Permanent Establishment requires actual activity in India; offshore engineering receipts were taxed as fees for technical services.

Receipts from a detailed project implementation report and engineering services performed from outside India were not attributable to business profits in India because no permanent establishment was shown during the relevant period. The project office in India was set up later and was tied to proposed construction supervision that never materialised, while the record did not establish actual activity through a fixed place or personnel in India, nor the conditions for a construction or supervisory permanent establishment under the treaty threshold. The income was therefore taxable as fees for technical services under Article 13(4) of the India-Spain DTAA, not as business profits attributable to a permanent establishment.

---

---

Issues: Whether the receipts from detailed project implementation report and engineering services were taxable as business profits attributable to a permanent establishment in India, or as fees for technical services rendered from Spain.

Analysis: The agreement and the actual conduct of the parties showed that the relevant receipts arose from detailed project implementation report and engineering services performed from outside India, while the project office in India was established later and was linked to construction supervision, which never in fact materialised. The finding of a permanent establishment could not rest on assumptions about the need for site analysis or other preparatory work in India without evidence of actual activities carried on through a fixed place or personnel in India during the relevant period. The conditions for a construction or supervisory permanent establishment under Article 5(2)(k) were also not met, as there was no material showing on-site activity in India continuing beyond the prescribed period.

Conclusion: The assessee had no permanent establishment in India for the relevant receipts, and the income was taxable as fees for technical services under Article 13(4) of the India-Spain DTAA, not as business profits attributable to a permanent establishment.

Ratio Decidendi: A permanent establishment cannot be inferred from the composite nature of a contract or from presumed preparatory activity alone; actual business activity through a fixed place or personnel in India, satisfying the treaty threshold, is necessary before receipts can be attributed to business profits in India.

---