TMI Blog1996 (8) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessee, as per art. II(1)(h)(cc) of the AADT with West Germany. 3.3 The CIT(A) failed to appreciate that : 1. the assessee was merely rendering supervisory services and had no permanent establishment in India as alleged by the AO. 2. the supervisory services were rendered at GNFC's site. 3. the assessee merely sent experts from Germany to supervise erection of the plant being carried on by GNFC. 4. the definition in art. II(1)(h)(cc) of the AADT contemplates that the `site' should be that of the assessee and not of the customer. 3.4 In the circumstances, the Hon'ble Tribunal be pleased to reverse the order of the CIT(A) on this issue and hold that the assessee has no permanent establishment in India. The order of the AO on this point is reproduced below : (c) As per the AADT, the assessee-company has `permanent establishment' in terms of cl. 1(h)(cc) of art. II. Consequently as per cl. 1 of art. III, the assessee's profits are to be taxed in India as are attributable to the `permanent establishment'. Since the training imparted by the assessee-company to the personnel of GNFC come under the aegis of the contract s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he non-resident's assistance/expertise is sought. Had it been otherwise, then the appellants would not have been treated as a non-resident at all. The appellants' association in a collaboration agreement (installation project) over a duration exceeding 6 months will amount to their permanent establishment in India. As regards the reference made to AADTs entered by the Govt. of India with other Government, I feel that no inference can be drawn on the basis of `absence' of specific words in the agreement under consideration. It can mean both ways : (a) that the intention was not made specific in this particular agreement, or (b) that the specific coverage of these words was not intended at all, as suggested by authorised representative. I do not see any reason why the Government would have desired not to include these words in the agreement with the Govt. of West Germany alone. Therefore, I am not inclined to subscribe to the view/assumption that the omission was intentional. Secondly, the words now forming the definition of PE are wide enough to cover technical/consultancy/supervisory services. There is no obvious exclusion of such services in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh High Court in CIT vs. Visakhapatnam Port Trust (1984) 38 CTR (AP) 1: (1983) 144 ITR 146(AP), where a German company was supplying equipment to the Port Trust authorities, which equipment was assembled and set up by the Port Trust and the German company supervised the installation through its engineers and the question was whether the German company could be said to be having a permanent establishment in India. The conclusion of the High Court was that because the engineers who were supervising, did not actually carry on any construction, installation or assembling project or the like on behalf of the German company in India but only supervised it, such a supervision did not bring about a permanent establishment in India. He also referred to the decision of the Tribunal in Dy. CIT vs. CIT Alcatel (1993) 47 ITD 275where a French concern was providing supervision on installation and the question was whether such supervision of installation amounted to installation or not and the Tribunal held that it does not amount to installation. He further referred to the decision of the Tribunal in Boudier Christian vs. ITO (1993) 46 ITD 114where again a French company was only to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment., 1., Subject to the provision of para. (3) below,, tax shall not be levied in one of the territories on the industrial or commercial profits of an enterprise of the other territory unless profits are derived in the first-mentioned territory through a permanent establishment of the said enterprise situated in the first-mentioned territory. If profits are so derived,, tax may be levied in the first-mentioned territory on the profits attributable to the said permanent establishment. 2.Subject to the provisions of para. 3,, where an enterprise of a contracting State carries on business in the other contracting State through a permanent establishment situated therein,, there shall in each contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preceding paragraphs,, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. . 7 Where profits include items of income which are dealt with separately in other articles of this agreement,, then the provisions of those articles shall not be affected by the provisions of this article. . Reading of the above provisions of art. III of the 1985 and 1960 Agreements, we find that there is some improvement but in substance they remain the same i.e. taxability is to be limited with reference to that part that is attributable to the permanent establishment. The term permanent establishment as contained in art. II(1)(h)(cc) of the 1985 is art. II(1)(bb) in the 1960 Agreement, which is also reproduced below for the sake of facility : (bb) an enterprise of one of the territories shall be deemed to have a fixed place of business in the other territory if it carries on in that other territory a construction, installation of assembly project or the like. The only difference that we can note is that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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