Permanent establishment under India-Canada DTAA not established where premises were not at disposal and treaty duration threshold was unmet.
A fixed place permanent establishment under the India-Canada DTAA requires a place of business at the enterprise's disposal, permanence, and business carried on through that place; mere access to customer premises for project-specific work was insufficient, so no fixed place permanent establishment existed in India. An installation or supervisory permanent establishment also was not constituted because the relevant activities did not exceed the treaty's 120-day threshold in the 12-month period; accordingly, no income could be attributed on that basis. The additions based on the alleged permanent establishment were therefore unsustainable and the assessee's appeal succeeded.
Issues: (i) Whether the assessee had a fixed place permanent establishment in India under Article 5(1) of the India-Canada DTAA; (ii) Whether the assessee had an installation or supervisory permanent establishment in India under Article 5(2)(k) of the India-Canada DTAA, and consequently whether any income could be attributed to such alleged permanent establishment.
Issue (i): Whether the assessee had a fixed place permanent establishment in India under Article 5(1) of the India-Canada DTAA.
Analysis: The relevant tests for a fixed place permanent establishment were the existence of a place of business, disposal of that place to the enterprise, permanence, and conduct of business through that place. The enterprise did not own or lease any premises in India, the Indian customers' premises were not at its disposal, and the activities in India were limited and project-specific. Mere access to the customer's premises for installation-related work did not satisfy the disposal test, and the factual matrix did not establish the required continuity or business presence in India.
Conclusion: No fixed place permanent establishment existed in India. This issue was decided in favour of the assessee.
Issue (ii): Whether the assessee had an installation or supervisory permanent establishment in India under Article 5(2)(k) of the India-Canada DTAA, and consequently whether any income could be attributed to such alleged permanent establishment.
Analysis: The only activity in the relevant year was a five-day visit for inspection and preparatory work, while the actual installation occurred later and lasted only for 17 days. On either basis, the activities did not continue for more than 120 days within the relevant 12-month period, so the treaty threshold for an installation or supervisory permanent establishment was not met. Once the alleged permanent establishment failed, no attribution of income to such a presence could survive.
Conclusion: No installation or supervisory permanent establishment existed in India, and no income was attributable on that basis. This issue was decided in favour of the assessee.
Final Conclusion: The additions premised on the existence of a permanent establishment were unsustainable, and the assessee's appeal succeeded.
Ratio Decidendi: A fixed place permanent establishment requires the enterprise to have the relevant premises at its disposal and to carry on business through them, while an installation or supervisory permanent establishment under the treaty arises only if the qualifying activities exceed the prescribed duration threshold.
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