RSM India

GIA US gem grading services through GIA India will not constitute PE in India

The Mumbai ITAT in the case of Gemological Institute of America Inc. (‘GIA US’) [ITA No. 1138/ Mum2015] dated 21 June 2019 has considered the provisions of the Income-tax Act, 1961 (‘the Act’) and Double Taxation Avoidance Agreement (‘DTAA’) between India and USA and held that GIA US gem grading services to Indian customers through GIA India Laboratory Private Limited (‘GIA India’) will not constitute the Permanent Establishment (‘PE’) of GIA US in India.

The Mumbai ITAT has relied on the Supreme Court judgment of ADIT v. E-Funds IT Solution Inc. [2017] 399 ITR 34 (SC) and held that GIA India will not constitute either the Fixed Place PE, Service PE or Agency PE of GIA US in India. Further, the Mumbai ITAT has held that the judgment of the Supreme Court given in the case of Formula One World Championship Ltd. v. CIT [2017] 394 ITR 80 (SC) is not applicable in the present facts of the case.

Accordingly, the order passed by the lower authorities is reversed and appeal of the assessee is allowed.

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