Service permanent establishment can arise from connected phases of a single project; profit attribution must reflect Indian and offshore services.

Separate service order forms may be aggregated for the treaty service-PE duration test where the underlying Business Service Agreement operates as a single commercial arrangement and the activities are interrelated, sequential and commercially coherent. On those facts, the service permanent establishment in India was upheld because the work formed connected phases of one project rather than independent engagements. For profit attribution, receipts from services rendered outside India could not be fully assigned to the Indian PE; the computation had to be revisited on the basis of evidence relating to Indian and non-Indian services and expenses. The attribution issue was therefore remanded for fresh computation.

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Issues: (i) Whether the services rendered under multiple service order forms were to be treated as one connected project so as to constitute a service permanent establishment in India under the treaty; (ii) Whether the profits attributable to the alleged permanent establishment required recomputation on the basis of services rendered in India and Norway.

Issue (i): Whether the services rendered under multiple service order forms were to be treated as one connected project so as to constitute a service permanent establishment in India under the treaty.

Analysis: The Business Service Agreement was treated as a single unified arrangement, with the service order forms operating within that framework. The services were found to be interrelated, sequential, and commercially coherent, with one activity feeding into another and with consolidated quarterly billing. On those facts, the services could not be isolated as independent projects for the duration test under the service-PE clause.

Conclusion: The existence of a service permanent establishment in India was upheld, against the assessee.

Issue (ii): Whether the profits attributable to the alleged permanent establishment required recomputation on the basis of services rendered in India and Norway.

Analysis: The assessment made an ad hoc attribution of profits from gross receipts. The Tribunal accepted that receipts arising from services rendered outside India could not be fully attributed to the Indian permanent establishment and that the profit computation required examination of the evidence relating to Indian and non-Indian services and expenses.

Conclusion: The profit attribution issue was remanded to the Assessing Officer for fresh computation, partly in favour of the assessee.

Final Conclusion: The appeal failed on the principal jurisdictional issue of service permanent establishment, while the quantum of attribution was sent back for reconsideration; the overall appeal was dismissed.

Ratio Decidendi: For the service-PE duration test, separate service orders may be aggregated where the underlying arrangement shows commercial coherence and the activities form connected phases of a single project.

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