Treaty PE and offshore taxability turn on separate project analysis and notified-area limits under Indian tax law.

Under the India-UAE tax treaty, the construction-project duration test applies separately to each site or project unless the facts show a connected, interdependent commercial whole; mere common client or geographic proximity is insufficient, so the two contracts were not aggregated and no permanent establishment arose in India. Barge hire receipts were taxable in India because that issue was accepted as covered against the assessee. Receipts for services rendered beyond India's continental shelf and exclusive economic zone were not taxable in India because the Act's extension applies only to the notified area, and separately identifiable offshore receipts outside that area fall outside Indian tax.

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Issues: (i) Whether the assessee had a permanent establishment in India under the India-UAE tax treaty by aggregating the duration of two contracts; (ii) whether the amounts received as barge hire were taxable in India; (iii) whether receipts relatable to services rendered beyond India's continental shelf and exclusive economic zone were taxable in India.

Issue (i): Whether the assessee had a permanent establishment in India under the India-UAE tax treaty by aggregating the duration of two contracts.

Analysis: The treaty provision on construction or assembly projects requires the relevant duration test to be applied to each site or project unless the facts show that the activities are so interconnected or interdependent that they form a coherent whole. Mere commonality of the client or geographical proximity is not enough. On the facts, the two contracts were of different nature, and there was no finding of interdependence, artificial splitting, or a connected project of the kind that would justify aggregation.

Conclusion: The assessee did not have a permanent establishment in India.

Issue (ii): Whether the amounts received as barge hire were taxable in India.

Analysis: The assessee accepted that this issue was covered against it. The barge hire receipts were therefore liable to be brought to tax under the applicable provision.

Conclusion: The barge hire receipts were taxable in India.

Issue (iii): Whether receipts relatable to services rendered beyond India's continental shelf and exclusive economic zone were taxable in India.

Analysis: The extension of the Income-tax Act to the continental shelf and exclusive economic zone is confined to the notified area. Receipts attributable to services rendered outside that notified area, where the consideration can be identified separately, do not form part of taxable income in India.

Conclusion: Such receipts were not taxable in India.

Final Conclusion: The assessee succeeded on the permanent-establishment issue and on the offshore-services issue, but failed on the taxability of barge hire receipts. The appeals were therefore disposed of with limited modification of the assessment.

Ratio Decidendi: For construction-type treaty provisions, duration cannot be aggregated across distinct projects unless the projects are shown to be connected, interdependent, or commercially and geographically a coherent whole; separate receipts for offshore services beyond the notified territorial extension are not taxable in India.

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