Construction or assembly projects under a tax treaty require the nine-month test before a permanent establishment can arise.

A construction or assembly project under Article 5(2)(i) of the India-Mauritius DTAA is subject to the specific nine-month threshold, and that temporal condition governs pipeline-laying work treated as assembly rather than a mere service activity. The general fixed-place rule in Article 5(1) does not displace the specific treaty rule for such projects, so a permanent establishment arises only if the project continues for more than nine months. Because the exact project duration was not examined below, that factual issue required verification and the matter was remitted for limited determination.

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Issues: (i) Whether the assessee had a permanent establishment in India under Article 5 of the India-Mauritius DTAA, and in particular whether the pipeline laying activity constituted a construction or assembly project governed by the nine-month threshold; (ii) Whether the interaction between the general fixed-place rule and the specific construction or assembly project rule excluded a permanent establishment when the project duration was less than nine months.

Issue (i): Whether the assessee had a permanent establishment in India under Article 5 of the India-Mauritius DTAA, and in particular whether the pipeline laying activity constituted a construction or assembly project governed by the nine-month threshold.

Analysis: The work undertaken consisted of laying and connecting pipelines through a marine vessel spread and was treated as assembly of pipelines rather than a mere service activity. Article 5(1) lays down the general concept of a fixed place of business, while Article 5(2)(i) specifically includes a building site or construction or assembly project only if it continues for more than nine months. The Tribunal distinguished cases dealing only with the general fixed-place rule and held that the project here fell within the specific treaty provision for construction or assembly projects.

Conclusion: The activity was a construction or assembly project, and the permanent establishment question had to be tested under the nine-month rule in Article 5(2)(i).

Issue (ii): Whether the interaction between the general fixed-place rule and the specific construction or assembly project rule excluded a permanent establishment when the project duration was less than nine months.

Analysis: Reading Article 5(1) and Article 5(2)(i) together, the specific rule for construction or assembly projects was held not to be rendered otiose by the general definition of permanent establishment. The contracting parties had expressly chosen a nine-month threshold for such projects, so a project lasting less than that period would not give rise to a permanent establishment. As the exact duration had not been examined by the lower authorities, that factual aspect required verification by the Assessing Officer.

Conclusion: The assessee could not be treated as having a permanent establishment unless the project duration exceeded nine months, and the matter on that limited factual question was remitted.

Final Conclusion: The assessee succeeded on the legal interpretation of Article 5, but the question of permanent establishment was sent back for factual determination of the project duration, so the appeal was not finally concluded on that aspect.

Ratio Decidendi: Where a treaty specifically brings construction or assembly projects within the definition of permanent establishment only if they continue for more than the stipulated period, that specific temporal condition governs such projects and must be satisfied before the general fixed-place rule can be invoked.

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