Permanent establishment under treaty upheld where contract operations in India supported taxation of the project income.

The assessee failed to show, with material evidence, that Usha Sales was an independent branch rather than a permanent establishment under the India-Finland treaty. On the facts recorded, income attribution for the relevant contract work, including operations carried out in India, was treated as taxable in India because the assessee did not displace the revenue's case. The order also proceeded on the basis that the trailer-related work involved construction, assembly or installation operations in India. The departmental appeal was allowed, the CIT(A)'s order was set aside, and the assessment was restored.

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Issues: Whether the assessee had a permanent establishment in India under the India-Finland treaty and whether income from the contracts, including the amounts attributed to work done in India and outside India, was taxable in India.

Analysis: The assessee failed to establish, with material and evidence, that Usha Sales was not a permanent establishment and was only an independent branch. On the facts recorded, the finding that Usha Sales was not independent for the relevant income attribution was accepted, and the assessment was sustained. The order also proceeded on the basis that the work relating to the trailers involved operations in India and attracted the treaty provisions dealing with construction, assembly or installation projects. In the circumstances, the assessee did not displace the revenue's case that the assessed income was liable to tax in India.

Conclusion: The assessee was held to have a taxable presence in India for the relevant contract income, and the departmental appeal was allowed by setting aside the order of the CIT(A) and restoring the assessment.

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