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TMI Blog2015 (7) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... and furnishing of services as stated in Article 5(6). Both should be read independent of each other, or else there was no requirement of enshrining separate provisions. If the activities relating to construction or installation are specifically covered under Article 5(3), then one need not to go in Article 5(6). Thus, the activity of the assessee which is purely installation services has to be scrutinized under Article 5(3) only and not within Article 5(6). Project relating to contract with Allseas - finding of the DRP is that employees of the assessee who have stayed in India were for duration of minimum 3 days to 101 days and on second trip the duration ranges from 14 days to 48 days which aggregates to less than 183 days - Held that:- The DRP has not given any finding that the period of stay of employees has crossed 183 days. The only case of the DRP is that, the assessee constitute a service PE within Article 5(6) which prescribed for 90 days and 30 days. Thus, so far as contract with Allseas, the same do not constitute a service PE as period of stay in India is less than 183 days. So far as contract with Swiber GB Gaslift Project also, the number of days as per the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee. - ITA No. 1876/Mum/2014 - - - Dated:- 12-6-2015 - SHRI R.C. SHARMA AND SHRI AMIT SHUKLA, JJ. For The Assessee : Shri Percy Pardiwala For The Revenue : Shri S. D. Srivastava ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the Assessee, against final assessment order dated 22.01.2014, passed by DDIT [International Taxation] 3(1) Mumbai, in pursuance of direction given by the Dispute Resolution Panel [DRP] u/s 144C(5) for the quantum of assessment passed u/s 143(3) r.w.s. 144C (13) for the A.Y. 2010-11. The assessee is mainly aggrieved by assessment of total income at ₹ 9,63,55,119/- on the ground that the assessee has Service Permanent Establishment ( PE ) in India. The effective ground in this regard have been raised vide Ground No. 2 to 5. Sum and Substance of the grounds are that:- i) The Ld. Assessing Officer has erred in law and on facts holding that assessee constituted in Service PE in India Under Article 5(6) of India Singapore DTAA; ii) The Ld. Assessing Officer has erred in applying provision of Article 5(6) instead of applying specific provision of Article 5(3), applicable in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 5 of the final assessment order. 3. In the draft assessment order, the Assessing Officer observed that in so far as the contract with M/s. Swiber BG Hydra Project, the contract was signed on 01.08.2009 and was completed on 12.02.2010 and therefore, the duration of the said project was more than 183 days. The reason given by him was that, the contracts are proceeded by certain activities like estimation of work, reconnaissance of place feasibility study etc., which requires personnel from assessee to physically come down to the place of work and to evaluate. All these activities constitutes the foot prints of the assessee that cumulatively leads to successfully completion of the project. Therefore, the project duration shall be reckoned strictly from the date of execution of the agreement to the date of completion. Besides this, the assessee could not reconcile its revenue from the contract agreements item wise. The assessee has not given proper explanation so as to lead to establishment of PE and project has been so schemed as not to let the PE trigger, even though the natural course of such prolonged and specialized activity, PE gets established. Accordingly, he held that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar project was less than 183 days, therefore, no Service PE was established in India. The Assessing Officer initially in the draft assessment order held that Article 5(3) is applicable, however, the DRP has now held that the assessee constitutes PE under Article 5(6). The said provisions of Article 5(6) is not applicable in the case of the assessee, because it envisages furnishing of services and here in this case, the assessee is purely into installation and construction for which specific provision has been separately enshrined in the treaty i.e. Article 5(3). Article 5(6) has no application in the present case. Further separate days have to be calculated for the separate projects, firstly, there is no geographic coherence between the projects and secondly, in the case of the Service PE in connection with construction, installation or assembly, project wise activities has to be seen on standalone basis. Therefore, for the purpose of counting number of days each project has to be examined separately and not by aggregating number of days spent on various project or activity on consolidated basis. Regarding observation of the Assessing Officer that in the case of Swiber BG Hydra P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d pipeline crossing installations and riser remedial etc. b) Contract with Swiber-BG Hydra A- Scope of works for installation services from Swiber Supporter Execution of construction and installation of riser clamps, risers and spools from barge Swiber Supporter (work vessel), free issued by Swiber. Subsea installation Scope of work shall include: i) Installation of Risers, two nos at PPA (existing) and one each at PK SWP (new) platforms. ii) Installation of Riser and I-tube clamps for two risers and one I-tube at PPA Platform iii) Installation of I-tube at PPA Platform encashing a 2-inch rigid chemical injection line iv) Installation of spool spice connectors at PPA and SWP Platforms between riser and pipelines and piggy back line and chemical injection line inside of I-tube v) Installation of stalk on 10 riser at PK Platform vi) Installation of spool piece connector between piggy back pipe and chemical injection line inside of I-tube. B-Scope of works for installation services from HD-2500 Execution of construction and installation for subsea installation of SWP and PK Jackets (structures) shall be undertaken by Kreuz from barge HD-2500 (work v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant paras of Article 5 of India Singapore DTAA is reproduced hereunder:- 3. A building site or construction, installation or assembly project constitutes a permanent establishment only if it continues for a period of more than 183 days in any fiscal year. 4. An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it carries on supervisory activities in that Contracting State for a period of more than 183 days in any fiscal year in connection with a building site or construction, installation or assembly project which is being undertaken in that Contracting State. 5. Notwithstanding the provisions of paragraphs 3 and 4, and enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in that Contracting State for a period of more than 183 days in any fiscal year in connection with the exploration, exploitation or extraction of mineral oils in that Contracting State. 6. An enterprise shall be deemed to have a permanent establishment in a Contracting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see which is purely installation services has to be scrutinized under Article 5(3) only and not within Article 5(6). 9. Now we have to see, whether the threshold the period of more than 183 days in the fiscal year has crossed or not in this case. So far as project relating to contract with Allseas, the finding of the DRP is that employees of the assessee who have stayed in India were for duration of minimum 3 days to 101 days and on second trip the duration ranges from 14 days to 48 days which aggregates to less than 183 days. The DRP has not given any finding that the period of stay of employees has crossed 183 days. The only case of the DRP is that, the assessee constitute a service PE within Article 5(6) which prescribed for 90 days and 30 days. Thus, so far as contract with Allseas, the same do not constitute a service PE as period of stay in India is less than 183 days. So far as contract with Swiber GB Gaslift Project also, the number of days as per the finding of DRP itself is much less than 183 days and therefore, this project also do not constitute Service PE in India. 10. Now coming to the contract with Swiber BG Hydra Project, though the finding of the DRP in page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion , has also opined this view in the following manner:- The question whether there is a PE in a specific Contracting State or not should be considered separately for each business activity performed in that State, i.e. for each individual place of business, existing there as well. In this connection, the place where the individual activity is performed may very well be relocated, for instance, where a road is being constructed in stages. If, in contrast, all building sites maintained in one State were treated as one single PE, this would in effect be tantamount to applying the force of attraction principle. Moreover, this would violate the principle that various business activity performed by one and the same enterprise, none of which individually constitutes a PE, cannot lead to a PE if combined. Further in the decision of Valentine Maritime, the Tribunal held that for the purpose of computing the threshold time limit, what is to be taken into account is the activity of a foreign enterprise on a particular site or a project and not on all the activities in a tax jurisdiction as a whole. The expression use in the relevant definition clause are in similar and there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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