Project-wise PE test under Indo-Mauritius DTAA; liaison support can remain auxiliary, while related receipts need factual verification.

Under the Indo-Mauritius DTAA, construction-site duration under Article 5(2)(i) is tested project-wise unless the treaty expressly permits aggregation, so separate Indian projects cannot be clubbed for the nine-month threshold. Liaison office and related back-office support functions were treated as auxiliary or preparatory activities rather than a separate permanent establishment on the facts found. Receipts including insurance claims, miscellaneous income, change orders and disputed invoices were not finally ruled taxable; because the factual record was incomplete, those items were remanded for fresh verification and adjudication.

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Issues: (i) Whether, for determining the nine-month threshold under Article 5(2)(i) of the Indo-Mauritius DTAA, the duration of different contracts/projects in India had to be aggregated or each project had to be examined separately; (ii) whether the liaison office and related support functions constituted a permanent establishment in India or fell within the auxiliary/preparatory exclusion; (iii) whether receipts such as insurance claims, miscellaneous income, change orders and disputed invoices were taxable in India or required fresh factual verification.

Issue (i): Whether, for determining the nine-month threshold under Article 5(2)(i) of the Indo-Mauritius DTAA, the duration of different contracts/projects in India had to be aggregated or each project had to be examined separately.

Analysis: The treaty provision dealing with a building site, construction, assembly or supervisory activity was applied on a stand-alone basis. The reasoning accepted that the clause did not contain any express aggregation language and that the nature of each site or project had to be tested independently. The earlier orders in the assessee's own case were followed to hold that separate projects could not be clubbed merely because they belonged to the same enterprise.

Conclusion: Each project had to be examined separately and no aggregation of days was permissible. The Revenue's challenge on PE duration failed and the finding was in favour of the assessee.

Issue (ii): Whether the liaison office and related support functions constituted a permanent establishment in India or fell within the auxiliary/preparatory exclusion.

Analysis: The materials from survey and the employee statements were found to show coordination, liaisoning, logistics and other back-office support functions rather than substantive business, negotiation or conclusion of contracts. The exclusion in Article 5(3)(e) for a fixed place used solely for supply of information or similar activities of a preparatory or auxiliary character was applied. It was also held that where the business in India was essentially a construction/project activity, the specific PE rule in Article 5(2)(i) governed the matter and the office could not be separately treated as a PE under the general office clause in Article 5(2)(c) on the facts found.

Conclusion: The liaison office did not constitute a separate PE on the facts found, and the assessee succeeded on this issue.

Issue (iii): Whether receipts such as insurance claims, miscellaneous income, change orders and disputed invoices were taxable in India or required fresh factual verification.

Analysis: These receipts were treated as connected with the project business, but the record was insufficient to determine with certainty the exact project linkage, the relevant period, whether the underlying project constituted a PE at the relevant time, and whether the claimed expenses had ever been allowed or debited. For that reason, the matter was sent back for factual examination and fresh adjudication.

Conclusion: The issue was remanded for verification and fresh decision; no final taxability finding was returned on merits at this stage.

Final Conclusion: The consolidated result was that the Revenue's objections on PE formation were rejected, the assessee obtained relief on the core PE issues, and the remaining income-attribution questions were restored for fresh examination where facts were incomplete.

Ratio Decidendi: In the absence of an express treaty provision permitting aggregation, construction-site duration under Article 5(2)(i) must be tested project-wise, and back-office liaison or support functions that are merely auxiliary do not constitute a separate permanent establishment.

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