Permanent Establishment and offshore supply receipts were outside presumptive taxation under section 44BB absent proof of India PE.

No Permanent Establishment in India was established under Article 5 of the India-UK DTAA because the assessee's role was confined to manufacture and offshore supply of Subsea Production System components, while project management, engineering, procurement, construction, fabrication, transport, testing, support and installation activities were undertaken by other consortium members. In the absence of evidence of a fixed place, installation site, project office, or installation activity in India, the Revenue could not attribute a PE to the assessee. As PE was not proved, offshore supply receipts could not be taxed on a presumptive basis under section 44BB, which was therefore held inapplicable.

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Issues: (i) Whether the assessee had a Permanent Establishment in India under Article 5 of the India-United Kingdom Double Taxation Avoidance Agreement. (ii) Whether the receipts from offshore supply of equipment could be taxed under section 44BB of the Income-tax Act, 1961.

Issue (i): Whether the assessee had a Permanent Establishment in India under Article 5 of the India-United Kingdom Double Taxation Avoidance Agreement.

Analysis: The contract and the material placed on record showed that the assessee's role was confined to manufacture and supply of Subsea Production System components. The project management, engineering, procurement, construction, fabrication, transportation, testing, support services and installation-related activities were allocated to other consortium members. The record also did not establish any project office or installation activity by the assessee in India. The Revenue did not bring cogent evidence to show that any fixed place, installation site or consortium member constituted a PE of the assessee in India.

Conclusion: No Permanent Establishment of the assessee in India was established.

Issue (ii): Whether the receipts from offshore supply of equipment could be taxed under section 44BB of the Income-tax Act, 1961.

Analysis: Section 44BB could not be invoked on a presumptive basis in the absence of a PE where the receipts related to offshore supply of equipment and the assessee was not shown to have carried out taxable onshore or installation activities in India. The facts were found to be materially identical to the assessee's earlier year and the same reasoning was followed. Since the Revenue failed to establish PE, the receipts could not be brought to tax under section 44BB.

Conclusion: Section 44BB was held inapplicable to the offshore supply receipts.

Final Conclusion: The addition made on presumptive taxation was deleted and the assessee succeeded on the substantive tax issues.

Ratio Decidendi: Where the Revenue fails to establish a Permanent Establishment in India, offshore supply receipts cannot be taxed on a presumptive basis under section 44BB.

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