The concept of Permanent Establishment is important in determining the tax implications of cross border transactions. Examine the significance thereof (PE), when such transactions are governed by Double Taxation Avoidanc

Double Taxation Avoidance Agreements (DTAA) generally contain an Article providing that business income is taxable in the country of residence, unless the enterprise has a permanent establishment in the country of source, and such income can be attributed to the permanent establishment. As per section 92F(iiia) of the Income tax Act, 1961, the term "Permanent Establishment" includes a fixed place of business through which the business of an enterprise is wholly or partly carried on. This means, to constitute a permanent establishment, there must be a place of business which is fixed and the business of the enterprise must be carried out wholly or partly through that place. Section 9(1)(i) of the Income tax Act, 1961 requires existence of business connection for deeming business income to accrue or arise in India. DTAAs however provide that business income is taxable, if there is a permanent establishment in India.