PE is decided on facts and treaty text, and for a foreign company the dispute route is largely fixed by statute. Here is who can advise at each stage, and what the work genuinely requires before you appoint anyone.
Permanent establishment and international tax work in India is handled by chartered accountants and advocates, and for a material exposure the team usually needs both, plus someone who understands the commercial reality of how the business actually operates in India.
A chartered accountant can advise on the position, handle the withholding and compliance consequences, and represent you before the Assessing Officer, the Dispute Resolution Panel, the CIT(A) and the Income Tax Appellate Tribunal. Under Section 515 of the Income-tax Act, 2025 (formerly Section 288), an accountant is a recognised authorised representative, with written authorisation required.
An advocate is needed for the High Court and Supreme Court, and is worth involving earlier where the dispute turns on treaty interpretation rather than facts.
But the credential is the least interesting part of the answer. PE is decided on facts, and the adviser who wins is the one who can establish what your people in India actually do.
Two features set this work apart from ordinary tax disputes.
The forum is largely pre-determined. A foreign company is an eligible assessee under Section 275 of the Income-tax Act, 2025, formerly Section 144C, regardless of whether transfer pricing is involved. So the Assessing Officer cannot pass a final order straight away. He must first issue a draft order, and you then have thirty days to either accept it or file objections with the Dispute Resolution Panel.
That thirty-day election decides your entire path, and it is irreversible. Our guide to the Dispute Resolution Panel in income tax sets out how the panel works and why no demand crystallises while it is hearing you.
Two questions get argued, not one. First, does a PE exist? Second, if it does, how much profit is attributable to it? Advisers frequently win the second while losing the first, or spend everything on the first and arrive at attribution unprepared. Both need building from the start.
Before anyone advises on PE, three separate concepts have to be kept apart. They get conflated constantly, including by advisers.
Residence. Is the company itself resident in India? That turns on place of effective management, a different test with different consequences. Our worked case study on POEM in Indian tax law runs through the analysis.
Business connection under domestic law. Section 9 casts a wider net than a treaty article, and it matters where no treaty applies or where the domestic test is the one being invoked.
PE under the treaty. Article 5 of the relevant treaty, covering fixed place PE, agency or dependent agent PE, service PE and construction PE, each with its own thresholds.
An adviser who cannot immediately tell you which of the three the department is actually asserting has not read the notice properly.
Functional and factual analysis. Who does what in India, from where, under whose instruction, with what authority to conclude contracts. This is fieldwork: employment contracts, travel records, email authority, office leases, secondment agreements, board minutes. PE cases are won and lost on these documents.
Treaty reading. Which article, which protocol, which Most Favoured Nation clause, and how the relevant country's version differs from the model. Two treaties that look alike can produce opposite answers.
Attribution. If a PE exists, computing the profit attributable to it, which imports transfer pricing methodology and often a functional analysis very similar to a benchmarking study. See our guide to transfer pricing methods.
Withholding consequences. A PE finding changes the characterisation and rate on payments to the non-resident, so the two issues have to be run together rather than sequentially.
Litigation strategy. Preserving objections at the draft order stage, choosing DRP or the ordinary route, and knowing when a treaty question needs counsel.
A chartered accountant with cross-border experience leading. They hold the factual record, handle attribution and withholding, and can appear through the Tribunal, which is the last forum that examines facts.
Counsel engaged where the fight is on treaty interpretation. If the argument is what Article 5 means rather than what your people did, that is advocacy work, and it may be heading to the High Court.
Your group tax function supplying the commercial truth. Where decisions are actually taken, who signs what, how the India entity is described internally. Departments read internal presentations and websites, and a PE case is frequently made from the taxpayer's own marketing material.
The failure mode is engaging India advisers who never speak to the parent's advisers. PE is a two-country question, and an inconsistent position taken abroad becomes evidence here.
Five recurring patterns, and each tells you what evidence to hold.
Secondees and expatriates. Employees of the foreign parent working in India, particularly where the parent continues to pay them and cross-charges. This is the single most common service PE trigger.
A liaison or branch office doing more than it should. Permitted activity is narrow, and a liaison office that negotiates or concludes anything is a different animal.
Agency arrangements. A distributor, agent or group company in India habitually concluding contracts or playing the principal role leading to their conclusion.
Project and construction sites. Duration thresholds under the relevant treaty, and whether connected projects aggregate.
Digital and remote presence. The expanded business connection provisions reach non-residents with no physical presence at all, which makes the traditional fixed-place analysis insufficient on its own.
Where the entity also transacts with related parties, the same facts feed a transfer pricing exposure, so read this alongside transfer pricing study report applicability and building a transfer pricing defence file. Where GST touches the same intra-group flows, see intercompany transactions and dual exposure under TP and GST.
In practice most groups meet the PE question through a withholding decision rather than an assessment. The Indian payer wants a no-PE declaration before remitting, and the answer determines the rate.
Getting that wrong is expensive for the payer, not the recipient, through disallowance of the expense, interest and assessee-in-default treatment. Our case study on withholding tax for cloud services under the India-US position shows how much rides on characterisation, and the DTAA treatment of software licences after the Supreme Court ruling is the companion analysis.
Where tax has been withheld abroad on the same income, relief depends on the treaty and on filing Form 67 correctly and on time.
If the same PE or attribution question recurs annually, litigating it every year is the expensive option.
An advance pricing agreement can cover attribution to a PE and provide forward certainty, sometimes with rollback. A Mutual Agreement Procedure claim under the treaty engages both tax administrations and is the right tool where the other country asserts a conflicting position. Where the exposure is on margins rather than existence, safe harbour rules may resolve it.
An adviser who has never raised any of these is selling litigation rather than solving your problem.
Yes. A CA can advise on the position, handle withholding and attribution, and represent a foreign company before the Assessing Officer, the DRP, the CIT(A) and the ITAT.
Not for the DRP or the Tribunal. You do for the High Court, and counsel is worth involving earlier where the dispute is on treaty interpretation rather than facts. The routes are compared in our note on writ versus appeal in tax litigation.
Because a foreign company is an eligible assessee, so the Assessing Officer must issue a draft order first and give you thirty days to object to the DRP.
Usually yes. No demand crystallises while the panel is hearing you, it runs to a statutory clock, and it can consider material not placed before the Assessing Officer.
No. POEM asks whether the company is resident in India. PE asks whether a non-resident has a taxable business presence here. Different tests, different consequences.
Often, through an advance pricing agreement covering attribution, or a Mutual Agreement Procedure claim where the other country's position conflicts.
Send us the notice or the draft order, along with your India engagement model. We will tell you which limb is being asserted, where the factual record is vulnerable, what attribution realistically looks like, and whether the DRP is the right route. DSRV and Co LLP advises foreign companies and Indian groups on permanent establishment, treaty positions, attribution and withholding, and represents clients before the DRP and the ITAT as part of our tax litigation and controversy practice.
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