India: Supply Of Technical Equipment And Rendering Lighting Services For An Event In India Constitutes A Fixed Place PE In India

Last Updated: 31 January 2018
Article by SKP  

Recently, in the case of Production Resource Group1, the Authority for Advance Rulings (AAR) held that the payments received for providing technical equipment and lighting services for commonwealth games in India constitutes a fixed place Permanent Establishment (PE) in India.

The AAR also held that such payments cannot be taxed as royalty or Fees For Technical Services (FTS) under the India-Belgium Tax Treaty (Treaty).


  • The taxpayer, a Belgian company, is engaged in the business of providing technical equipment and services for events including lighting, sound, video and LED technologies.
  • It entered into a service agreement with the Organising Committee of the Commonwealth Games (OCCG) for furnishing on a turnkey basis, lighting and searchlight services during the opening and closing ceremonies of the Delhi Commonwealth Games (CWG) for a consideration of USD 3.5 million.
  • The employees and equipment of the taxpayer were in India for an aggregate period of 66 days for preparatory services, installation and dismantling of equipment.

Issues involved

  • Whether the aforesaid payments received by the taxpayer for rendering lighting and searchlight services to OCCG would be taxable in India according to the provisions of the Indian Income Tax Act (ITA).
  • If the answer to above is yes, whether the aforesaid payments would be taxable in India as per the provision of the India-Belgium Tax Treaty read along with the Protocol and the India-Portugal Tax Treaty.

Taxpayer's contentions

  • The services provided by the taxpayer undertaken on a turnkey basis does not fall within the purview of the expression "rendering of any managerial, technical or consultancy services'' appearing in Section 9(1)(vii) of the ITA as it indicates the service recipient's desire for a continued provision of the services and not merely an end result.
  • Furthermore, the services are standard services and not technical services as it involves providing only routine and mechanical processes. The taxpayer relied on Madras High Court's decision in the case of Skycell Communication Ltd2, wherein it was held that standard cellular services provided to the public at large would not be considered as technical services.
  • Protocol to Article 12 of the India-Belgium Tax Treaty read together with the India-Portuguese Tax Treaty provides that mere rendition of technical, consultancy or managerial services is not enough to attract this Article as it necessitates the taxpayer to transmit the technical knowledge in such a fashion that OCCG would be able to utilise them in the future, independent of the taxpayer.
  • It was also submitted that the equipment, resources, know-how and other things required for providing turnkey services have not been transferred by the taxpayer who still continues to own it. In light of the above, the payments under consideration are not under the purview of Article 12 of the treaty.
  • With regards to PE in India, the taxpayer relied on the decision of the Andhra Pradesh High Court in the case of Visakhapatnam Port Trust3, wherein it has been held that a fixed place of permanent nature of foreign enterprises should be such that it results in virtual projection of the business of the foreign enterprise on Indian soil. The taxpayer argued that it does not have any office, branch, establishment, or other fixed place of business in India. The taxpayer also argued that it does not have the right to use the premises of OCCG in relation to the rendition of contracted services. Accordingly, there was no virtual projection of its business in India and hence it does not create a PE in India.
  • The taxpayer also argued that all the crucial aspects of PE such as the place of business, the power of disposition, permanence, location, business activity and business connection were absent in the present case. Furthermore, the taxpayer was of the view that having an insurance cover for its equipment and other assets in no certain terms leads to the constitution of PE in India.
  • It was also argued that project/installation PE also does not trigger as the period of contract in India was less than the threshold limit of 6 months as provided under Article 5(2)(j) of the treaty.
  • The taxpayer also argued that decision of the Supreme Court in the case of Formula One World Championship Ltd (FOWC)4 was not applicable to facts of the present case as the taxpayer did not have full control over the space provided (i.e. stadium where the event was held).

Revenue's contentions

  • The nature of work of the taxpayer is highly technical and sophisticated which is covered by intellectual property such as copyrights, patents, trademarks, designs, brand names, logos, data and confidential information.
  • As per the agreement, the taxpayer agreed to provide intellectual property in the final product to OCCG. Based on this, the Revenue Authorities contended that intellectual property created by way of specific design, patent, plan or process which is not known to others have been transferred to the organisers and hence the same constitutes royalty as per the provision of the ITA and treaty.
  • The taxpayer had a comprehensive physical presence on the stadium since the taxpayer had installed its equipment at various sites before and throughout the stadium which included the laying of cables and erecting structures throughout the operation of the CWG. Also, the taxpayer was required to provide services throughout the period of the contract and not only during the opening and closing ceremony. The taxpayer was also required to abide by the relevant regulations and obtain all the required authorisations, permits and licenses to perform the aforesaid services.
  • Based on various clauses of the agreement, OCCG was required to provide limited space and on-site space to the service provider. Furthermore, OCCG was also required to provide a suitable workplace for repairing fixtures, storage and empty key storage area. The taxpayer was also required to have personnel available for any maintenance and repair works at the site. Based on this, it was contended that the taxpayer had an office space/on-site space in India.
  • The taxpayer was also responsible for ensuring that it had adequate insurance to cover all risks associated with the provision of the said services. This also meant that for managing the risks, it was necessary for the taxpayer to be available at the site throughout the tenure of the contract.
  • The taxpayer had subcontracted certain tasks pertaining to lighting and designing. This led to the taxpayer having an office space or an on-site space pertaining to the sub-contractor.
  • The time period for which it was operating in India cannot be a deciding factor for determination of PE in India as the entire business activity was completed in a short period of time. Revenue placed reliance on the decision of the Supreme Court in the case of FOWC4.

Ruling of the AAR

Taxability of payments as royalty

  • The AAR held that the taxpayer has only assigned the rights in the final product (i.e. providing equipment and services including lighting, sound, etc.) and there is no assignment of the right to use know-how, technical experience, intellectual property, etc. comprised therein. These rights have simply been used by the taxpayer in preparing the final product.
  • Accordingly, it was held that payments received for the supply and services do not constitute as royalty under the provisions of the ITA as well as the treaty.

Taxability of payments as FTS

  • It was held that services rendered were not standard services since they were customised services for a particular customer. It was also held that services are not routine in nature but were technical services which required the assistance of highly trained technical personnel to furnish the same. Accordingly, it was held that services would qualify as FTS under the ITA.
  • AAR held that services were not ''made available'' to OCCG in such a manner that it acquired the know-how or empowered OCCG to carry out such task in the future on its own. Accordingly, it was held that payments received for the services do not constitute as FTS as per the Protocol in the India-Belgium Tax Treaty read with India-Portugal Tax Treaty.

Taxability of payments by virtue of having PE in India

  • The taxpayer had some space at its disposal which was lockable, implying that it had access to as well as control over such space. Furthermore, such space was not merely for storage alone, but given the nature of the business, space was also for carrying out the business itself.
  • The taxpayer was subcontracting some of its activities which indicates that the taxpayer had an address/an office from which it could call for or award sub-contracts. AAR also held that it was difficult to assume that without premises under control, the taxpayer could have hired key technical and other personnel for the entire duration of the event.
  • The taxpayer had insured its equipment's which also indicates having a fixed place of business since no insurance company would insure any equipment, structures against any risk unless the place was safe and at the disposal of the insurer (i.e. taxpayer in the present case).
  • Apart from the above, the taxpayer was also provided with a covered area and an empty workplace for storing equipment along with the necessary security at all times, implying that the taxpayer alone had exclusive access to such place and that such place was solely at its disposal.
    Based on the above, it was held that taxpayer had an office space in India which was available at its disposal.
  • The taxpayer's argument that its business place in India was not enduring or permanent in nature was rejected. It was held that business place should not be in control forever but the same has to be looked in the context of business undertaken from such place. In the present case, the place of business was at the disposal of the taxpayer for as much time as its business required and hence it was held that permanence test was satisfied. AAR also relied on the decision of the Supreme Court in the case of FOWC4.
  • In light of the above, it was held that the taxpayer met each of the criterion for establishing a PE, namely place of business, the power of disposition, the permanence of location, business activity, etc. Accordingly, the payment so received was chargeable to tax in India as business income in terms of Article 7 read with Article 5 of the treaty.
SKP's comments
Yet another decision holding that supply of equipment's and services for an event in India constitute a PE. This decision is broadly in line with the decision of the Supreme Court of India in the case of FOWC, wherein a motor racing circuit was held to be a fixed place PE.

Given that various international events are taking place in India, it is imperative for the foreign companies to take note of these decisions and consider the impact of the same. There could be far-reaching tax implications in India for the companies conducting events in India if such events constitute a PE in India.

This ruling once again emphasised on the principle that the degree of permanence has to be checked with respect to the business requirements of the taxpayer and just because the business's presence in India was for a short duration may not absolve the companies from fixed place PE risk. It is interesting to note that there is no detailed discussion on whether this case can fit into the project PE clause and whether the principles of specific PE over general PE could have been applied.


1. A.A.R. No. 1330 of 2012

2. 251 ITR 53 (Mad)

3. (1983) 144 ITR 146

4. Civil Appeal Nos. 3849 to 3851 of 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions