Samsung’s Mumbai Project Office not a Fixed Place PE sans ‘core business conduct’
The Supreme Court in the case of Samsung Heavy Industries Co. Ltd. has held that its Mumbai Project Office did not constitute a Fixed Place Permanent Establishment (PE) in India as per Article 5(1) of the India-Korea DTAA as ‘core business’ of the assessee was not carried out through the Project Office.
The Supreme Court has made plain that profits of the foreign enterprise are taxable only when the enterprise carries on its core business through the alleged PE. After examining the documents related to setting up of Project Office, number & qualification of employees and financial statements of the PO, the SC held that the PO was merely an auxiliary office meant to act as a liaison between the assessee and ONGC. The principle of substance over form has been applied to arrive at this decision in favour of the taxpayer.
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