2023 (5) TMI 962 - AT - Income Tax

PE India - determine the duration test of nine months to construe installation PE in terms of Article 5(3)(a) of the Tax Treaty - whether the assessee had a fixed place PE in India in terms of Article 5(1) of the Tax Treat? - HELD THAT:- Assessee has no such place or establishment in India in terms of Article 5(2). Departmental authorities have alleged that the assessee had a project office in India, which has to be construed as PE.

Whereas, the assessee has contested the aforesaid conclusion of the departmental authorities by contending that the project office is of other consortium partner, who is entrusted with onshore activity. The aforesaid claim of the assessee has not been controverted by the Revenue by bringing on record any cogent material. It is trite law, the burden is entirely on the Revenue to establish existence of fixed place PE.

Revenue has failed to discharge such burden. We hold that Revenue’s stand that the assessee had a fixed place PE in India is not borne out on record. Accordingly, we hold that the assessee had no fixed place PE in India in terms of Article 5(1).

Determine the duration test of nine months to construe installation PE in terms of Article 5(3)(a) of the Tax Treaty - AO must be given a fair opportunity to go through such additional evidences and conduct factual verification to ascertain assessee’s claim of stoppage of work and demobilisation of personnel and equipments during monsoon period. Only when complete set of facts are brought on record, the legal proposition as laid down in the judicial precedents cited before us by the assessee can be applied.

Though, we admit the additional evidences furnished by the assessee before us, however, considering the fact that they were not furnished before the departmental authorities, we deem it appropriate to restore the issue relating to existence of installation PE to the file of Assessing Officer for de novo adjudication after verifying all facts and materials brought on record or to be brought on record by the assessee including the additional evidences. While doing so, the Assessing Officer must apply duration test of nine months strictly abiding by the ratio laid down by Hon’ble jurisdictional High court in the case of National Petroleum Construction Company (supra) and other decisions, which may be brought to his notice by the assessee.

Taxability of offshore supplies, it is fully dependent on the outcome of the existence or otherwise of installation PE. Therefore, this issue is also restored back to the Assessing Officer for adjudicating afresh after providing due opportunity of being heard to the assessee.

All other residuary issues, being consequential to the issue of existence or otherwise of PE in India, are also restored back to the AO for deciding afresh depending upon the decision to be taken in respect of existence or otherwise of PE. Accordingly, grounds are allowed for statistical purposes.