1. Introduction

In a recent ruling of the Indian Authority for Advance rulings (AAR), a Belgian company had provided certain services in India for a duration of mere 66 days. The AAR concurred with the Belgian company that its income did not amount to royalty or fees for technical services, but it concluded that the Belgian company had a permanent establishment in India. While reaching that conclusion, the AAR took into account the fact that the customer had provided empty space at the site (for performance of services) and certain lockable space for storing the Belgian company’s tools and equipment. On that basis, the AAR inferred that the Belgian company enjoyed ‘power of disposition’ in respect of a place of business in India.

The AAR opined that the ‘duration test’ was not relevant for determination of existence of the Belgian company’s fixed place permanent establishment in India under Art. 5(1) of the Belgium-India tax treaty.

While reaching the above-mentioned conclusions, the AAR relied on the Indian Supreme Court’s recent landmark decision in Formula One World Championship. As pointed out in this article, with due respect, the AAR seems to have misapplied the Supreme Court’s decision.

For the reasons discussed in detail in this article, the AAR’s approach and conclusion on the permanent establishment issue in the above-mentioned ruling seem questionable.