Golf in Dubai not liable to pay tax here, rules AAR
October, 20th 2008
Golf in Dubai (GID), an event management team that organises golf tournaments across the world, including India, has been declared not liableto tax in India by the Authority for Advance Ruling (AAR), a quasi-judicial body for settling tax disputes involving foreign companies.
GIDs income from the Golf tours in India were identified as sponsorship fees, involving reimbursement of prize money, players accommodation expenses, golf course fees, catering, advertisements, management fee for organising the tournament and income generated through merchandise sales.
GID had organised two tournaments in India the Emaar-MGF Ladies Masters 2007 at Eagleton, Bangalore, and the Emaar-MGF Indian Masters 2007 at the Delhi Golf Club.
The questions raised before the AAR were whether the GID was liable to be taxed in India on account of the income generated in India from the golf tournaments and could Eagleton and the Delhi Golf Club be construed permanent establishments in India for the GID for the purpose of levying tax in India.
The relevance of the second question arises from the fact that a permanent establishment is a justification for any tax regime to levy tax on the operation of an overseas entity.
Before concluding that the GID was not liable for tax in India, the AAR examined the possibilities of Eagleton and the Delhi Golf Club being permanent establishments of GID by scrutinising the definition of permanent establishment as explained under article 5 of the Double Taxation Avoidance Agreement (DTAA) between India and the UAE.
The AAR, considering all possible interpretation of the definition of a permanent establishment given under article 5 of India-UAE DTAA, held, "Taking an overall view, we are unable to hold that by organising and conducting golf tournaments at Delhi and Bangalore for a week's duration, the applicant has carried on business through a fixed place in India. On the basis of a solitary or isolated activity during the year, it is difficult to infer the existence of a permanent establishment within the meaning of Article 5.1 of the Treaty."