Global integrated solutions provider, Nair & Co, reports that, in the case of Seagate Singapore, the AAR determined that the demarcated space made available in the warehouse by the company's independent logistics service provider constitutes a Permanent Establishment under the India Singapore Double Taxation Avoidance Agreement (DTAA).
The principles discussed in the case have persuasive value and may be considered by the tax and judicial authorities in India in future, and companies are advised to analyse the impact of this ruling on their sales and distribution models in India.
Singapore-based Seagate manufactures disks and ships them to independent logistics service providers in India for warehousing and ultimate supply to Original Equipment Manufacturers (OEMs) on a just-in time basis.
Seagate says it has neither a physical presence in India nor any premises owned, leased or kept for its disposal in India.
However, Indian tax authorities believe that the demarcated space in the warehouse is a fixed place of business and thus ownership of the facility is irrelevant.
According to the Organisation for Economic Cooperation & Development (OECD) Model Convention, activities such as the use of facilities solely for the purpose of storage, etc, are exempt from Permanent Establishment status.
However, Nair & Co notes that the India - Singapore treaty restricts this exemption to a certain degree.
Source : EFT, 18.03.10.
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