Taxes can't be levied if a company doesn't have any presence in India: ITAT

A tax tribunal has held that domestic taxes cannot be levied if a company doesn't have any presence in India, offering much needed clarity for companies with advertising income.

The tax tribunal was ruling in the case of ESPN, the sports channel, versus the tax authorities.

The Delhi Income Tax Appellate Tribunal (ITAT) ruled that since ESPN did not have a permanent establishment (PE) or a business connection in India, domestic taxes cannot be levied on the company.


PE is a concept in taxation that determines which country has the first right to tax a company.

As per the details of the case, ESPN was selling advertisement time and programme sponsorship to India from an entity in Mauritius.

An Indian company-ESPN Software India-was acting as an intermediary.

ESPN Software India would acquire advertisement time from the Mauritius entity or would further sell that to Indian advertising agencies.

The tax department said the income generated through this arrangement should be taxed in India as the payment was being made by domestic companies for the advertisements.

The tax tribunal ruled that ESPN was covered under India's tax treaty-double tax avoidance agreement (DTAA)-with Mauritius. And that India doesn't have a right to tax the company.