DTAA | Foreign Company Providing Software To Its Agents In India Doesn't Mean It Has 'Permanent Establishment' In India: Delhi HC

The Delhi High Court has held that 'software' being an intangible property, cannot alone constitute 'Permanent Establishment' of a foreign entity in India. In the case at hand, the issue before the Court was whether the Voyager software provided by Western Union Financial Services Inc. to its agents in India would constitute PE, for the purposes of taxation in India. An intangible property, which software is, clearly lacks the physical attributes which underlie and constitute an integral part of the concept of PE.” The Revenue through Assessing Officer had initially held that income of the Western Union accrued in India and would be exigible to tax under DTAA. At the outset, the High Court observed that the software only constituted a medium of communication which enabled the Indian agents to talk and communicate with the servers of Western Union housed in the USA. “The Vogel Commentary, while examining the concept of a 'place' under Article 5 takes the categorical position that purely intangible property, such as software, cannot constitute a PE,” the High Court said and dismissed Revenue's appeal.