India: Anti-fragmentation rule in definition of PE not applicable absent any business activity carried on by foreign enterprise in India (tribunal decision)
The tribunal held that a foreign enterprise's preparatory services in India do not constitute a permanent establishment under the India-Ireland tax treaty.
The Mumbai Bench of the Income-tax Appellate Tribunal held that an Indian group company, providing preparatory and auxiliary support services, did not constitute a fixed place permanent establishment (PE) or a dependent agent PE of the taxpayer in India under the India-Ireland tax treaty.
The tribunal also analyzed the anti-fragmentation rule introduced through the multilateral instrument (MLI), which overrides the PE exemption provided for preparatory or auxiliary activities under the treaty. It concluded that the rule was not applicable because the taxpayer and the Indian group company were not conducting complementary business activities that formed part of a cohesive business operation in the same country (i.e., India).
The case is: RGA International Reinsurance Company Designated Activity Company v. DCIT
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