TaxTonic Session : Profit Attribution to Permanent Establishments!

Episode Duration:
90 minutes

Episode Background:

'TaxTonic', a new 'subscriber only' thought leadership series, is Taxsutra's endeavour to consistently deliver top notch technical content to it's readers. The labyrinth of tax rulings on convoluted transactions keeps the world of taxation unpredictable and ever-evolving. This series will feature engrossing presentations, incisive analyses and a deep-dive by the tax experts on burning issues & controversies. So, gear up for a 'tonic' to chisel your tax mind and challenge your wit.

Speaker:

Mr. Anish Thacker (SRBC & Associates LLP)

Moderator: 

Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

Taxpayers and the Revenue often find themselves in the conflict zone over the existence of a Permanent Establishment (PE) due to the form and nature of foreign company’s activities in India. Once this conflict gets resolved with a conclusion of the existence of PE in India, the battle for profit attribution begins. Alas! There is no one-size-fits-all approach for attribution of profit as the form and substance of the transactions and complexity of the Functions, Assets and Risk (FAR) profile poses grave questions. To delve into this interesting subject, TaxTonic brings to you a discussion to deconstruct the complexities surrounding the attribution of profits to PE.

The statutory provisions read with the rules and Article 7 of the DTAAs reflect an agreement to attribute reasonable profits from the activities in the source jurisdiction by treating the PE as an independent and distinct unit of the non-resident. However, there is no standard answer or guide to compute the profits. The episode intends to analyse the judicial precedents to address some the following facets:

1. Practical implementation of single versus dual taxpayer approach
2. Reconciliation on profit attribution approach suggested by OECD and UN Model
3. Implications of composite or indivisible contracts in profit attribution
4. Computation of profit in Installation or Supervision PEs
5. Profit attribution to Dependent Agent PE