Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

April 11, 2024

PE Watch | Latest developments and trends, April 2024

PE case law

Indian Court rules no further profit attribution needed for Singapore company's Indian operations

On 21 March 2024, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of a Singapore company, holding that no further profits are attributable to its alleged permanent establishment (PE) in India, where its Indian associated enterprise (AE) had already been remunerated at arm's length.

The case stemmed from Indian tax authorities' earlier determination that the Singapore company's Indian AE constituted a fixed-place PE and a dependent agent PE. Consequently, the authorities attributed profits to this alleged PE. The ITAT had initially ruled that the Singapore company did not have a PE in India. However, the Delhi High Court remanded the matter to the ITAT to decide the profit attribution issue.

Before the ITAT, the Singapore company contended that no further attribution was warranted because its Indian AE had already been remunerated at arm's length, relying on a Supreme Court's ruling. The ITAT accepted this argument, noting its previous finding that the Indian AE did not perform additional functions leading to a PE.

Indian tribunal rules on physical presence requirement for Service PE

On 14 March 2024, the New Delhi Branch of the Income Tax Appellate Tribunal (ITAT) issued decision 2681 & 3377/Del/2023, analyzing the existence of a Service PE and a Virtual Service PE. The case involved a Singapore tax resident entity providing legal services to multiple clients in India.

During the assessment years, the taxpayer provided legal services remotely from outside India. However, the taxpayer's employees were physically present in India for a total period of 120 days. This period included 36 days of vacation, 35 days of business development activities, and five common days. Excluding these non-service days, the taxpayer rendered services in India for 44 days.

Initially, the taxpayer filed a tax return declaring nil income. However, after scrutiny, the assessing officer concluded that the taxpayer constituted a Service PE based on the physical presence of employees in India. Additionally, the assessing officer determined the existence of a Virtual Service PE, arguing that the Singapore-India tax treaty does not require physical presence for a Service PE.

The ITAT noted that physical presence of employees in India is a prerequisite to determining the existence of a Service PE. Consequently, vacation days, business development days, and common days should be excluded as no services were provided to customers in India during those periods.

Regarding the Virtual Service PE, the ITAT observed that although this type of PE does not require physical presence, the Singapore-India tax treaty does not contain provisions for such a PE. Therefore, the taxpayer cannot constitute a Virtual Service PE in India under the existing treaty.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young Belastingadviseurs LLP (Netherlands)

Ernst & Young Solutions LLP (Singapore)

Ernst & Young LLP (United States)

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more