Construction-site permanent establishment test requires actual contract duration; sub-nine-month projects do not create taxable business profits.

For a construction-site permanent establishment under the Indo-Mauritius DTAA, each contract must be tested on its actual period of work, based on real commencement and completion dates and only genuine preparatory activity. Applying that contract-by-contract approach, the first contract lasted 8 months and 11 days, the second 10 days, and the third 3 months and 14 days, so none crossed the nine-month threshold in Article 5. As the duration test was not satisfied, no permanent establishment arose in India and the contract receipts were not taxable as business profits under Article 7.

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Issues: Whether the contracts executed in India were of sufficient duration to constitute a permanent establishment under Article 5 of the Indo-Mauritius DTAA and thereby attract taxation of business profits under Article 7.

Analysis: The Tribunal had earlier directed examination of the duration of each contract independently, with reference to the actual dates of commencement and completion and not merely the contractual dates or the timing of invoices and advances. On that basis, the first contract lasted 8 months and 11 days, the second 10 days, and the third 3 months and 14 days. The finding that no preparatory work was done for the first contract was accepted, and no material was shown to dislodge the factual determination of the CIT(A). As each contract fell short of the nine-month threshold, the duration test under Article 5 was not satisfied. In the absence of a permanent establishment, the business profits could not be taxed under Article 7.

Conclusion: The contracts did not constitute a permanent establishment in India, and the income from the contract work was not taxable as business profits.

Ratio Decidendi: For determining a permanent establishment under a construction-site duration clause, each contract must be examined on its actual period of work, including only real preparatory activity, and where the threshold period is not met contract-wise, no permanent establishment arises.

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