1. Introduction

Recently, the Indian tax authorities sought to invoke the Indian Supreme Court’s landmark Formula One decision for supporting the claim that a franchise arrangement with an Indian franchisee gave rise to a US company’s (franchisor’s) fixed place permanent establishment and dependent agency permanent establishment in India. The Indian Income Tax Appellate Tribunal (ITAT), however, rejected that proposition. This decision is very important for a rather large number of cross-border franchise arrangements.

 

It is also evident that the tax authorities (particularly, from India) could be expected to invoke the Indian Supreme Court’s above-mentioned landmark decision in a large number of cases for supporting the claim for existence of a permanent establishment.

But as we would see in this article, in many cases, it should be possible to distinguish the Formula One decision.