Red Bull, Williams Grand Prix Tax Cases: Delhi High Court To Examine AAR's Power To Decide Permanent Establishment Issue

The Delhi High Court has framed an additional question for consideration in a batch of income tax petitions involving Formula One racing teams, including Red Bull Racing Limited and Atlassian Williams.

A division bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta would examine "Whether the Authority for Advance Ruling, which is enjoined upon to decide questions of law, as provided under Section 245N of the Income Tax Act of 1961, can decide as to whether an entity is having a permanent establishment in India, given that the fact about the existence of permanent establishment is a transaction based fact-finding exercise?"

The additional issue arose in the batch of petitions filed by the Commissioner of Income Tax (International Taxation) against Red Bull Racing Limited, Williams Grand Prix Engineering Limited, and other Formula 1-related entities.

The matters have now been listed for further hearing on September 25.

The batch of writ petitions was instituted in 2017 and notices were issued in October 2017, when the Court had also observed that the losing party could be burdened with costs of the litigation.

Subsequently, in January 2018, appearance was entered on behalf of the respondent entities. At their request, the Court granted time to file counter affidavits and directed that rejoinders, if any, be filed thereafter.

After hearing the parties in the present round of proceedings, the Bench found it necessary to formulate the additional question on the scope of the AAR's jurisdiction.

For Petitioner: Senior Counsel G.C. Srivastava with Senior Standing Counsel Vipul Agrawal, Advocates Vipra Bhardwaj, Harshita Kotuu, Gaoraang Ranjan and Shubham Bansal. Senior Standing Counsel Indruj Singh Rai with Junior Standing Counsels Sanjeev Menon, Rahul Singh and Priya Sarkar, and Advocates Gaurav Kumar and Prateek Bhati for the Revenue.

For Respondents: Senior Advocate Jay Savla with Advocate Rajpal Singh.

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