Formula One Racing Circuit Constituted Fixed Place Permanent Establishment (‘PE’) for Commercial Rights Holder in UK

Permanent Establishments in India has been construed as one of the primary exposures for foreign entities seeking to carry out business activities in India. Constitution of a permanent establishment results in the taxation of an entity’s business income in India. Determining the existence of a permanent establishment has been a highly litigative issue, owing to the inherent subjectivity and multiplicity of factors involved in an exhaustive diagnosis. Similar to the case of several foreign companies, the issue of Permanent Establishment also arose in the case of Formula One World Championship Ltd, a UK based entity, when it sought to organize a Grand Prix event in India. In a landmark ruling , the Supreme Court has confirmed that owing to its access to and control over the racing circuit, the UK entity constituted a Permanent Establishment in India, considering that the circuit was at its disposal. The Supreme Court has also laid down important principles in this regard, which are summarized in this write-up.