Tribunal Rules Non-Resident Firm Has PE in India; Mobilization Charges Included in Presumptive Income Under Sec 44BB.

The Tribunal dismissed the assessee's appeal, affirming that the non-resident company had a Permanent Establishment (PE) in India under Article 5 of the DTAA, as its activities were conducted on Indian soil and waters. The Tribunal also held that payments received did not constitute fees for technical services, as there was no transfer of technical knowledge. The revenue's appeal was allowed, ruling that mobilization/demobilization charges must be included in the gross revenue for computing presumptive income under section 44BB, following the jurisdictional HC's decisions.

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Issues Involved:
1. Whether the assessee had a Permanent Establishment (PE) in India.
2. Whether the payments received by the assessee constituted fees for technical services.
3. Whether mobilization/demobilization charges should be included in the gross revenue for computing presumptive income under section 44BB.

Detailed Analysis:

Issue 1: Permanent Establishment (PE) in India
The primary issue was whether the assessee, a non-resident company incorporated under the laws of the Netherlands, had a PE in India. The assessee had undertaken three contracts in India with ONGC, Cairn Energy, and Ganesh Benzo Plast, with a cumulative duration of 91 days. The lower authorities concluded that the assessee had a PE in India based on the nature of work and the locations where the work was performed.

The assessee argued that under Article 5 of the DTAA between India and the Netherlands, a PE would only be established if the activities continued for more than 183 days. The assessee cited various judgments, including CIT v. Visakhapatnam Port Trust, Dy. CIT v. Subsea Offshore Ltd., and an Advance Ruling A No. P-11 of 1995, to support the contention that the duration of activities was below the threshold required to constitute a PE.

The revenue countered that the contracts involved fixed places of business in India, such as drilling locations and vessels, and that the duration of activities was immaterial under paragraph 1 of Article 5, which defines a PE as a fixed place of business through which the business is wholly or partly carried on.

The Tribunal held that the assessee had a PE in India under paragraph 1 of Article 5, as the work was carried out on Indian soil and territorial waters on-board an Indian ship. The Tribunal noted that the assessee had been conducting investigations in India on an ongoing basis, indicating a real projection of the foreign enterprise onto Indian soil.

Issue 2: Fees for Technical Services
The revenue argued alternatively that the payments received by the assessee constituted fees for technical services under clause (b) of paragraph 5 of Article 12 of the DTAA. However, as per paragraph 7, such fees would be considered under Article 7 if the enterprise carries on business through a PE in the other Contracting State.

The assessee relied on the decision of the Bangalore Bench of the Tribunal in ITO v. De Beers India Minerals (P.) Ltd., where it was held that payments for services that do not involve the transfer of technical knowledge or skill do not constitute fees for technical services. The Tribunal agreed with the assessee, holding that the payments did not amount to fees for technical services, as there was no transfer of technical knowledge or skill, and the assessee merely provided data and results of investigations.

Issue 3: Mobilization/Demobilization Charges
The revenue contended that mobilization/demobilization charges should be included in the gross revenue for computing presumptive income under section 44BB, relying on the decisions of the Uttarakhand High Court in Sedco Forex International Inc. v. CIT and CIT v. Halliburton Offshore Services Inc. These decisions held that section 44BB considers all amounts paid or payable, whether in India or outside India, for calculating the aggregate amount to compute 10 percent profit and gains.

The assessee argued that only charges attributable to activities carried out in India should be included, citing the order of ITAT, Delhi, in R&B Falcon Drilling Co. v. Asstt. CIT. However, the Tribunal followed the jurisdictional High Court's decisions, holding that all amounts received by the assessee, including mobilization/demobilization charges, are to be included in the receipts for computing presumptive income under section 44BB.

Conclusion:
- The appeal of the assessee was dismissed, affirming that the assessee had a PE in India and the payments did not constitute fees for technical services.
- The appeal of the revenue was allowed, including mobilization/demobilization charges in the gross revenue for computing presumptive income under section 44BB.

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