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Business support activities proposed by Indian subsidiary won’t create PE of its foreign holding Co.: AAR

June 14, 2018[2018] 94 taxmann.com 194 (AAR - NewDelhi)
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IT : Where applicant, a State owned oil company of Kingdom of Saudi Arabia and world's largest crude oil exporter, has set up a subsidiary, Aramco India, as a separate legal entity, to provide procurement related support services under Services Agreement, and extend further support to Saudi Aramco's Crude Oil Sales and Marketing Department, by providing business support/marketing support functions under Proposed Addendum, since no material has been brought on record to show that support team in Aramco India is manned by employees or hired personnel of applicant, or will be so manned in future when activities begin, based on nature of business support/marketing support activities proposed to be undertaken by Indian affiliate entity, Aramco India would not create a Permanent Establishment (PE) for applicant in India under article 5 of Double Taxation Avoidance Agreement between India and Kingdom of Saudi Arabia, where such activities of Aramco India are duly compensated on an Arm's Length basis in accordance with Indian transfer pricing laws and regulations

• Unless a case is made out that applicant foreign company proposes to carry out its main business itself from an establishment in India, or through its employees and personnel, or Indian subsidiary can act as an agent of holding company, i.e. it proposes to do acts that are specifically mentioned in DTAA, it cannot automatically be concluded that Indian subsidiary would constitute a PE of applicant.

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