This case involves a dispute between Automation Anywhere Inc., a company incorporated in the USA and the Deputy Commissioner of Income Tax, Circle-1(1)(1), International Taxation, New Delhi regarding the existence of a Permanent Establishment (PE) in India and the resulting tax liabilities for the assessment year 2018-19.
Automation Anywhere Inc. develops and markets Robotic Process Automation (RPA) software and services. The dispute centers around whether the company has a PE in India through its employees and their activities within the country, which would subject the company to Indian tax jurisdiction under the India-USA Double Taxation Avoidance Agreement (DTAA).
The case was brought before the Income Tax Appellate Tribunal, Delhi Bench, where both parties presented extensive arguments. The primary issue was whether the activities carried out by Automation Anywhere’s employees in India constituted a PE as defined under the DTAA. The company argued that its employees’ visits were temporary and did not meet the criteria for a PE, including permanency, a fixed place of business, and carrying out core business activities.
The tribunal’s decision focused on the detailed analysis of the nature of work performed by the employees in India. It was found that the activities were auxiliary and preparatory, such as training and attending meetings, and did not involve carrying out any core business or concluding contracts. The tribunal noted that the premises of Automation Anywhere’s Indian affiliate were not at the disposal of the visiting employees and thus did not constitute a fixed place of business. Consequently, it was held that there was no PE in India.
The tribunal’s decision underscores the importance of the specific activities performed by employees in determining the existence of a PE. The judgment provides clarity on the interpretation of treaty provisions related to PE, especially in the context of temporary visits and the nature of activities undertaken by foreign employees in India. This case is significant for multinational corporations operating in India through temporary assignments or business visits, providing insights into tax liabilities and treaty protections.
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