We had access to an Indian venue for only a few days in the year. Can that be a permanent establishment?
Yes. A place is at the disposal of an enterprise when the enterprise has the right to use it and control over it, and a fixed place permanent establishment needs stability, productivity and dependence rather than ownership or a long lease. The Buddh International Circuit was a fixed place through which Formula One World Championship Ltd carried on its commercial activity, so it had a permanent establishment in India.
Decided by the Supreme Court (Supreme Court of India, A.K. Sikri J and Ashok Bhushan J (Civil Appeal No. 3849 of 2017 with Civil Appeal Nos. 3850 and 3851 of 2017)) on 2017-04-24, reported as [2017] 394 ITR 80 (SC); [2017] 80 taxmann.com 347 (SC); [2017] 248 Taxman 192 (SC); (2017) 15 SCC 602. It bears on section 9, section 90, section 195, section 195(2), section Article 5 of the Income Tax Act 1961, in Assessment & Scrutiny and Residence & Treaty Benefit matters.
This is the case that made short-duration, event-based and shared-space arrangements taxable, and it supplies the disposal test that the Supreme Court applied again in Hyatt. It is cited by the department against exhibitors, event organisers, concessionaires and anyone with contractual control over an Indian venue, and by taxpayers for the proposition that the enquiry is control over the place, not the number of days.
Binding on every court and authority in India.
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Formula One World Championship Ltd, resident in the United Kingdom, held the commercial rights to the FIA Formula One World Championship, transferred to it through Formula One Administration Ltd and confirmed for a hundred years by the Concorde Agreement of 2009. By a Race Promotion Contract dated 13 September 2011, replacing an earlier agreement of 25 October 2007, it granted Jaypee Sports International Ltd the right to host, stage and promote the Grand Prix of India at the Buddh International Circuit at Noida for US$ 40 million. On the same day Jaypee granted back circuit rights — mainly media and title sponsorship — to Beta Prema 2 and paddock rights to Allsports, both affiliates of Formula One World Championship Ltd, and Formula One Administration Ltd generated the television feed. The Authority for Advance Rulings held that there was no permanent establishment in India. Formula One World Championship Ltd and Jaypee challenged the ruling by writ petition, and by judgment dated 30 November 2016 the Delhi High Court held that the circuit was a fixed place permanent establishment. Three appeals came to the Supreme Court — by Formula One World Championship Ltd, by Jaypee, and by the Revenue, whose appeal concerned dependent agent permanent establishment.
The Buddh International Circuit was a fixed place at the disposal of Formula One World Championship Ltd through which it carried on its own business, so it had a fixed place permanent establishment in India and was liable to tax here on the income earned on this soil (para 76). Two conditions have to be satisfied under Article 5(1): a fixed place of business, and business of the enterprise carried on wholly or partly through that place (para 66). Mere construction of the track by Jaypee at its expense, its ownership of the circuit, and its organising of other events there were all immaterial, the examination being limited to the conduct of the championship and control over the track during that period (para 74). The limited number of days for which access was available made no difference, given that access was full and exclusive for the whole of the relevant period (para 70). The appeals of Formula One World Championship Ltd and of Jaypee were dismissed, subject to the Court's observations, and the Revenue's appeal on dependent agent permanent establishment was disposed of as academic (paras 80-81). Two qualifications belong with the result. Only that portion of the income attributable to the permanent establishment is business income taxable here, and only that part attracts deduction under s.195; how much is attributable is expressly left to the Assessing Officer to adjudicate in the assessment order, at which stage Jaypee may also argue that penalty should not be charged because its failure to deduct was bona fide — the Court saying in terms that it expressed no opinion either way (para 78).
The Court read Article 5(1) as posing twin conditions — the existence of a fixed place of business, and the carrying on of the enterprise's business wholly or partly through it — noting that the list in Article 5(2) is inclusive and that Article 5(3) is a negative list (para 66). It took it as beyond denial that the circuit is a fixed place from which an economic activity, the conduct of races, was carried out, and treated the real questions as whether the circuit was at the disposal of Formula One World Championship Ltd and whether it carried on business there (para 67). To answer them it insisted that the several agreements be read together rather than in isolation, so as to find who had real and dominant control over the event (para 67). Reading them that way, it found that the commercial rights vested in the company for a hundred years, that all the revenue-earning rights — media, title sponsorship, paddock — ended up with it or its affiliates, that the event could not happen without the participating teams, the circuit and the paddock, all of which it and its affiliates controlled, and that its physical control of the circuit ran from the inclusion of the event in the calendar to its conclusion (para 68). It adopted the High Court's clause-by-clause analysis of the Race Promotion Contract, under which the circuit had to be built in a form approved by the company, access to restricted areas was only by passes it issued, Jaypee was barred from making or permitting recordings and assigned all intellectual property in images to it, and the term was five years (paras 68-69). On duration it agreed with the High Court that access for a limited period does not prevent the place from being fixed where the access is exclusive and the arrangement recurs — the presence being neither ephemeral, fleeting nor sporadic — and it drew support from a trade fair stand occupied three weeks a year, a temporary restaurant at a Dutch flower show, the Norwegian decision in Universal Furniture and the Canadian decision in Joseph Fowler (paras 70-72). On the second condition it held that the company carried on business in India because its rights could only be exploited by the actual conduct of the race with its active participation and control (paras 73-75). It then applied the test from CIT v. Visakhapatnam Port Trust, finding the circuit a virtual projection of the foreign enterprise on Indian soil, and Philip Baker's three characteristics of stability, productivity and dependence, all of which it found present (para 76). Finally, on withholding it followed GE India Technology Centre (P.) Ltd. v. CIT: the obligation to deduct under s.195 is limited to the appropriate portion of income chargeable in India, with recourse otherwise to s.195(2), and the quantification was left to the Assessing Officer (paras 77-78).
Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, one could clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e. FOWC) on the soil of this country. It is already noted above that as per Philip Baker, a PE must have three characteristics: stability, productivity and dependence. All characteristics are present in this case. Fixed place of business in the form of physical location, i.e. Buddh International Circuit, was at the disposal of FOWC through which it conducted business.
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Handle my notice → Ask a CA on WhatsAppYes. A place is at the disposal of an enterprise when the enterprise has the right to use it and control over it, and a fixed place permanent establishment needs stability, productivity and dependence rather than ownership or a long lease. The Buddh International Circuit was a fixed place through which Formula One World Championship Ltd carried on its commercial activity, so it had a permanent establishment in India. This was decided by the Supreme Court (Supreme Court of India, A.K. Sikri J and Ashok Bhushan J (Civil Appeal No. 3849 of 2017 with Civil Appeal Nos. 3850 and 3851 of 2017)) and bears on section 9, section 90, section 195, section 195(2), section Article 5 of the Income Tax Act 1961. It is reported as [2017] 394 ITR 80 (SC); [2017] 80 taxmann.com 347 (SC); [2017] 248 Taxman 192 (SC); (2017) 15 SCC 602. This is the case that made short-duration, event-based and shared-space arrangements taxable, and it supplies the disposal test that the Supreme Court applied again in Hyatt. It is cited by the department against exhibitors, event organisers, concessionaires and anyone with contractual control over an Indian venue, and by taxpayers for the proposition that the enquiry is control over the place, not the number of days. If it applies to you, the first step is this: Test the arrangement for the right to use and control over the venue, not for exclusivity or for how long the enterprise was there.
Formula One World Championship Ltd, resident in the United Kingdom, held the commercial rights to the FIA Formula One World Championship, transferred to it through Formula One Administration Ltd and confirmed for a hundred years by the Concorde Agreement of 2009. By a Race Promotion Contract dated 13 September 2011, replacing an earlier agreement of 25 October 2007, it granted Jaypee Sports International Ltd the right to host, stage and promote the Grand Prix of India at the Buddh International Circuit at Noida for US$ 40 million. On the same day Jaypee granted back circuit rights — mainly media and title sponsorship — to Beta Prema 2 and paddock rights to Allsports, both affiliates of Formula One World Championship Ltd, and Formula One Administration Ltd generated the television feed. The Authority for Advance Rulings held that there was no permanent establishment in India. Formula One World Championship Ltd and Jaypee challenged the ruling by writ petition, and by judgment dated 30 November 2016 the Delhi High Court held that the circuit was a fixed place permanent establishment. Three appeals came to the Supreme Court — by Formula One World Championship Ltd, by Jaypee, and by the Revenue, whose appeal concerned dependent agent permanent establishment. The matter was decided on 2017-04-24 by the Supreme Court (Supreme Court of India, A.K. Sikri J and Ashok Bhushan J (Civil Appeal No. 3849 of 2017 with Civil Appeal Nos. 3850 and 3851 of 2017)). On those facts the Supreme Court held as follows. The Buddh International Circuit was a fixed place at the disposal of Formula One World Championship Ltd through which it carried on its own business, so it had a fixed place permanent establishment in India and was liable to tax here on the income earned on this soil (para 76). Two conditions have to be satisfied under Article 5(1): a fixed place of business, and business of the enterprise carried on wholly or partly through that place (para 66). Mere construction of the track by Jaypee at its expense, its ownership of the circuit, and its organising of other events there were all immaterial, the examination being limited to the conduct of the championship and control over the track during that period (para 74). The limited number of days for which access was available made no difference, given that access was full and exclusive for the whole of the relevant period (para 70). The appeals of Formula One World Championship Ltd and of Jaypee were dismissed, subject to the Court's observations, and the Revenue's appeal on dependent agent permanent establishment was disposed of as academic (paras 80-81). Two qualifications belong with the result. Only that portion of the income attributable to the permanent establishment is business income taxable here, and only that part attracts deduction under s.195; how much is attributable is expressly left to the Assessing Officer to adjudicate in the assessment order, at which stage Jaypee may also argue that penalty should not be charged because its failure to deduct was bona fide — the Court saying in terms that it expressed no opinion either way (para 78).
The Court read Article 5(1) as posing twin conditions — the existence of a fixed place of business, and the carrying on of the enterprise's business wholly or partly through it — noting that the list in Article 5(2) is inclusive and that Article 5(3) is a negative list (para 66). It took it as beyond denial that the circuit is a fixed place from which an economic activity, the conduct of races, was carried out, and treated the real questions as whether the circuit was at the disposal of Formula One World Championship Ltd and whether it carried on business there (para 67). To answer them it insisted that the several agreements be read together rather than in isolation, so as to find who had real and dominant control over the event (para 67). Reading them that way, it found that the commercial rights vested in the company for a hundred years, that all the revenue-earning rights — media, title sponsorship, paddock — ended up with it or its affiliates, that the event could not happen without the participating teams, the circuit and the paddock, all of which it and its affiliates controlled, and that its physical control of the circuit ran from the inclusion of the event in the calendar to its conclusion (para 68). It adopted the High Court's clause-by-clause analysis of the Race Promotion Contract, under which the circuit had to be built in a form approved by the company, access to restricted areas was only by passes it issued, Jaypee was barred from making or permitting recordings and assigned all intellectual property in images to it, and the term was five years (paras 68-69). On duration it agreed with the High Court that access for a limited period does not prevent the place from being fixed where the access is exclusive and the arrangement recurs — the presence being neither ephemeral, fleeting nor sporadic — and it drew support from a trade fair stand occupied three weeks a year, a temporary restaurant at a Dutch flower show, the Norwegian decision in Universal Furniture and the Canadian decision in Joseph Fowler (paras 70-72). On the second condition it held that the company carried on business in India because its rights could only be exploited by the actual conduct of the race with its active participation and control (paras 73-75). It then applied the test from CIT v. Visakhapatnam Port Trust, finding the circuit a virtual projection of the foreign enterprise on Indian soil, and Philip Baker's three characteristics of stability, productivity and dependence, all of which it found present (para 76). Finally, on withholding it followed GE India Technology Centre (P.) Ltd. v. CIT: the obligation to deduct under s.195 is limited to the appropriate portion of income chargeable in India, with recourse otherwise to s.195(2), and the quantification was left to the Assessing Officer (paras 77-78). In the words reproduced by the source cited on this page: "Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, one could clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e. FOWC) on the soil of this country. It is already noted above that as per Philip Baker, a PE must have three characteristics: stability, productivity and dependence. All characteristics are present in this case. Fixed place of business in the form of physical location, i.e. Buddh International Circuit, was at the disposal of FOWC through which it conducted business." The decision followed or applied CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146 / 15 Taxman 72 (AP); GE India Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456 / 193 Taxman 234 (SC); Universal Furniture Ind. AB v. Government of Norway (Stavanger Court, Case No. 99-00421, 19 December 1999); Joseph Fowler v. Her Majesty the Queen 1990 (2) CTC 2351.
It was decided by the Supreme Court on 2017-04-24 and is reported as [2017] 394 ITR 80 (SC); [2017] 80 taxmann.com 347 (SC); [2017] 248 Taxman 192 (SC); (2017) 15 SCC 602. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 9, section 90, section 195, section 195(2), section Article 5, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Buddh International Circuit was a fixed place at the disposal of Formula One World Championship Ltd through which it carried on its own business, so it had a fixed place permanent establishment in India and was liable to tax here on the income earned on this soil (para 76). Two conditions have to be satisfied under Article 5(1): a fixed place of business, and business of the enterprise carried on wholly or partly through that place (para 66). Mere construction of the track by Jaypee at its expense, its ownership of the circuit, and its organising of other events there were all immaterial, the examination being limited to the conduct of the championship and control over the track during that period (para 74). The limited number of days for which access was available made no difference, given that access was full and exclusive for the whole of the relevant period (para 70). The appeals of Formula One World Championship Ltd and of Jaypee were dismissed, subject to the Court's observations, and the Revenue's appeal on dependent agent permanent establishment was disposed of as academic (paras 80-81). Two qualifications belong with the result. Only that portion of the income attributable to the permanent establishment is business income taxable here, and only that part attracts deduction under s.195; how much is attributable is expressly left to the Assessing Officer to adjudicate in the assessment order, at which stage Jaypee may also argue that penalty should not be charged because its failure to deduct was bona fide — the Court saying in terms that it expressed no opinion either way (para 78). It arises in Assessment & Scrutiny and Residence & Treaty Benefit matters, on section 9, section 90, section 195, section 195(2), section Article 5 of the Income Tax Act 1961, and was decided by Supreme Court of India, A.K. Sikri J and Ashok Bhushan J (Civil Appeal No. 3849 of 2017 with Civil Appeal Nos. 3850 and 3851 of 2017). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Map the commercial activity actually carried on at the venue, since the Court asked whether business was carried on through the place. Where access is short but repeated or contractually entrenched, expect the department to run stability, productivity and dependence, and prepare the answer on each. Deal separately with the withholding position of the Indian counterparty, which is where the exposure usually crystallises first.
Still good law. Followed twice by the Supreme Court. In Assistant Director of Income-tax v. E-Funds IT Solution Inc. [2017] 399 ITR 34 (SC), decided 24 October 2017, the Court set this judgment out at length as settling what a fixed place of business is and applied the disposal test to hold that no permanent establishment existed on those facts. In Hyatt International Southwest Asia Ltd. v. Additional Director of Income-tax [2025] 478 ITR 238 (SC), decided 24 July 2025, the Court followed it at para 18 for the propositions that exclusive possession is not essential and that temporary or shared use of space suffices provided business is carried on through it, that the test is not whether a formal right of use is granted but whether in substance the premises were at the enterprise's disposal, and it applied the stability, productivity and dependence formulation to hold that a Dubai company had a fixed place permanent establishment at the Indian hotels it oversaw. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full. Two points on the quotation. The report prints a footnote reference number immediately after 'Philip Baker' in para 76; that marker is omitted from the quotation and nothing else has been changed. And the sentence previously quoted in this entry, that the circuit is a fixed place, opens para 67 and is followed at once by the Court asking whether it was at the disposal of the company — it is the beginning of the analysis, not its conclusion. On the result: the decision settles that a permanent establishment existed and that Jaypee had to deduct under s.195, but the amount attributable to that permanent establishment, and so the extent of the withholding obligation and the question of penalty, were left to the Assessing Officer, with the Court expressly declining to express any opinion. The Revenue's own appeal, on dependent agent permanent establishment, was not decided; counsel for the Revenue accepted that it had become academic. The quantum attributable to the permanent establishment is not decided — the Court left it to the Assessing Officer (para 78), and what he made of it is not traced here. The decision does not say how the affiliates that took the circuit and paddock rights, Beta Prema 2 and Allsports, are to be taxed; it treats their revenues as part of the picture of control rather than deciding their liability. It decides nothing on dependent agent permanent establishment, that appeal having been treated as academic. And the assessment years are not stated in the report. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Buddh International Circuit was a fixed place at the disposal of Formula One World Championship Ltd through which it carried on its own business, so it had a fixed place permanent establishment in India and was liable to tax here on the income earned on this soil (para 76). Two conditions have to be satisfied under Article 5(1): a fixed place of business, and business of the enterprise carried on wholly or partly through that place (para 66). Mere construction of the track by Jaypee at its expense, its ownership of the circuit, and its organising of other events there were all immaterial, the examination being limited to the conduct of the championship and control over the track during that period (para 74). The limited number of days for which access was available made no difference, given that access was full and exclusive for the whole of the relevant period (para 70). The appeals of Formula One World Championship Ltd and of Jaypee were dismissed, subject to the Court's observations, and the Revenue's appeal on dependent agent permanent establishment was disposed of as academic (paras 80-81). Two qualifications belong with the result. Only that portion of the income attributable to the permanent establishment is business income taxable here, and only that part attracts deduction under s.195; how much is attributable is expressly left to the Assessing Officer to adjudicate in the assessment order, at which stage Jaypee may also argue that penalty should not be charged because its failure to deduct was bona fide — the Court saying in terms that it expressed no opinion either way (para 78).
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