ITAT holds that Toyota Tsusho did not create a permanent establishment in India as supervisory activities did not exceed 183 days, per Article 5(4) of the India-Japan DTAA.
ITAT Rules No Permanent Establishment for Toyota Tsusho in India
The Income Tax Appellate Tribunal (ITAT) has held that Toyota Tsusho Corporation did not have a permanent establishment (PE) in India under Article 5(4) of the India-Japan Double Taxation Avoidance Agreement (DTAA), as the supervisory activities related to a project lasted less than 183 days.
The tribunal examined the duration and nature of presence of Japanese personnel in India and found that the activities were project-specific, temporary, and fell short of the six-month threshold required to trigger a construction or supervisory PE under the treaty. The ITAT emphasized that mere presence, without enterprise-level operational permanence, does not constitute a PE.
"Supervisory activities confined to a single project and lasting under 183 days do not amount to a permanent establishment under Article 5(4)."
The ruling provides clarity on the application of time thresholds in PE determination under tax treaties. Taxpayers engaged in short-term technical or supervisory assignments in India can rely on this to avoid unwarranted attribution of profits and PE creation, provided they maintain accurate time records and project documentation.
Citations
- India-Japan DTAA, Art. 5(4)
