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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the assessee's contract activities in India constituted an installation permanent establishment under Article 5(2)(g) of the India-Cyprus Double Taxation Avoidance Agreement so as to tax the contract receipts in India.
Analysis: The relevant test under Article 5(2)(g) was whether the site, project or activity continued for more than twelve months. The scope of work showed that the assessee's role was confined to rock transport and delivery, supply, temporary installation facilities, rock dumping and site restoration. Preparatory visits undertaken before the effective date for tendering and data collection could not be treated as commencement of the installation project at the site. The duration for the PE test had therefore to be computed from the actual commencement of project activities, which on the record was no earlier than 4 January 2008, and not from pre-contract preparatory steps. On the completion side, the project had ended by 30 September 2008, supported by the completion certificate, demobilisation and receipt of payments, and there was no material to show that the activity continued beyond twelve months. The onus to prove a longer duration lay on the Revenue, and the material relied upon did not establish that burden.
Conclusion: No installation permanent establishment was established under Article 5(2)(g), and the contract receipts were not taxable in India under Article 7.
Final Conclusion: The assessee succeeded on the core jurisdictional issue, and the additions and consequential grounds did not survive.
Ratio Decidendi: For an installation PE under a treaty clause requiring activity to continue for more than twelve months, the period runs from the actual commencement of project operations at site and not from pre-contract preparatory work undertaken for tendering or data collection.
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