Offshore supply income and fixed place PE tests failed where contract was divisible and subsidiary premises were not at foreign enterprise's disposal.

Offshore supply profits from rolling stock were not attributable to India where the contract was divisible, with separate cost centres, invoicing, and consideration for offshore and onshore work. The offshore supply activity fell within the foreign enterprise's own scope, and title to the goods passed outside India, so the related receipts did not arise in India for tax purposes. A fixed place permanent establishment also was not established because the Revenue had to prove that the foreign enterprise carried on business through the Indian subsidiary's premises and that those premises were at its disposal. No evidence of actual use or disposal was shown, so the burden to prove a permanent establishment was not met.

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Issues: Whether profits from offshore supply of rolling stock were taxable in India by attribution to an alleged fixed place permanent establishment, and whether the Indian subsidiary constituted a fixed place permanent establishment of the foreign enterprise under Article 5(1) of the treaty.

Analysis: The scope of work of the consortium partners was separately demarcated under the contract, with distinct cost centres, separate invoicing, and separate receipt of consideration. The offshore supply activities were performed under the foreign enterprise's own scope, while the Indian subsidiary carried out onshore activities and offered its income to tax in India. On the facts, the contract was divisible, and the receipts from offshore supply arose where title to the goods passed outside India. For constituting a fixed place permanent establishment, the Revenue had to prove that the business was carried on through the Indian subsidiary's premises and that such premises were at the disposal of the foreign enterprise. No evidence was brought to show actual use or disposal of the subsidiary's premises by the foreign enterprise, and the burden to establish permanent establishment remained unmet.

Conclusion: The offshore supply income was not attributable to a permanent establishment in India, and the Indian subsidiary was not a fixed place permanent establishment of the foreign enterprise.

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