Installation PE under treaty: twelve-month period starts with actual site operations, not preparatory tendering or data collection.

For an installation permanent establishment under the India-Cyprus treaty, the twelve-month test runs from actual commencement of project operations at site, not from pre-contract tendering or data-collection visits. The assessee's work was confined to rock transport, delivery, temporary installation facilities, dumping and site restoration, and the record showed project activity began no earlier than 4 January 2008 and ended by 30 September 2008. Completion certificate, demobilisation and receipt of payments supported the conclusion that the activity did not continue beyond twelve months. The Revenue did not discharge the burden of proving a longer duration, so no installation PE was established and the contract receipts were not taxable in India under Article 7.

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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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