India: Physical presence required for service PE under India-Singapore treaty (court decision)
Delhi High Court holds that physical presence is required to constitute a service permanent establishment (PE) under the India-Singapore tax treaty.
The Delhi High Court held that, for the purposes of the 90-day threshold for establishing a service permanent establishment (PE) under the India-Singapore tax treaty, an employee’s vacation days and business development days are to be excluded because no services were rendered to Indian clients during these days. Also, the common day (when more than one employee is present in India on the same day) should be counted as one.
Further, the court rejected the Department of Revenue’s arguments regarding the existence of a virtual service PE, holding that the provisions not expressly covered within the treaty cannot be read into it by the courts. Accordingly, the physical presence of employees in India providing services to clients is a precondition for the constitution of service PE.
The case is: CIT, International Tax v. Clifford Chance Pte Ltd.
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