TMI Blog2022 (11) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... y refers to PE as construction, assembly or installation project or supervisory activities in connection therewith where such activities continue for a period of more than twelve months? - HELD THAT:- This Court in the case of National Petroleum Construction Company Vs. Director of Income Tax (International Taxation) [ 2016 (2) TMI 47 - DELHI HIGH COURT] has analysed a similar clause being Article 5(2)(h) of the India UAE DTAA and held essence of a PE under Article 5(2)(h) is a building site or a construction or assembly project and the activities of an enterprise relating thereto in the source country - duration of a permanent establishment would commence with the performance of business activities in connection with the building site or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in present case and consequently no Permanent Establishment ( PE ) can be said to have been established in accordance with Article 5(2)(g) of India Cyprus Treaty on the basis of the dates mentioned in the contract. 3. He further states that ITAT has erred in disregarding the fact that activities of the assessee at the site had started in September, 2007 i.e., prior to the contract date. He contends that the finding of the ITAT suffers from perversity as it ignores that the assessee did not provide any details of arrival of stay etc. of the employees visiting India prior to the date of contract thereby seeking to avoid the rigours of Article 5(2)(g) of India Cyprus Treaty. 4. The ITAT in the impugned order has dealt at length with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h site project or activity continues for a period of more than 12 months . The duration of 12 months per se is activity specific qua the site, construction, assembly or installation project. If the contract would not have been awarded, then any kind of preparatory work for tendering of contract cannot be reckoned for carrying out any activity as stipulated in this clause. Hence, in this case all such preparatory work for tendering purpose before entering into contract cannot be counted while calculating the threshold period. Situation would be different if after the contract/work has been awarded/assigned and then if any kind of active work of preparatory or auxiliary nature is carried out, it could be counted for determining the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore 30 th September 2008 and even the completion certificate mentions 30 th September 2008. Though certain formalities for final completion certificate may have exceeded one or two months but still it will not make the continuity of the activity where it has been brought on record that the last barge sailed out or was decommissioned from India on 25th September, 2008 and the entire payments were received on or before that date. The activity qua the project comes to an end when the work gets completed and the responsibility of the contractor with respect to that activity comes to end. Here activity of the assessee qua the project as per the terms of contract had come to an end on or before 30th September, 2008 for the reason that; firstly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Article 5(2)(g)so as to tax the receipts in India as per Article 7. 14. Thus, on the facts and material on record and in view of our reasoning given above which is in consonance and in line with the principle laid down in the Hon'ble Jurisdictional High Court, we hold that threshold period of 12 months have not exceeded in the present case and consequently no PE can be said to have been established in Article 5(2)(g). Accordingly, we hold that no income of the assessee on the Contract executed by assessee in India can be held to be taxable in terms of Article 7. Thus grounds raised by the assessee on this score is allowed. (emphasis supplied) 5. Article 5(2)(g) of the India Cyprus Treaty reads as under:- A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity which may be related or incidental to the project but which is not carried out at the site in the source country would clearly not be construed as a PE as it would not comply with the essential conditions as stated in paragraph 1 of Article 5 of the DTAA. It is necessary to understand that a building site or a construction assembly project does not necessarily require an attendant office; the site or the attendant office in respect of the site/project itself would constitute a fixed place of business once an Assessee commences its work at site. Thus, for clause (h) of paragraph 2 of Article 5 to be applicable, it is essential that the work at site or the project commences - it is not relevant whether the work relates to planning or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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