In Brief
U.A.E. Exchange Centre, a foreign company providing remittance services to Non-Resident Indians, operated liaison offices in India to dispatch cheques/drafts to beneficiaries per NRI instructions. The Department sought to tax these operations as arising from a permanent establishment in India. The Supreme Court upheld the High Court's decision, holding that the liaison office activities—downloading remittance information, printing cheques, and dispatching them—were of a preparatory or auxiliary character under Article 5(3)(e) of the India-UAE Double Taxation Avoidance Agreement. Since such activities do not constitute a permanent establishment, no income is taxable in India. The DTAA provisions override domestic income tax law where inconsistent, and restricted regulatory permission confirmed the auxiliary nature of the operations.
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