permanent establishment - The Legal Chamber

The Supreme Court held that a temporary lull in business activities does not amount to cessation of business. The absence of a permanent establishment or a subsisting contract is not determinative; continuous business efforts, such as correspondence and bidding, suffice to constitute "carrying on business" for claiming deductions under Sections 37 and 71 and carry-forward of depreciation under Section 32(2) of the Income Tax Act. Facts Of The Case: The appellant, Pride Foramer S.A., a French non-resident company engaged in oil drilling, was awarded a 10-year contract by ONGC in 1983, which concluded in 1993. A subsequent drilling contract was awarded only in October 1998, formalized in January 1999. During the interregnum assessment years (1996-97, 1997-98, 1999-2000), the comp...

The Supreme Court of India upheld the Delhi High Court's ruling that Hyatt International Southwest Asia Ltd. had a Permanent Establishment (PE) in India under Article 5(1) of the India-UAE Double Taxation Avoidance Agreement (DTAA). The Court emphasized that a fixed place of business PE exists if the enterprise has a right to use and control a physical location for its business activities, regardless of exclusive possession. The appellant's extensive control over hotel operations under the Strategic Oversight Services Agreement (SOSA) satisfied the "disposal test" and established a PE. Consequently, the income derived from these activities was deemed taxable in India under Article 7 of the DTAA. The appeals were dismissed, affirming the tax liability. Facts Of The Case: Hyatt Internation...

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Supreme Court Allows Business Expense Deduction for Firm in “Lull Period” Between Contracts

Supreme Court Verdict on Cross-Border Taxation: Hyatt’s India Operations Fall Under PE, Income Taxable