2019 (11) TMI 1760 - AT - Income Tax

Determination of PE - assessee activity under the contract - duration of assessee s operation in India - Threshold period of 12 months exceeded to have a PE established under Article 5(2)(g) of the DTAA - India-Cyprus Tax Treaty - assessee was awarded a contract by Allseas Marine Contractors, S.A.(AMC) in relation to the development of the Dhirubhai 1 and Dhirubhai 3 gas fieldslocated offshore in the Krishna Godavari Basinof the East Coast of India - Whether duration of assessee s operation in India have to be counted from the visit of its employee? - Assessee submitted that as per the provisions of Article 5(2)(g) of the DTAA, a non-resident engaged in construction activities in India would be considered as having a PE in India only if the construction activity continues for a period exceeding twelve months - HELD THAT - As relying on assessee own case for the AY 2008-09 2018 (8) TMI 438 - ITAT DELHI we answer the issue in favour of the assessee holding that no income of the assessee on contract executed by the assessee in India can be held to be taxable under Article 5(2)(g) of the DTAA. Grounds of appeal of the assessee are accordingly allowed.

Summary

Issues:
1. Whether the assessee has a Permanent Establishment (PE) in India as per Article 5(2)(g) of the India-Cyprus Tax Treaty for the assessment year 2009-10?

Analysis:
The appeal filed by the assessee was against the order passed by the Commissioner of Income-tax (Appeals) for the assessment year 2009-10. The assessee, a company incorporated in Cyprus, was awarded a contract by Allseas Marine Contractors, S.A. (AMC) for the development of gas fields in India. The dispute arose regarding the existence of a Permanent Establishment (PE) in India for the assessee. The Assessing Officer (AO) held that the assessee had a PE in India based on the duration of its operations in the country. The AO made an addition to the assessee's income, which was confirmed by the Commissioner of Income-tax (Appeals).

The assessee contended that its activities in India did not exceed 12 months as required under Article 5(2)(g) of the India-Cyprus Tax Treaty to constitute a PE. The assessee argued that its role was limited to construction activities for a specific period, and therefore, no PE existed. The assessee also highlighted that a previous Tribunal decision for the assessment year 2008-09 supported its position that no PE was established. The assessee's representative emphasized that the activities were completed within a timeframe that did not meet the threshold for a PE under the tax treaty.

The Tribunal analyzed the facts and previous decisions related to the same contract and concluded that the assessee did not have a PE in India for the assessment year 2009-10. The Tribunal noted that the activities performed by the assessee did not extend beyond the threshold period of 12 months as required by the tax treaty. The Tribunal emphasized that the completion of activities and receipt of payments were within the specified timeframe, indicating that no PE was established. The Tribunal relied on factual evidence and legal principles to support its decision that the income from the contract executed in India was not taxable under Article 5(2)(g) of the tax treaty.

In light of the detailed analysis and consistent interpretation of the relevant provisions, the Tribunal allowed the appeal of the assessee, holding that no income from the contract executed in India could be taxed under Article 5(2)(g) of the India-Cyprus Tax Treaty for the assessment year 2009-10. The Tribunal's decision aligned with previous rulings and factual evidence, providing a clear resolution to the issue of the existence of a Permanent Establishment in India for the assessee.