Permanent establishment test bars Indian taxation of offshore project receipts where core work was performed outside India.

Offshore project receipts were treated as outside India's taxing scope because the work relating to designing, fabrication, transportation and related activities was carried out mainly in Korea, and the assessee had no presence at the offshore site before the structures arrived. The Revenue failed to show a fixed place of business, supervisory infrastructure or other features needed to establish a permanent establishment in India. With the prior year's findings also having attained finality and the facts for the year under appeal being materially similar, the treaty rules on business profits did not allow taxation in India of receipts not attributable to an Indian permanent establishment.

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Issues: Whether the assessee had a permanent establishment in India in relation to the offshore project receipts and, consequently, whether the income from activities carried on outside India was taxable in India.

Analysis: The contracts and the contemporaneous certificates showed that the relevant work relating to designing, fabrication, transportation and related offshore activities was performed mainly in Korea and that the assessee had no presence at the offshore site before the arrival of the structures. The Revenue did not bring material to show that the assessee maintained a fixed place of business, supervisory infrastructure or other features necessary to constitute a permanent establishment in India for the concerned projects. The findings recorded for the immediately preceding year had also attained finality, and the facts for the year under appeal were found to be materially similar. In the absence of proof that the receipts were attributable to any permanent establishment in India, the treaty provisions governing business profits did not permit taxation in India of the outside-India receipts.

Conclusion: The assessee had no permanent establishment in India for the disputed offshore receipts, and the income from the activities carried on outside India was not taxable in India.

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