9911796707
TMI Blog2008 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... R U L I N G (By Hon'ble Chairman) The applicant is a company incorporated in Australia and a 'tax resident' of Australia. The applicant which is in the business of providing professional services such as engineering, procurements and project management, entered into a contract with Gas Authority of India Limited (hereinafter to as 'GAIL') in July, 2003. Under the said Contract, the applicant had to monitor the project known as 'Dehej - Vijaipur Gas Pipeline Project' being undertaken by GAIL as project monitoring consultant. The applicant has to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in nature of 'royalties' as defined in Article 12 of the DTAA between India and Australia? · The applicant has a PE in India under the contract with GAIL? · If answers to (a) and (b) above are in affirmative, only so much of receipts of the applicant, under the contract with GAIL, as are attributable to such PE in India are taxable in India as business profits? · The balance receipts of the applicant unde the contract with GAIL are not taxable in India? The questions are recast as follows :- o whether the receipts from the contract entered into with GAIL are in the nature of 'royalties' as defined in Article 12 of the DTAA between India and Australia. o If the answer to the first question is in the negative, whether such receipts are to be treated as business profits under Article 7 of the DTAA liable to be taxed in India and if so, to what extent? 3. The applicant submits that most of the services relating to the work assigned to it was performed in India and the employees of the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in sub-paragraph (c); o ………. o ……….. the rendering of any services (including those of technical or other personnel) which make available technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of a technical plan or design; but that term does not include payments or credit relating to services mentioned in sub-paragraphs (d) and (g) that are made; x x x x x x x x x x x x x 5. The relevant clause is clause (g). It has no application in the present case inasmuch as no technical knowledge, experience, skill or know-how is 'made available' to GAIL on account of rendering the services. Mere rendering of services is not sufficient to attract clause (g), but those services should result in technical knowledge, etc. being made available to the other contracting party. Monitoring and supervision of project work with a view to ensure its timely completion within the approved cost does not amount to making ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shment, so much of the profits of the enterprise attributable to the permanent establishment are liable to be taxed in India in terms of Article 7. As already noted the applicant itself stated that very little work was done outside India and about 90 per cent or more of the activities were carried out in India by setting up a permanent establishment. 8. As regards the existence of Permanent Establishment, as rightly pointed out by the applicant the specific clause (k) of Article 5.2 governs the applicant's case. Article 5.2 of the DTAA contains the inclusive definition of the term 'permanent establishment'. ARTICLE 5 - Permanent Establishment ………….. ………….. (k) a building site or construction, installation or assembly project, or supervisory activities in connection with such a site or project, where that site or project exists or those activities are carried on (whether separately or together with other sites, projects or activities) for more than six months. In view of the averment made by the applicant at page 9 para (b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (P.V. Reddi) (Rao Ranvijay Singh) Member Chairman Member F. No. AAR/750/2007&n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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