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TMI Blog2022 (11) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel for the Appellant states that the ITAT has erred in not appreciating that Article 5(2)(g) of the India Cyprus Treaty 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. He emphasises that the ITAT has erred in holding that the threshold period of twelve months has not been exceeded 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 si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or carrying out any preparatory work. Auxiliary and preparatory activity, purely for tendering purpose before entering of the contract and without carrying out any activity of economic substance or active work qua that project cannot be construed as carrying out any activity of installation or construction. Clause (g) of Article 5(2) ostensibly refers to activity based PE, because the main emphasis is on "where such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008); and not before that as the preparatory work if any, was for tendering purpose and to get the contract. 13. In so far as the date of completion, the Contract provides the completion date of 1st August, 2008, whereas as per the material placed on record and also the payment schedule etc., points out that all the activities connected with the project including the receiving of the payments was before 30th September 2008 and even the completion certificate mentions 30th 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity before the effective date; and after the date of decommissioning of the project/ demobilisation certain formalities must have been carried out. Such a contention sans any corroborative material cannot be accepted, because the onus is heavily: upon the revenue to establish that that assessee's activity had crossed the threshold period of 12 months and hence constitutes PE in India 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject or site. The said clause is also to be read harmoniously with paragraph 1 of Article 5 of the DTAA which necessarily entails a fixed place of business from which the business of an enterprise is carried on. Thus, a building site or an assembly project could be construed as a fixed place of business only when an enterprise commences its activity at the project site. An activity 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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