India vs Samsung Heavy Industries, July 2020, Supreme Court, Case No 12183 OF 2016

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At issue was if the activities carried out by Samsung Heavy Industries’ Mumbai project office constituted a permanent establishment or if the activities were of a preparatory and auxiliary nature.

The Indian Supreme Court decided in favor of Samsung Heavy Industries.

Under the Tax Treaty, the condition for application of Article 5(1) of the Tax Treaty and there by constituting PE is that there should be a place ‘through which the business of an enterprise’ is wholly or partly carried on, and furthermore that these activities are not of a preparatory and auxiliary nature, cf. Article 5(4)(e).

Board Resolution documents showed that the Mumbai project office was established to coordinate and execute “delivery documents in connection with construction of offshore platform modification of existing facilities for Oil and Natural Gas Corporation”. The office was not involved in the core activity of execution of the Project.

No expenditure was incurred by the office in India – only 2 employees.

The burden of proving that the office does not constitute a PE is not on the taxpayer.

The activities carried out by the office in Mumbai were within the exclusionary Article 5(4)(e) of Tax Treaty as an auxiliary office acting only as a liaison office between taxpayer and Oil and Natural Gas Corporation.

 

India vs Samsung 21524_2014_34_1501_23033_Judgement_22-Jul-2020





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