Treaty permanent establishment threshold not met, so installation project profits were taxable only in the State of residence.

A Singapore-based non-resident was found not taxable in India on installation project receipts because the India-Singapore treaty conditions for a permanent establishment were not satisfied. The project in India lasted 178 days in the relevant fiscal year, which was below the 183-day threshold under Article 5.3, so no permanent establishment arose in India. As a result, the business profits fell to be taxed only in the State of residence under Article 7.1, and the income from the project was held not liable to Indian tax.

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Issues: Whether the applicant, a Singapore-based non-resident, had a taxable income in India from execution of the installation project, and whether the project duration and treaty provisions excluded the existence of a permanent establishment in India.

Analysis: The applicant relied on the India-Singapore Double Taxation Avoidance Agreement and contended that the installation project fell within Article 5.3. The department accepted that the project executed in India continued for only 178 days in the relevant fiscal year, which was less than 183 days. On that basis, no permanent establishment could be constituted in India under Article 5.3, and the resulting business profits were taxable only in the State of residence under Article 7.1. In view of this acceptance, the income from the project was not liable to tax in India.

Conclusion: The income earned from the installation project was held not taxable in India, and the application was disposed of accordingly.

Final Conclusion: The ruling denied Indian taxability of the project receipts because the treaty conditions for a permanent establishment were not met, leaving the business profits taxable only in the applicant's State of residence.

Ratio Decidendi: Where the treaty-based permanent establishment threshold is not met, the enterprise's business profits are taxable only in the State of residence and not in India.

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