If a corporation has no presence in India, it cannot be taxed: ITAT

Domestic taxes cannot be assessed if a corporation does not have a presence in India, according to a tax tribunal, providing much-needed clarity for companies that earn money through advertising.

ESPN, the sports channel, vs. the tax authorities was the subject of the tax tribunal’s decision.

ESPN cannot be taxed in India since it does not have a permanent establishment (PE) or a commercial tie, according to the Delhi Income Tax Appellate Tribunal (ITAT).

PE is a tax principle that determines which jurisdiction has first right of refusal to tax a firm.

According to the facts of the lawsuit, ESPN was selling ad time and programme sponsorship to India through a Mauritius-based business.

ESPN Software India, an Indian company, was operating as a middleman.

ESPN Software India would purchase advertising time from the Mauritius business or sell it to Indian advertising agency.

The income generated through this arrangement, according to the tax administration, should be taxed in India because the advertisements were paid for by domestic companies.

ESPN was found to be protected under India’s Double Tax Avoidance Agreement (DTAA) with Mauritius, according to the tax tribunal. Also, India does not have the authority to tax the corporation.

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