Fixed place permanent establishment requires evidence of the foreign enterprise's own place of business, not merely an Indian subsidiary.

A foreign enterprise is not treated as having a fixed place permanent establishment in India merely because it operates through an Indian subsidiary. Separate supervision contracts, distinct scopes of work, and the absence of evidence that the foreign enterprise used the subsidiary's premises to perform its own core services defeated the PE allegation under Article 5 of the India-Germany DTAA. Without a permanent establishment, the supervision-service income was not taxable in India as business profits under Article 7. The existence of a subsidiary and common industry line, without more, was insufficient to establish treaty-based taxability.

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Issues: Whether the assessee had a fixed place permanent establishment in India through its Indian subsidiary for the purposes of Article 5 of the India-Germany DTAA, and whether the supervision-service income could be taxed in India on that basis under Article 7.

Analysis: The assessee produced separate supervision contracts with its Indian clients and the subsidiary's separate contracts for non-core supplies, along with supporting material showing distinct scopes of work. The revenue authorities did not controvert the genuineness of those contracts or bring material to show that the assessee used the subsidiary's premises for rendering services. On the record, the existence of a subsidiary and common industry line was held insufficient to establish a fixed place permanent establishment. In the absence of a PE, the business income from the supervision services could not be taxed in India under Article 7 on that footing.

Conclusion: The finding of a permanent establishment in India was rejected and the assessee succeeded on the substantive PE issue.

Ratio Decidendi: A foreign enterprise is not chargeable in India on business profits under the treaty merely because it has an Indian subsidiary; a fixed place permanent establishment must be shown by evidence that the foreign enterprise had its own place of business in India through which its core activities were carried on.

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