Tax Appeal Allowed for Statutory Compliance

The Tribunal allowed the appeal for statistical purposes, directing the CIT(A) to re-examine the duration of each contract independently and provide a detailed, speaking order addressing the taxpayer's contentions. The Tribunal clarified that the aggregation principle should not apply unless the projects are interconnected or interdependent, and the actual work duration at the site should be considered for determining the existence of a PE.

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Issues: Whether, for applying the nine-month threshold under Article 5(2)(i) of the India-Mauritius tax treaty, the time spent on separate contracts at the same oilfield could be aggregated to hold that the assessee had a permanent establishment in India.

Analysis: The duration test for a construction, assembly or supervisory project is to be applied to each individual site or project on a standalone basis unless the Revenue establishes that the contracts were artificially split to defeat the treaty or that the activities were so interdependent as to form a coherent whole. Mere commonality of principal, similarity of work, or location in the same broad geographical area is not enough. Aggregation is justified only where the activities are inextricably interconnected and must necessarily be viewed together. On the facts, there was no finding that the contracts were sham arrangements or that they were so interdependent that they could only be treated as one project. The further factual question whether any individual contract, viewed separately, exceeded nine months had not been decided by the first appellate authority on the correct legal basis.

Conclusion: The contracts could not be aggregated merely because they were executed for the same principal or in the same field, and the existence of a permanent establishment had to be examined contract-wise on the basis of actual project duration.

Ratio Decidendi: In the absence of treaty language providing for aggregation, the duration threshold for a construction or assembly project under a PE clause must be applied separately to each project unless the Revenue proves artificial splitting or such interdependence that the activities constitute a single coherent whole.

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