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United Tax Network – The Smarter Choice

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Formula One Circuit held as Permanent Establishment for Corporate tax purpose

The OECD as well as the UN Model conventions [Article 5(1)] defines a permanent establishment (PE) as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Accordingly, for a foreign enterprise to be regarded as having fixed place PE in a source state, the following conditions must be satisfied:


  • There must be a place of business
  • Such place of business is at the disposal of the enterprise
  • Such place must be fixed
  • The enterprises wholly or partly carry on its business through such fixed place of business.


Recently, the Supreme Court of India in the case of Formula One World Championship Ltd. v. Commissioner of Income-tax, (IT)-3, Delhi, held that the Buddh International Circuit, Greater Noida, Uttar Pradesh, (“Buddh International Circuit”) should be construed as a fixed place Permanent Establishment (“PE”) in India within the meaning of the India UK Double Taxation Avoidance Agreement (“India UK DTAA”) for Formula One World Championship Limited (“FOWC”). The Supreme Court held that the international circuit constitutes fixed place of business under the tax treaty since the international circuit was under the control and at the disposal of the taxpayer. It further held that all business income attributable to such PE would be taxable in India.


This judgment of the Supreme Court has upheld the judgment of the Delhi High Court, which had reversed the decision of the Authority for Advance Ruling (“AAR”) made in this matter.