India: Service permanent establishment; provision of cloud-based software-driven platform as technical services

The KPMG member firm in India has prepared reports about the following court decisions (read more at the hyperlinks provided below).

• Duration of provision of services from outside India not relevant for purposes of service permanent establishment (PE): The Delhi bench of the Tribunal held that for the purposes of service PE in India, the actual performance of services in India is essential. Accordingly, only the duration of the employees physically present in India for furnishing the services is to be considered for the purposes of the duration threshold under the service PE clause of the treaty. The tribunal rejected the tax officer's position that the duration of the provision of services from outside India is also included. The tribunal also held that the taxpayer’s presence in India does not include the days during which the employees did not render any services to the clients such as the employees’ vacation days and days on which they performed non-revenue generating business development activities. The case is: Clifford Chance. Read a March 2024 report [PDF 406 KB]
• Provision of cloud-based software-driven platform not technical services unless customized or specifically designed for a particular customer: The Delhi High Court found that payments for the provision of a cloud-based software driven platform cannot be taxed as fees for technical services if not customized or specially designed for a particular customer. The court quashed the tax officer’s order denying the nil tax withholding certificate and remitted the matter back to the tax officer for a fresh consideration in the light of the observations given in the decision. The case is: SFDC Ireland. Read a March 2024 report [PDF 324 KB]