Fixed place permanent establishment not found where offshore and onshore work were separately demarcated under the treaty

The Indian company was not a fixed place permanent establishment of the foreign assessee because the treaty conditions were not satisfied: the Indian premises were not shown to be at the foreign assessee's disposal, and the foreign assessee did not carry on its business through those premises. The composite arrangement separately demarcated offshore and onshore activities through distinct cost centres and separate invoicing, and the issue was covered by the assessee's earlier year case. As a result, profits from offshore supply of sub-assemblies could not be attributed to an alleged Indian PE, and the addition was unsustainable.

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Issues: Whether the Indian company could be treated as a fixed place permanent establishment of the foreign assessee in India for taxing profits from offshore supply of sub-assemblies.

Analysis: The issue was covered by the assessee's own case for an earlier assessment year. The scope of work under the composite arrangement was separately demarcated between offshore activities and onshore activities, with distinct cost centres and separate invoicing. The record did not show that the Indian company's premises were at the disposal of the foreign assessee or that the foreign assessee carried on its business through that premises. In the absence of satisfaction of the fixed place PE conditions under the treaty, profits from offshore supply could not be attributed to an alleged Indian PE.

Conclusion: The Indian company was not a fixed place permanent establishment of the assessee, and the addition based on attribution of profits from offshore supply was not sustainable.

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