Permanent establishment under India-Malaysia DTAA depends on proof of fixed place use and verified installation duration.
A fixed place permanent establishment under the India-Malaysia DTAA requires proof of a fixed place of business used by the enterprise in India, and the Revenue failed to discharge that burden on the facts discussed. An installation permanent establishment under Article 5(3)(a) turns on the duration of the installation activity, but the factual record on commencement, site access, survey work, monsoon interruption, commissioning, and demobilisation was incomplete and required verification. Offshore supplies and other consequential tax issues depended on that threshold PE determination, so they were also sent back for fresh adjudication.
Issues: (i) Whether the assessee had a fixed place permanent establishment in India under Article 5(1) and Article 5(2) of the India Malaysia DTAA. (ii) Whether the assessee had an installation permanent establishment in India under Article 5(3)(a) of the India Malaysia DTAA and whether the matter required factual verification. (iii) Whether the taxability of offshore supplies and other consequential issues could be finally decided without first determining the existence of installation permanent establishment.
Issue (i): Whether the assessee had a fixed place permanent establishment in India under Article 5(1) and Article 5(2) of the India Malaysia DTAA.
Analysis: A fixed place permanent establishment requires a fixed place of business through which the enterprise carries on its business wholly or partly in India. The Revenue relied upon the alleged project office, but no cogent material was brought on record to show that the project office belonged to the assessee or that it was used by the assessee as its own fixed place of business. The burden to establish a fixed place permanent establishment lay on the Revenue, and that burden was not discharged.
Conclusion: The assessee did not have a fixed place permanent establishment in India.
Issue (ii): Whether the assessee had an installation permanent establishment in India under Article 5(3)(a) of the India Malaysia DTAA and whether the matter required factual verification.
Analysis: The duration test under Article 5(3)(a) depends on the period for which the installation activity continued in India. The record contained competing claims regarding the commencement date, the effect of survey work, the actual period of hook-up and commissioning work, and the exclusion of monsoon interruption and demobilisation. Additional evidence was produced before the Tribunal, but the factual matrix was incomplete and had not been examined by the Assessing Officer. The duration test could be applied properly only after verification of the dates, access to site, stoppage during monsoon, and demobilisation of men and machinery.
Conclusion: The issue of installation permanent establishment was restored to the Assessing Officer for de novo adjudication after factual verification.
Issue (iii): Whether the taxability of offshore supplies and other consequential issues could be finally decided without first determining the existence of installation permanent establishment.
Analysis: The taxability of offshore supplies and the remaining consequential matters depended upon the outcome of the installation permanent establishment question. Since that foundational issue was remanded for fresh examination, these matters could not be finally concluded at this stage.
Conclusion: These issues were also restored for fresh adjudication.
Final Conclusion: The assessee succeeded on the fixed place permanent establishment issue, while the installation permanent establishment question and all dependent matters were sent back for fresh consideration, leaving the appeals disposed of only for statistical purposes.
Ratio Decidendi: The Revenue must prove the existence of a fixed place permanent establishment, and an installation permanent establishment can be determined only by applying the statutory duration test on a fully verified factual record.
TaxTMI 
AI Drafter ✕
TaxTMI 
