Formula One decision departs from jurisprudential and OECD standards of what is a PE
A UK corporation, which held the worldwide rights to commercially exploit the Formula One World (car-racing) Championships, was held by the Supreme Court of India in Formula One to have a permanent establishment in India respecting annual three-day Grand Prix races held there given its alleged degree of operational control (not really explained in the decision) over the event. It is suggested that this decision was incorrect:
1. The Supreme Court of India improperly considered the activities of all affiliated entities globally in concluding that a business was being carried on in India by FOWC. No foundation was laid for such an approach in the treaty (even under article 5(4.1) of the 2017 Model Treaty Commentary).
2. The Court focused entirely on control without regard to whose business was actually being carried on in India and without sufficient factual analysis to support its conclusion.
3. The Court's acceptance that a presence of three weeks per year in India, in respect of a commercial venture that operated for only three days per year, suffices to give rise to a permanent establishment is not supported by the Model Treaty and the overwhelming weight of case law, and does violence to the policy behind the existence of this threshold to domestic taxation.
Neal Armstrong. Summary of Richard Tremblay and Ilana Ludwin, "Indian Supreme Court Diverges from OECD Guidelines, Relies on Questionable Canadian Precedent, in Deciding PE Issue in Formula One," Tax Management International Journal, 2018, p. 125 under Treaties – Income Tax Conventions - Art. 5.