Formula One World Championship Ltd. v. Commissioner of Income-tax
Case Meta
- CASE_TITLE: Formula One World Championship Ltd. v. Commissioner of Income-tax
- PRIMARY_KEYWORDS: Permanent Establishment, DTAA Article 5, FOWC, Buddh International Circuit
- SECONDARY_KEYWORDS: Royalty vs Business Income, AAR, Delhi High Court, International Sports Events Tax
- PUBLISH_DATE: 1 Nov 2025
- AUTHOR_NAME: Gulzar Hashmi
- LOCATION: India
- Slug:
formula-one-world-championship-ltd-v-commissioner-of-income-tax
Quick Summary
This case answers a simple yet powerful question: Can a short, high-profile sports event create a Permanent Establishment (PE) in India? The Supreme Court said “Yes.”
Formula One World Championship Ltd. (FOWC) ran the Indian Grand Prix at the Buddh International Circuit. The Court held that the circuit functioned as a fixed place for FOWC’s business during the event. Because the place was under FOWC’s effective control and used to earn money, the income was taxable in India as business profits attributable to a PE.
Issues
- Whether FOWC had a Permanent Establishment (PE) in India under Article 5 of the India–UK DTAA?
Rules
- DTAA Article 5(1): A PE is a fixed place of business through which the enterprise’s business is wholly or partly carried on.
- Core features of a fixed place PE: Stability (not a fleeting accident), Productivity (business is carried on), and Dependence (place is at the enterprise’s disposal/control).
- Short duration ≠ automatic no-PE: If the enterprise has effective control and uses the place to conduct business, a PE can exist even for a scheduled short period.
Facts — Timeline
Sep 2011
FOWC and Jaypee Sports International Ltd. (owner of Buddh International Circuit) signed a Race Promotion Contract. Jaypee would organize, stage, and promote the Indian Grand Prix.
Oct 2011
On race week, FOWC engaged Formula One Asset Management for logistics, data services, licensing, and oversight of participants at the event.
AAR Proceedings
AAR ruled that Jaypee’s payments to FOWC were “royalty” and that FOWC did not have a fixed place PE in India.
Delhi High Court
On writ petitions, the High Court reversed the AAR on key aspects adverse to FOWC.
Supreme Court
Appeals by FOWC, Jaypee, and Revenue reached the Supreme Court of India.
Arguments
Appellant (FOWC/Jaypee)
- The circuit belonged to Jaypee; FOWC had no fixed place at its disposal.
- Presence was brief and event-specific; no ongoing control or office.
- Payments were for IP and race rights; characterized as royalty, not business profits via PE.
Respondent (Revenue)
- FOWC controlled access, branding, and operations at the circuit.
- Commercial activity was carried on at a specific place during the event.
- Stability–Productivity–Dependence test satisfied → fixed place PE.
Judgment (Held)
Held: FOWC had a Permanent Establishment in India in relation to the Grand Prix at Buddh International Circuit.
- The circuit functioned as a fixed place for FOWC’s business during the event.
- Stability: Scheduled, planned occupation and control for the race period.
- Productivity: Real commercial use—broadcast rights, sponsorship, race operations.
- Dependence: Venue was effectively at FOWC’s disposal through contracts and operational command.
Result: Income attributable to the PE was taxable in India as business profits.
Ratio Decidendi
A venue used under the enterprise’s effective control to run its core commercial activity—even for a short, pre-set duration—can be a fixed place PE when the tests of stability, productivity, and dependence are met.
Why It Matters
- Clarifies that short-term events can create PE based on control and business use.
- Guides tax planning for international sports and entertainment events in India.
- Signals that contractual labels yield to the actual conduct at the venue.
Key Takeaways
If the enterprise can control who enters, what happens, and how branding runs, the place may be “fixed” for PE.
Duration is not decisiveA few days can still count as PE when the event is planned, repeatable, and commercially rich.
Business profits linked to the venue operations are taxable in India.
Form vs substanceCourts look at substance—the real control and activity—not just what the contracts say.
Mnemonic + 3-Step Hook
Mnemonic: “SPD at the Track”
- Stability — planned use of the circuit
- Productivity — real business done (broadcasts, sponsors)
- Dependence — venue under FOWC’s effective control
3-Step Hook (Exam Writing):
- State Article 5 test (fixed place PE).
- Show SPD facts at Buddh Circuit.
- Seal with conclusion: PE exists → profits taxable in India.
IRAC Outline
| Issue | Rule | Application | Conclusion |
|---|---|---|---|
| Did FOWC have a PE in India under DTAA Article 5? | Fixed place PE requires a place at disposal used to carry on business (stability, productivity, dependence). | FOWC controlled access, branding, and race operations at Buddh Circuit during the event; commercial activity occurred at that place. | Yes. The circuit was a fixed place PE; profits attributable to that PE are taxable in India. |
Glossary
- Permanent Establishment (PE)
- A fixed place through which a foreign enterprise carries on business in another country.
- DTAA
- Double Taxation Avoidance Agreement between two countries.
- AAR
- Authority for Advance Rulings—gives binding rulings on tax questions for specified applicants.
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