Summary
The Mumbai project office was an auxiliary liaison office, not a fixed-place permanent establishment through which Samsung carried on its core business under the India–Korea treaty. The Tribunal had selectively read the board resolution, disregarded evidence of the office’s limited functions and wrongly placed the initial burden on the assessee. The Revenue’s appeal was dismissed on these grounds, making the other attribution questions unnecessary to decide.
Issues
- Whether the Mumbai office constituted a fixed-place permanent establishment under the applicable treaty.
- Who bore the initial burden and whether the Tribunal’s findings were sustainable.
Provisions considered
- Articles 5(1), 5(4)(e), 7(1) and 7(2), India–Republic of Korea Double Taxation Avoidance AgreementRequired business activity through the establishment, excluded solely auxiliary functions and limited taxation to attributable profits. (¶¶ 15, 16, 23, 27, 28)
Held
- A fixed-place permanent establishment requires the enterprise’s business to be wholly or partly carried on through it. Preparatory or auxiliary activities fall within the treaty exclusion, and only profits attributable to an established permanent establishment may be taxed in the other State. The initial burden of proving its existence rests on the Revenue. (¶¶ 15, 16, 17, 21, 22, 23, 27)
- The full board resolution concerned coordination and delivery of documents. The Tribunal’s reliance on its first paragraph alone to infer execution of the core project was perverse, as was its dismissal of accounts showing no execution expenditure and reversal of the initial burden of proof. (¶¶ 24, 25, 26, 27)
- The two Mumbai employees lacked qualifications for the assessee’s core activity. On the established facts the office was solely auxiliary liaison and did not constitute the asserted fixed-place permanent establishment. Other argued questions, including alternative attribution issues, did not require decision. (¶¶ 28, 29)
Result
Revenue appeal dismissed for the Supreme Court’s stated reasons; no fixed-place permanent establishment established through the Mumbai project office. Other questions unnecessary to decide.