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TMI Blog2020 (1) TMI 1697X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction and installation sites; supervisory or carrying out assembly project on a site, or services or facilities in connection with the exploration, exploitation or extraction of mineral oils etc., which are specific activity based PE generally with a threshold period, which here in this case is 183 days. Article 5(1) contains the general rule for permanent establishment that it must be a fixed place business at the disposal of the enterprise through which the business enterprise carries on its business. Article 5(2) contains illustrative list of places of business which prima facie constitute PE, provided it satisfies the requirement of Article 5(1). Article 5(3) to 5(5) contains special rule for construction and installation site or services or facilities in connection with the exploration, exploitation or extraction of mineral oils etc. and it is a limitation on the general provision of Article 5(1). Once activities as defined para 5 or 3 are attracted, the minimum period test has to be applied and being specific activity based article, it will prevail over general rule of Article 5(1). If such activity based PE are to seen from the general rule perspective only then there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st specific mandamus issued by the Hon ble Uttarakhand High Court in Writ Petition and consequent Special Appeal filed by the Appellant before Hon ble Uttarakhand High Court. 3. That on the facts and circumstances of the case and in law, the order passed by Ld. CIT u/s 263 bad in law in as much it does not fulfill the jurisdictional conditions envisaged by section 263 of the Act. 4. That on the facts and circumstances of the case and in law, the order passed by Ld. CIT u/s 263 is against the settled legal dictum in as much that the Ld. CIT erred in not appreciating that- a. It was not a case where no enquiry was made by the Ld. Assessing Officer, on the contrary, was a case where assessment order was passed after making detailed enquiries. b. That 263 proceedings cannot be initiated on a mere change of opinion c. That where two views are possible and Assessing Officer has adopted on of the views, 263 does not lie d. If two reasonable constructions of a taxing provision are possible, the construction that favours the assessee has to be adopted. 5. That on the facts and circumstances of the case and in law, the Ld. CIT has failed to appreciate the interplay between Article 5(1) and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 201415; and in support, filed various documents like bills, vouchers and invoices, details of expats who had come to India was also submitted. After examining the contract and all the details, the Assessing Officer accepted the assessee s contention holding that no PE exists in India. The relevant observations and findings of the Assessing Officer in the assessment order reads as under: - 2. The assessee company incorporated under laws of Singapore and is a tax resident of Singapore. It is engaged in the business of rendering offshore geophysical services to international oil gas industry. The assessee has entered into a contract with Cairn India Limited on 11 February 2014 for provision of 3D Marine Seismic Data Acquisition services. 3. During the year under consideration assessee has filed Return of income declaring gross income as NIL. During the course of assessment proceedings vide order sheet entry dated 24.11.2016, the assessee was asked to submit the basis of filing nil return. Vide written submissions dated stated that the assessee is a company incorporated under the laws of Singapore and is eligible for beneficial provisions of DTAA between India and Singapore. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nability of the process of initiation of revisionary jurisdiction u/s. 263 of the Act, however, the Hon ble High Court held that the Ld. CIT will consider objections to the show cause notice and decide accordingly. Thereafter, the assessee filed detailed objections and submissions before the Ld. CIT, the copy of which has been placed in the paper book. However, the Ld. CIT held that the AO should have seen the applicability of Article 5(1) before coming to Article 5(5) and held that there has to be place of business to fall within the ambit of PE and there has to be linked between the place of business and a specific geographical point and it does not mean that equipment constituting the place of business had to be actually fixed to the soil on which it stands. The words through which are also open to wide interpretation, first to apply to any situation where business activities were carried out, that is, a particular location which is at the disposal of the enterprise for that purpose. Thus, he held that seismic survey vessel was at the disposal of the assessee from where it has performed its duties within the specific geographical location and therefore, vessel constitutes a Fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding it be erroneous as well as the prejudicial to the interest to the Revenue after observing as under:- On the basis of above discussion, it is evident that the assessee M/s Nordic maritime Pte. ltd. has a fixed place of business in the shape of its vessel used for conducting the seismic survey and hence, under Article-7 of India- Singapore DTAA, the receipt of the assessee is taxable in India as business income. While verifying the applicability of any provisions of any statute law has to be read from the beginning of the provision. Accordingly, the test of existing of PE under the provision of Article 5 of the DTAA has to be made starting from first sub-Article. If it fails to include the existence of PE under sub-article (1) of Article 5, then one has to go to second sub-article and then third and so on. In this case, the very first sub article states that a fixed place of business could be held as a PE. Therefore, it was incorrect on the part of the assessee as well as the AO to resort to the fifth sub-article without verifying the applicability of the sub-article (1)-of Article 5'of the DTAA; Based on the above discussion, it is evident that the AO wrongly accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as quoted above by the Ld. CIT in the impugned order. Thus, he strongly relied upon the order of the Ld. CIT. 8. We have heard rival submissions and also perused the relevant findings given in the impugned order as well material on record placed before us. We have already discussed the facts in detail in the preceding paragraphs. It is undisputed fact that the assessee had carried out 3D Marine Seismic Data Acquisition Services for Cain India Ltd. and the scope of work consisted of acquisition and processing of seismic data as well as gravity and magnetic data. During the year, the assessee has shown gross revenue of Rs.133 Crores and has claimed that it is not liable to be taxed in India as a tax resident of Singapore, in view of Article 5(5) of India Singapore DTAA. The explanation of the assessee was that, it has provided services and facilities in India for a period of less than 183 days and has also given details and evidences to prove that the activities carried out in India were 102 days which fact has been accepted by the Assessing Officer after verification and same has not been disputed by the Ld. CIT also. The only case of the Ld. CIT is that the AO should have examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices as defined in Article 12, within a Contracting State through employees or other personnel, but only if: (a) activities of that nature continue within that Contracting Slate for a period or periods aggregating more than 90 days in any fiscal year; or (b) activities are performed for a related enterprise (within the meaning of Article 9 of this Agreement} for a period or periods aggregating more than 30 days in any fiscal year. 7. Notwithstanding the preceding provisions of this Article, the term permanent establishment shall be deemed not to include; (a) The use of facilities solely for the purpose of storage, display or occasional delivery of goods or merchandise belonging to the enterprise (b) the maintenance of a stock of goods of merchandise belonging to the enterprise solely for the purpose of storage, display or occasional delivery; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise sole:;, for the purpose of processing by (d) another enterprise;the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information. for (e) the maintenance of a fixed place of business the enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r otherwise shall not of itself constitute/either company a permanent establishment of the other. 10. The core issue before us is that, whether assessee who is carrying out specific activity of providing services or facilities in connection with the exploration, exploitation or extraction of mineral oils, which activity falls within the scope and definition given in Article 5(5), then whether general provision of Article 5(1) would apply or not. There are three types of PE contemplated under Article 5, firstly an establishment which is carrying out a business from a fixed place of business like office, branch, etc. and second type is agency PE. The third type of PE is for construction and installation sites; supervisory or carrying out assembly project on a site, or services or facilities in connection with the exploration, exploitation or extraction of mineral oils etc., which are specific activity based PE generally with a threshold period, which here in this case is 183 days. Article 5(1) contains the general rule for permanent establishment that it must be a fixed place business at the disposal of the enterprise through which the business enterprise carries on its business. Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to learned counsel was a specific provision and it was well-settled that a specific provision overrides the general provision. The plea in concluding was that article 5 (3) was an exception to article 5(1) and article 5 (2) and where a building, site or construction assembly or installation project does not exist for a period exceeding nine months, an office rendering support services to such project could not be regarded as a permanent establishment within the meaning of articles 5(1) and 5(2) since article 5(3) was a specific provision. The Income-tax Appellate Tribunal has also recorded in its finding that we are not sufficiently convinced to treat the income from Indian operations at Rs. Nil for the assessment year 1988-89, specially where the assessee had failed even before the tax authorities to support its facts and figures and we have upheld the application to section 145. The Income-tax Appellate Tribunal was right in rejecting the argument of zero profit on the Indian operations and to accept the alternative argument holding that Instruction No. 1767 is after all a guideline and computation can be made under the relevant provisions of the Act read with the guidel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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