In Brief
Two US companies—eFunds Corporation and eFunds IT Solutions Group Inc.—were assessed to tax in India on the basis that they had permanent establishments (PEs) through their wholly-owned Indian subsidiary, eFunds India. The assessing authorities found both a fixed place of business PE and service PE under the India-US Double Taxation Avoidance Agreement (DTAA). The Supreme Court held that no PE existed. A fixed place of business PE requires premises to be at the disposal of the foreign enterprise for its own business; mere outsourcing to a subsidiary does not create one. A service PE requires services furnished by the foreign company in India; auxiliary support services enabling services to customers abroad do not qualify. The Court also found arm's length pricing had been satisfied, precluding further income attribution to India. The appeals were accordingly dismissed.
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