treaties
through Multilateral Instrument, the introduction of concepts like
Significant Economic Presence and Equalisation Levy. Coupled
with international development a visible shift can be seen in the
jurisprudence of Permanent Establishment locally with decisions of
Supreme Court in the case of Formula One, E-Funds, UAE Exchange,
Samsung Heavy Industries. All these developments challenge the
conventional understanding of the subject and bring to light the
need to understand wider ramifications on business.

I-9

Foreword

This book ‘Permanent Establishment - emerging trends’ unravels
various niceties and tries to see the concept of Permanent Estab-
lishment through the prism of new developments. I am confident
that this book will help readers to understand the subject in depth;
business in understanding the impact of new development on its
business model and regulators in clarifying grey areas of law.

I compliment the efforts of authors CA H. Padamchand Khincha,
CA Bhaumik Goda, CA Narendra Jain, CA P. Shivanand Nayak
and CA Bibhuti Ram Krishna in painstaking analysing provisions
in-depth as also explaining the implications of emerging business
models with the help of case studies. In the words of the learned
authors “One is always a student and never a master as this helps
to keep moving forward”. This ideology have been penned down
in this book and have raised various thought provoking issues
through their research which I am sure will ignite debate amongst
academicians and contribute to the development of the subject.

Dr. Seuss has said that “The more that you read. The more things
you will know, the more that your learn, the more places you'll
go”. Keep this philosophy in mind we wish all the professionals
a very happy reading with the assurance that we will bring more
and more publications which will help all the professionals to grow
and enrich themselves.

Readers are encouraged to provide their suggestions which will
help the International Taxation Committee and Research and
Publication committee to gain from your experience and help in
contributing to the larger vision of the Chamber of Tax Consultant
of spreading knowledge.

Rajesh P. Shah Rajesh L. Shah

Chairman Chairman

Research and International Taxation

Publication Committee Committee

2020-21 2020-21

I-10

ABOUT THE AUTHORS

l H. Padamchand Khincha

l Bhaumik Goda

l Narendra Jain

l P. Shivanand Nayak

l Bibhuti Ram Krishna

H. Padamchand Khincha is a partner in H C
Khincha & Co. and H C Khincha & Associates,
Bangalore. With over 30 years of experience in
corporate and international tax regime, he has
spearheaded the income-tax consultancy and
litigation practice. He advises multinational
companies, Indian companies as well as high
networth individuals on various tax matters
including tax structuring, due diligence,
transfer pricing and compliance aspects. He
has represented large corporates in some of the high-profile cases
before various Income-tax tribunals across India and has been
associated with several landmark decisions too.

Padamchand Khincha is a prolific writer on various topics in
income-tax. He has authored the book “Emerging Issues in
International Taxation”. He has co-authored “Decoding section
5”, “Tax Holiday U/ss. 10A and 10B - An analysis”; “Tax Treaties
of India - A compilation”; “Capital gains of Non-residents”; “Tax
deduction at source”; “Concept of Indexation under capital gains”.
He has contributed to “101 Supreme Court Landmark Judgments”
published by The Chamber of Tax Consultants. He has authored
and co-authored innumerable articles across various tax magazines
including the Taxmann Publication, Bombay Chartered Accountants

I-11

About the Authors

Journal, ITR etc. He has delivered more than 500 lectures across
the nation on several income-tax issues.
He has been actively engaged in several initiatives undertaken by
the Institute of Chartered Accountants of India (ICAI). He was
appointed the group leader for preparing the approach paper on
the Guidance Note on Transfer Pricing. He was instrumental in
making a critical analysis of the Direct Tax code as a member of the
team constituted by ICAI on the request on CBDT. He currently
is a member of Committee of ICAI involved in preparing the
technical background paper on Income Computation and Disclosure
Standards. He has deposed as an expert before (a) high powered
committee on E-commerce constituted by the Central Board of
Direct Taxes in India; (b) Rangachary Committee set up to “Review
Taxation of Development Centres and the IT Sector; and (c) by the
A P Shah Committee constituted by the Government of India to
examine  the matters relating to MAT on FII/FPI(s). He has been
a country reporter for India for IFA Rio de Janeiro Congress 2017
on ‘Assessing BEPS – Origin, Standards, Responses’. He is on the
editorial board constituted for International Tax Journal published
by the Chamber of Tax Consultants.
His teaching stints in the past include guest lectures at IIM,
Bangalore; intensive coaching classes of ICAI; faculty at the Direct
Taxes Training Institute of the Income Tax Department. Padamchand
Khincha is a Commerce graduate from the University of Bangalore
securing 5th Rank at the University level. He holds a Bachelor’s
degree in Law. He qualified as a Chartered Accountant in 1982 by
securing the 25th Rank.

I-12

About the Authors

Bhaumik Goda is a Partner at BGSS &
Associates and is based in Mumbai. He is a
qualified Chartered Accountant from Institute
of Chartered Accountant of India.
Bhaumik practices in the field of Domestic and
International Taxation, with specific emphasis
on business restructuring, international taxation,
FEMA and tax litigation.
He is regular speaker at Institute of Chartered Accountant, Bombay
Chartered Accountant Society, Chamber of Tax Consultant and
writes regularly in Bombay Chartered Accountant Journal and
other journals of professional interest. He has authored/co-authored
following books:
l Interest Limitation under section 94B
l Tax Deduction at Source
l Compendium on General Anti Avoidance Rules
l Compendium on International Taxation
Prior to founding BGSS & Associates, he worked 9 years with
Ernst & Young.

I-13

About the Authors

Name : CA Narendrakumar J
Qualifications Jain, Advocate
Academic
Distinctions : B.Com, FCA, Company
Secretary, L.L.B.
Professional
achievements : All India 5th Rank in
CS Inter

A warded D L Mazum-
dar’s Silver Medal for
securing highest marks in
“Advance Company Law
& Practice” in C S Final

A warded Taxmann’s Prize Award for securing
highest marks in “Direct & Indirect Taxation-
Law & Practice” in CS Final

A warded Mrs. Pankajan Rengachari SIRC
Prize Award for securing highest marks in
“Advanced Company Law & Practice” in
CS Final.

:

(a) More than 15 years post qualification
experience in advising clients and handling
tax litigation in Income tax, transfer pricing,
corporate tax and international taxation.

(b) Written Book “Analysis of Transfer Pricing
Judgments” published by CCH (2 editions).

(c) Co-authored Book on Digital Commerce
– An analysis of taxation aspects and
emerging issues published by IFA
Bangalore sub-chapter.

(d) Made more than 150 presentations at
various conferences, workshops & study
circles etc. conducted by ICAI, Colleges
and other associations.

(e) Faculty for CA Final Students at CAPS
on Direct Taxes, International Taxation
and Transfer Pricing from 2004 to 2018.

(f) Convener of Bangalore Sub-Group of
Chamber of Tax Consultants, Mumbai.

I-14

About the Authors

P. Shivanand Nayak is a partner in H C Khincha
& Associates, Bangalore. He is commerce
graduate from the University of Bangalore and
holds a Bachelor’s degree in Law.
Shivanand is a Chartered Accountant having
experience of over 15 years in corporate and
international tax consultancy. He has worked
on various assignments involving a range of
tax and regulatory issues, including inbound
and outbound investment structuring and strategies.
Shivanand has co-authored a paper in “BEPS - The Global Taxation
Agenda”. He has contributed to “101 Supreme Court Landmark
Judgments” published by the Chamber of Tax Consultants and
“Emerging Issues in International Taxation” published by Oak Bridge
publications. He has contributed to technical background paper
on Income Computation and Disclosure Standards published by
ICAI. He has authored and co-authored articles across various tax
magazines including the Taxmann Publication, Bombay Chartered
Accountants Journal, ITR, AIFTP, ICAI etc. He has also delivered
lectures at the Bangalore branch of ICAI and CTC.
His teaching stints include IPCC (Taxation) classes at Bangalore branch
of SIRC and CS Institute, Bangalore. He has been a visiting faculty
for taxation at Welingkar’s Business school. Have given lectures on
various topics on income tax in the e-learning initiatives of ICAI.

I-15

About the Authors

CA Bibhuti Ram Krishna is a partner in
H. C. Khincha & Associates, Bengaluru. He
is commerce graduate from University of
Bangalore and holds a Bachelor’s degree in
Law. He is a Chartered Accountant having
experience of over 12 years in corporate and
international tax consultancy.
Bibhuti has co-authored articles across various
tax magazines including the Bombay Chartered
Accountants Journal, ICAI etc. He has contributed to technical
background paper on Income Computation and Disclosure Standards
published by ICAI.
His other interests include his continued passion for the game of
cricket and football. He was selected for Under 16 Cricket National
meet of K. V. Sanghatan, New Delhi.

I-16

AUTHORS NOTE

Taxes are essentially a means of shifting funds from private hands
to public hotchpot. Tax system are instrumental in inducing or
altering particular economic consequences through stimulating tax
incentives for investment, savings, employment, development and
other objects of public interest.

Laying down a tax policy, modifying it or re-creating it is always
a complex and daunting task. Especially in an Indian context
wherein both Union and State Governments have an important
role to play. Tax policy decisions are not taken in a vacuum. It is
not a hegemony of a few. Rather, they entail participative efforts
and wide consultation. They are an outcome of social and political
interactions of various stakeholders. States often adopt policies
learning how similar issues have been addressed by peers. Such
validated experience helps counter challenges that be devilled others.
A collaborative experience and effort contribute to desirable out-
comes. Deep deliberations and fine tuning are required to achieve
common goals of development. A robust tax system can be built
on the edifice of such intellectual exertion; which in turn would
strengthen the infrastructure of economic development.

Promotion of economic development has been the primary objective
of countries across the globe. Economic development translates into
higher levels of income, greater employment and other associated
benefits from such development. To a large extent, the economic
development is stirred by business activities. Business is the largest
of the human endeavours. Other efforts such as the investment,
sale of assets, financing etc. are factors which lead to creation,
maintenance and growth of business. In search of an ‘economically
ideal’ placement, humanity has travelled beyond borders. Business
has moved from ‘local’ to being ‘global’. Factor effecting produc-
tion (i.e., land, labour, capital and entrepreneurship) have become
more mobile. This is evidenced in increased geographical mobil-
ity [movement from one physical location to another]; horizontal

I-17

Authors Note

mobility [movement from one industry to another in the same place
or occupation]; occupational mobility [movement of these factors
from one occupation into another].

Tax is an extraction by a state of the profits of an enterprise. Extent
of tax is based on the Residence and Source theory. The state of
source lays claim to a share in tax on the emergence of Permanent
Establishment (PE). The constitution of PE, which is so very crucial
and critical in the economic development, has, over here, invited
a focused and detailed tax legislation.

Permanent Establishment is a concept emerging from the tax treaties.
These treaties function to (i) foster economic ties between nations;
(ii) protect discriminatory treatment of foreign investment; (iii)
encourage seamless flow of labour, capital and technology; (iv) build
strong mutual administrative co-operation. These are some posi-
tively stroked expectations. A tax treaty should assume an equally
forceful and effective combative form while handling tax abuses,
treaty shopping, tax arbitrage. The denial or limiting of benefits
through anti abuse tests (of Principal Purpose test and Limitation
of Benefit tests) should deter the dubious. Handling this dual role
of being progressive and deterrent is the most challenging facet of
tax policy determination particularly in relation to PE. The balance
between the economic promotion function and the deterrent effect
of the treaties has been fluctuating. They are often overpowered
by the prevailing priorities rather than forethought.

With COVID haunting the global economy, large deficits are ex-
pected in the years ahead. This crisis is bound to be a factor in  a
state’s tax policy. The Exchequer’s thirst for revenues only inches
towards becoming insatiable. Globally, one is a witness to efforts to
tilt the scale in favour of revenue. The eligibility to tax treaty has
been made tougher through tightening of eligibility conditions. The
changes in definitions, relief mechanisms and qualifying conditions
are more to garner revenues than to enhance relief from tax. These
sentiments have percolated into domestic laws also. The changing
global tax climate has lured various countries to arm its domestic
tax laws in an hitherto unseen manner.

The emergence of changes to the PE concept has to be understood
in this background of this trend. This book opens up with adapta-
tion of Indian domestic tax laws to the global trend. The advent of
Significant Economic Presence and its ramifications on the changing
concept on business connection has been deliberated. The study then

I-18

Authors Note

moves to observe the evolution of PE in the e-world. This is followed
by an insight into the Multilateral Instruments and Organisation
for Economic Co-operation and Development (“OECD”) position
on the changing garb of PE. As a closing thought, is included, the
impact of changing philosophy of PE in international tax space in
the domestic tax legislature. This change (which is predominantly
Revenue favouring) is more out of concern and is often akin to a
retaliation. A potential turbulence in international tax regime is
expected with the dawn of PE 2.0.
Our experience in compiling our thoughts into this literature
has been kindling. The study of PE evolution has enriched us
with what we know today and has humbled us in realizing the
unknowns. We also realised the complexity involved in designing
tax governance for a concept like PE which is not Nation-specific;
but impacts global taxation. The task of unravelling the domestic
tax laws, tax treaties, BEPS Action Plans, Multilateral Instruments,
technology developments, newer business models was difficult
to be comprehended by one. A collective effort therefore became
necessary to provide a comprehensive coverage.

I-19



MANAGING COUNCIL 2020-21

President Managing Council 2020-21
Anish Thacker

Vice-President Ketan Vajani

Hon. Jt. Secretaries Haresh Kenia
Neha Gada

Hon. Treasurer Parag Ved

Imm. Past President Vipul Choksi

Members Ashok Sharma
Atul Mehta
Dharan Gandhi
Dinesh Poddar
Heneel Patel
Hinesh Doshi
Hitesh R. Shah
K. Gopal
Kishor Vanjara
Mahendra Sanghvi
Maitri Savla
Mehul Sheth
Nilesh Vikamsey

I-21

Managing Council 2020-21

Nishtha Pandya
Paras K. Savla
Paresh P. Shah
Rajesh L. Shah
Rajesh P. Shah
Varsha Galvankar
Vipul Joshi

I-22

RESEARCH & PUBLICATIONS (R&P)
COMMITTEE 2020-21

Research & Publications (R&P) Committee 2020-21

Chairman Rajesh P. Shah

Vice-Chairperson Namrata R. Dedhia

Ex-Officio Anish M. Thacker

Ketan L. Vajani

Convenors Priti A. Shah

Sujoy Mehta

Past President Akbar Merchant

Advisor Jayant Gokhale

Office Bearer Haresh Kenia

Imm. Past Chairman Paras K. Savla

Mg. Council Member K. Gopal

Members Ameya Kunte

Ajitkumar Jain

Amit Purohit

Amrit Porwal

Anuj Shah

Anup Shah

Bhaumik Goda

Divyesh Jain

Isha Sekhri

Janhavi Jhaveri

Jigar Saiya

Jitendra Singh

Kapil Sanghvi

I-23

Research & Publications Committee 2020-21

Kartik Badiani
Kinjal Shah
Kushal Parikh
Nilesh Vikamsey
Saumya Sheth
Ninad Karpe
Tushar Desai
Varsha Galvankar
Vishal Shah
Vyomesh Pathak
Zubin Billimoria

I-24

INTERNATIONAL TAXATION
(INT TAX) COMMITTEE 2020-21

International Taxation (INT TAX) Committee 2020-21

Chairman Rajesh L. Shah

Vice-Chairman Kirit Dedhia

Shabbir Motorwala

Ex-Officio Anish Thacker

Ketan Vajani

Convenors Isha Sekhri

Ronak Doshi

Kartik Mehta

Past Presidents Manoj Shah

Hinesh Doshi

Advisor Dilip Thakkar

Office Bearer Haresh Kenia

Imm. Past Chairman Rajesh P. Shah

Mg. Council Member Paresh P. Shah

Members Ameya Kunte

Bhaumik Goda

Chirag Vajani

D. S. Sharma

Devendra Mehta

G. Rajgopalan

Harshal Bhuta

Heena Khajanchi

Jimit Devani

Kartik Badiani

I-25

International Taxation Committee 2020-21

Invitees Krutika Fadnis
Monika Wadhani
Namrata Dedhia
Niraj Chheda
Rajvi Mehta
Shreyas Shah
Siddharth Parekh
Ujwal Thakrar
Karishma Phatarphekar
Naresh Ajwani
Natwar Thakrar
Nilesh Kapadia
Rashmin Sanghvi
Sanjay Sanghvi
Sudhir Nayak
Tarun Singhal
Vispi Patel

I-26

INDEX

Page

Vision Statement I-3

About the Chamber of Tax Consultants I-5

President Message I-7

Foreword I-9

About the Authors I-11

Authors Note I-17

Managing Council 2020-21 I-21

Research & Publications (R&P) Committee 2020-21 I-23

International Taxation (INT TAX) Committee 2020-21 I-25

I. Introduction 1

II. Territorial nexus becomes aerial 7

III. Adaptations of Indian Domestic Laws 14

(A) Business connection concept 15

(B) Modification of business connection definition 20

(C) Significant economic presence 36

l Transaction based SEP 46

l Activity based SEP 59

l Inconsequential factors in a SEP 64

(D) Interplay of section 163 with Business 66
connection

(E) Amendments by Finance Act, 2020 67

I-27

Index

IV. PE in digital economy Page
73

(A) Relevant Indian Tax Provisions & Judicial 78
Pronouncements

(B) Emerging Technologies 86

l Artificial Intelligence (AI) 87

l Case Study 1 – Robotics and AI 89

l 3D Printing 97

l Blockchain 98

(C) Business models in digital economy 99

l Case Study 2 – Online Shopping 103

l Case Study 3 – Online Streaming 110

V. PE under Data Localisation Regime 117

(A) Data Protection Framework 118

(B) Other regulations on data localisation 121

VI. Server as PE 124

(A) Fixed Place PE Rule 124

l The Place of Business Test 125

l Location Test 125

l Disposal Test 125

l Permanence Test 127

l Business Activity Test 127

l OECD Commentary, 2017 on Electronic

Commerce 129

(B) Judicial precedents on Server/Website as PE 131

(C) Case Study 4 – Server in Source State 135

VII. Modification in Agency PE definition 142

(A) AP 7 – Areas of concern 142

(B) AP 7 and MLI provisions 144

I-28

Index

l Commissionaire Arrangements Page
145
l Article 12 of MLI 147
149
l EAPE Rule 162
165
l Low Risk Distributor (LRD) 169

(C) India’s Treaties 176
186
(D) Recent decisions on Agency PE 202
206
l Case Study 5 – Agency PE in 206
multi-country 208
215
l Case Study 6 - DAPE 221
228
l Case Study 7 – Global Contract 228
235
VIII. Modification in Independent agent definition 238
(A) Article 12 and Article 15 of MLI
l Independent agent 245
l Concept of CRE
(B) India’s tax treaties 248
IX. Preparatory or auxiliary activities 258
(A) Preliminary 258
(B) Paragraph 4 of Article 5 of OECD MTC 258
(C) India’s Tax Treaties
(D) Judicial precedents – Preparatory or 258

auxiliary character
l Case Study 8 – Specific Activity

Exemption
X. Construction PE – Journey, Abuse and Remedy
(A) Journey
l Evolution
l ‘Construction PE’ concept in Model

Conventions

I-29

Index

Page
l ‘Construction PE’ in Indian Treaties 260

l Some facets related to Construction
PE 262

(B) Abuse of existing measures 268

(C) Remedy 270

l Case Study 9 – Splitting of contracts 279

XI. Conclusion 292

ANNEXURES 297

Part I : Relevant provisions of the Act 297

Part II : OECD Model Convention

(Relevant extract) 310

Part III : PE Articles under various treaties 313

Part IV : Relevant Articles of Multilateral

Convention (MLI) 349

Part V : MLI Impact on PE Article of treaties

extracted in Part III 355

I-30