Sedco Forex International Drill Inc v. Commissioner of Income Tax - DTAA and non-resident taxation

The Supreme Court examined the scope of India-Canada DTAA provisions relating to taxation of income of foreign enterprises in India (permanent establishment). The Court held that a non-resident company having a Service PE in India is taxable only on profits attributable to the PE, and not on global profits. Established that the treaty provisions override domestic law (Section 90 of IT Act) and treaty benefits must be computed based on the actual profit attributable to Indian operations. This remains a leading precedent for DTAA interpretation and PE attribution of profits.

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