Supreme Court Refuses to Interfere with Delhi HC Ruling Holding Siemens Mobile Had No PE in India [Read Order]

The Supreme Court refused to interfere with the Delhi High Court’s finding that Siemens Mobile Communication SPA did not have a permanent establishment in India through its Indian subsidiary and that no income could be attributed to it in India on this ground.

The case arose from a judgment of the Delhi High Court which dismissed appeals filed by the Commissioner of Income Tax against Siemens Mobile Communication SPA and upheld the order of the Income Tax Appellate Tribunal passed in 2019 in favour of the assessee on the issue of permanent establishment.

The revenue approached the Delhi High Court challenging the Tribunal’s conclusion that Siemens Mobile did not have a permanent establishment in India under Article 5 of the India-Italy Double Taxation Avoidance Agreement. The revenue argued that the Indian subsidiary was carrying out activities on behalf of Siemens Mobile and that employees of the foreign company had visited India, which, according to the department, created a permanent establishment in India.

Before the High Court, the revenue counsel argued that Siemens Mobile had a business presence in India through its subsidiary and that activities such as installation, testing, maintenance and marketing established a sufficient nexus to constitute a permanent establishment. They also argued that Siemens Mobile failed to provide details of employees visiting India, which prevented proper examination of the PE issue.

The company argued that its role was strictly limited to offshore supply of telecom hardware from Italy. It explained that all contracts were executed outside India between February 1997 and January 1998, title to goods passed outside India and payments were received outside India.

They further explained that there was no occasion for its employees to visit India after execution of the contracts and that all onshore activities were carried out independently by the Indian subsidiary, which had already offered its income to tax in India.

The Division Bench of Justice Yashwant Varma and Justice Harish Vaidyanathan Shankar observed that the Tribunal had correctly examined the factual record and found that the contracts were entered into during a limited period and that no employee of Siemens Mobile visited India thereafter.

The court observed that Siemens Mobile’s role was confined to offshore supply of hardware from Italy and that even warranty repairs required the equipment to be sent back to Italy. The court also observed that income from onshore services and activities performed in India was already taxed in the hands of the Indian subsidiary.

The court held that there was no material to establish the existence of a permanent establishment of Siemens Mobile in India and no justification to attribute profits to it in India on this basis. On this reasoning, the High Court dismissed the Revenue’s appeals.

The revenue challenged the Delhi High Court’s judgment before the Supreme Court. The Supreme Court bench comprising Justice Pamidighantam Sri Narasimha and Justice Vijay Bishnoi observed that it was not inclined to interfere with the High Court’s findings on the permanent establishment issue. It dismissed the special leave petitions.SIEMENS MOBILE COMMUNICATION SPA

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