Permanent Establishment threshold under the India-UK tax treaty requires aggregate counting, excluding leave and forbidding double counting.

Under Article 5(2)(k)(i) of the India-UK tax treaty, the 90-day threshold had to be computed on an aggregate basis for personnel rendering services in India, excluding periods of leave where no services were actually performed and disallowing multiple counting of the same day for more than one employee. On the facts, the leave period was excluded and the threshold was not met, so no Permanent Establishment arose in India. As a result, receipts for work rendered outside India and the reimbursement component were not taxable in the assessee's hands, and the related additions were deleted.

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Issues: (i) Whether the assessee had a Permanent Establishment in India under Article 5(2)(k)(i) of the India-UK tax treaty on the basis of the stay of its employees or other personnel in India for more than 90 days in the relevant 12 month period. (ii) Whether the period during which one employee was on leave had to be excluded while computing the 90 day threshold and whether multiple counting of employees on the same day was permissible. (iii) Whether income relating to work rendered outside India and reimbursement of expenditure was taxable in the assessee's hands.

Issue (i): Whether the assessee had a Permanent Establishment in India under Article 5(2)(k)(i) of the India-UK tax treaty on the basis of the stay of its employees or other personnel in India for more than 90 days in the relevant 12 month period.

Analysis: The treaty provision required the employees or other personnel to have rendered services in India for a period exceeding 90 days in any 12 month period. On the factual material, the period when Shri Narayan Iyar was shown to be on study leave had to be excluded, as the contemporaneous records and the employee's confirmation supported the claim that no services were rendered in India during that period. The days spent in India by the personnel also had to be counted cumulatively, and not by impermissible multiple counting of more than one employee for the same day.

Conclusion: The assessee did not have a Permanent Establishment in India, and the related income was not taxable in India.

Issue (ii): Whether the period during which one employee was on leave had to be excluded while computing the 90 day threshold and whether multiple counting of employees on the same day was permissible.

Analysis: The evidence showed that the concerned employee was on leave for the stated period, and the invoice relied upon by the Revenue did not displace the assessee's records showing that the bill pertained to services rendered outside India. The treaty language contemplated aggregate stay of personnel, so the same day could not be counted repeatedly merely because more than one employee was present or working in India.

Conclusion: The leave period was excluded, and multiple counting was held impermissible.

Issue (iii): Whether income relating to work rendered outside India and reimbursement of expenditure was taxable in the assessee's hands.

Analysis: The issue was covered by the Tribunal's consistent earlier view in the assessee's own case. Since the assessee was held not to have a Permanent Establishment in India, the receipts connected with work rendered outside India and the reimbursement component could not be taxed as income in the relevant year.

Conclusion: The Revenue's challenges were rejected.

Final Conclusion: The assessee succeeded on the core jurisdictional question of Permanent Establishment, which led to deletion of the disputed addition, while the Revenue's appeals on related taxability issues also failed.

Ratio Decidendi: For Article 5(2)(k)(i) of the India-UK tax treaty, the 90 day threshold must be computed on an aggregate and legally supportable basis, excluding periods not involving services in India and without multiple counting of personnel for the same day; absent the threshold, no Permanent Establishment arises.

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