GIL Mauritius Holdings Ltd., Gurgaon v. ADIT, Dehradun

ITA 5686/DEL/2010 | 2007-2008
Pronouncement Date: 16-09-2011 | Result: Allowed

Appeal Details

RSA Number 568620114 RSA 2010
Bench Delhi
Appeal Number ITA 5686/DEL/2010
Duration Of Justice 9 month(s) 1 day(s)
Appellant GIL Mauritius Holdings Ltd., Gurgaon
Respondent ADIT, Dehradun
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 16-09-2011
Date Of Final Hearing 29-08-2011
Next Hearing Date 29-08-2011
Assessment Year 2007-2008
Appeal Filed On 15-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 5686(DEL)/2010 ASSESSMENT YEAR: 2007-08 GIL MAURITIUS HOLDINGS LTD. ASS ISTANT DIRECTOR OF INCOME-TAX C/O SR BATLIBOI & CO. (INTERNATIONAL TAXATION) GOLF VIEW CORPORATE TOWER-B VS. DEHRADUN . NEAR DLF GOLF COURSE SECTOR-42 GURGAON. (APPELLANT) (RESPON DENT) APPELLANT BY : S/SHRI PERCY PARDIWALLA PRASHANT SHAH MANONEET DALAL ARS RESPONDENT BY: SHRI ASHW ANI KUMAR MAHAJAN CIT DR DATE OF HEARING : 29.08.2011 DATE OF PRONOUNCEMENT: 16.09.2011. ORDER PER K.G. BANSAL : AM THE ASSESSEE HAS TAKEN UP SIX GROUNDS IN THI S APPEAL. IN THE COURSE OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THREE QUESTIONS NEED TO BE DECIDED FOR DISPOSAL OF T HE APPEAL. THESE QUESTIONS ARE (I) WHETHER THE ASSESSEE HAS A PERMANENT ESTABLISH MENT (PE FOR SHORT) IN INDIA; ITA NO. 5686(DEL)/2010 2 (II) IF YES WHETHER THE INCOME OUGHT TO BE COMPUTED UNDER THE PROVISION CONTAINED IN SECTION 44BB OF THE INCOME- TAX ACT 1961 (THE ACT FOR SHORT); AND (III) WHETHER THE ASSESSEE IS LIABLE TO PAY INTEREST U/S 234B OF THE ACT? 1.1 THE ASSESSING OFFICER HAD PREPARED A DRAFT ORDER ON 31.12.2009 IN WHICH THE TOTAL INCOME WAS COMPUTED AT RS. 33 69 92 014/-. DIRECTIONS WERE GIVEN TO CHARGE INTEREST UNDER SECTIONS 234 B AND 234C OF THE ACT. THE ASSESSEE OBJECTED TO THE DRAFT ORDER THEREF ORE SHE FORWARDED THE ORDER AND THE OBJECTIONS TO THE DISPUTE RESOLUTION PANEL NEW DELHI (DRP FOR SHORT). THE LD. DRP PASSED THE ORDER U/S 144C ON 31.08.2010 IN WHICH THE DRAFT ORDER WAS APPROVED. IT HAS INTER-ALIA BEEN MENTIONED THAT THE ASSESSEE HAS A PE IN INDIA IN VIEW OF TH E DECISION OF THE TRIBUNAL IN THE CASE OF FUGRO ENGINEERING BV ITA NO. 269( DEL)/2007. IT HAS FURTHER BEEN MENTIONED THAT IN ABSENCE OF ANY P ROFIT AND LOSS ACCOUNT THE AO HAS RIGHTLY ESTIMATED THE INCOME AT 25% OF THE TOTAL REVENUE. IT HAS ALSO BEEN MENTIONED THAT IT IS PREMATURE AT THIS STAGE TO CONSIDER ITA NO. 5686(DEL)/2010 3 DIRECTIONS REGARDING THE LEVY OF INTEREST. CONS EQUENTLY THE AO HAS PASSED THE ORDER U/S 143(3) DETERMINING THE T OTAL INCOME AS PER DRAFT ORDER AT RS. 33 69 92 014/-. DIRECTIONS HAVE ALS O BEEN ISSUED TO CHARGE INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT . AGGRIEVED BY THIS ORDER THE ASSESSEE HAS RAISED AFORESAID THREE QUESTIONS FOR DETERMINATION. 2. THE FACTS OF THE CASE ARE THAT THE ASSESS EE-COMPANY IS A TAX RESIDENT OF MAURITIUS. THE ASSESSEE COMPANY AN D BG EXPLORATION & PRODUCTION INDIA LTD. (BG FOR SHORT) ENTERED INTO AN AGREEMENT ON 20.11.2006. BG IS A NOMINEE OF CO-VENTURERS COMPA NY. IT IS INCORPORATED UNDER THE LAWS OF CAYMAN ISLANDS AND HAS ITS PRINCIPAL OFFICE AT BG HOUSE POWAI MUMBAI INDIA. BG IS A CO-VENTURE RS WITH ONGC LTD. RELIANCE INDUSTRIES LTD. WHO ARE A PARTY TO P RODUCTION SHARING AGREEMENT DATED 22.12.1994 FOR PANNA MUKTA AND SOUTH TAPTI CONTRACT AREAS. THESE THREE CO-VENTURES HAVE NOMINATED T HE BG TO GET CERTAIN WORK CARRIED OUT THROUGH THE ASSESSEE-COMPANY R EGARDING OFFSHORE TRANSPORTATION AND INSTALLATION OF PIPE LINES. THE TERMS ARE EMBEDDED IN THE AGREEMENT DATED 20.11.2006 EXECUTED BETWE EN THE BG AND THE ASSESSEE-COMPANY. ITA NO. 5686(DEL)/2010 4 2.1 THE SCOPE OF WORK IS MENTIONED IN EXHIBIT-A OF THE AGREEMENT. IT IS MENTIONED THAT THE PURPOSE OF THIS SECTION O F THE DOCUMENT IS TO PROVIDE THE ASSESSEE-COMPANY A SUMMERY OF PIPE LINES RISER AND PLEM WORK TO BE PERFORMED BY THE HIRED MARINE VESSEL SP READ. THE WORK TO BE PERFORMED IS SPECIFIED OR IMPLIED WITHIN THIS DOC UMENT SPECIFICATIONS DRAWINGS OR CAN BE REASONABLY INFERRED FROM O THER SECTIONS OF THIS DOCUMENT AS BEING NECESSARY FOR COMPLETION OF TH E WORK. THE FOLLOWING WORK IS TO BE CARRIED OUT UNDER THE AGREEMENT FR OM THE MARINE VESSEL SPREAD:- ONE NEW 20 INCH MTA TO TCPP INFIELD PIPELINE 21 897 M LONG INCLUDING STALK ON RISERS POST BURIAL OF THE MTA TO TCPP PIPELINE FROM KP 0.205 TO KP 21.629. THERE IS NO OTHER PIPE BURIAL REQUIREMENT. ONE NEW 4.5 INCH INSTRUMENT AIR PIPELINE LINE P IGGY- BACKED TO MTA-TCPP PIPELINE INCLUDING TIE-IN TO TH E PRE-INSTALLED RISERS AND STABILIZATION IF ANY OF SHORT SECTION OF THE PLATFORM APPROACH PIPELINE RESTING ON THE SEABED NEAR PLATFORM LOCATIONS BEFORE RISER TIE-I N. PRE-SWEEP EXISTING SAND WAVES ALONG THE EXPORT PIPELINE ROUTE AT TWO SECTIONS TOTALING APPROXI MATELY 5 KM IN EXPORT PIPELINE ROUTE. ITA NO. 5686(DEL)/2010 5 EXECUTING THE POST TRENCH AND PRE SWEEP WORK WITH ROTECH OR SUITABLE ALTERNATIVE EQUIPMENT. SOIL V ANE SHEAR STRENGTH SHALL NOT EXCEED 50 KPA ALONG THE PROPOSED PIPELINE ROUTES. ONE NEW 20 INCH TCPP EXPORT PIPELINE 75 729 M LO NG INCLUDING STALK ON RISER. ONE SUBSEA CHECK VALVE IN THE VICINITY OF TCPP. TWO PILED PLEM(S) (ONE EACH FOR TWO TRUNK-LINES) WITH ASSOCIATED PIPING AND VALVES AND SUB-SEA SPOOL P IECES IN THE VICINITY OF THE TIE-INS. ONE 20 INCH SPUR LINE 3 756 M LONG FROM PLEM FOR 36 INCH ONGC TRUCK-LINE SUB-SEA TIE-IN TO PLEM FOR 4 2 INCH ONGC TRUNK-LINE SUB-SEA TIE-IN. ALL THE FINAL SUB-SEA TIE INS BETWEEN NEW FINAL S POOL AND EXISTING 36 INCH ONGC SBHT TRUNK LINE AND THE SUB- SEA TIE IN BETWEEN NEW FINAL SPOOL AND EXISTING 42 I NCH ONGC SBHT TRUNK-LINE INCLUDING THE INTERFACE AND OPERABILITY OF EXISTING VALVES ON THE ONGC FACILIT Y SHALL BE ON DAY RATE BASIS. ELEVATION OF 36 AND 42 SUB SEA TIE IN VALVES I S HIGHER THAN THE ELEVATION OF ALL PIPING AT 36 AND 42 PLEM RESPECTIVELY. BASED ON COMPANY PERFORMED DIVE ASSISTED SURVEY THERE IS NO LEAKAGE THROUGH THE EXISTING 36 AND 42 SUB SEA TIE IN VALVES AND THESE EXISTING VALVE FLANGE S AT TIE IN POINTS ARE IN GOOD ORDER. HOWEVER IN CASE OF LEAKAGE COMPANY WILL BE ADVISED AT THE EARLIES T FOR EXTENT OF RESOURCES TO BE DEPLOYED AT SITE TO ME ET ANY CONTINGENCIES. CONTRACTOR SHALL DEPLOY AGREED RES OURCES AT COST PLUS FEE BASIS. CONTRACTOR WILL BE COMPEN SATED FOR COST AND TIME IF ANY FOR WORK TO BE EXECUTED UNDER CONTINGENCIES. ITA NO. 5686(DEL)/2010 6 PLEM INSTALLATION DOES NOT INCLUDE ANY LEVELING O F THE SEA BED OR ANY REMEDIAL WORK. HOWEVER ANY SUCH LEVELING OR REMEDIAL REQUIRED DUE TO ANY VARIANCE IN COMPANY SUPPLIED SUB SEA DATA SHALL BE DEALT AS PER CONTRACT. THE EXISTING 36 INCH AND 42 INCH ONGC T RUNK LINES HAVE TIE-IN LATERALS COMPRISING TEES AND BALL VALVE S. THE MTA-TCPP PIPELINE ASSOCIATED WITH THIS WORK HAS TO CROSS THE EXISTING STA INFIELD PIPELINE. THE EXP ORT PIPELINE HAS TO CROSS THE EXISTING 36 DIAMETER ONGC TRUNK LINE. THE CONTRACTOR SHALL PERFORM ALL WORK NECESSARY TO PROVIDE THE MARINE VESSEL SPREAD FOR THE SAFE INSTALLATION OT HER THAN THE WORK THAT IS EXPLICITLY STATED IN THIS CONTRACT THAT WILL BE PERFORMED BY THE COMPANY. THE CONTRACTOR SHALL P ERFORM THE WORK IN FULL COMPLIANCE WITH THIS CONTRACT AND HA VE THE FULL RESPONSIBILITY FOR PERFORMING THE ACTIVITIES LIST ED BELOW:- SET UP AND MANAGE ALL SHORE BASE FACILITIES AND EQUIPMENT NECESSARY TO SUPPORT THE WORK. PROVISION OF SYSTEM TOOLS AND SUPPORT FACILITIES NECESSARY TO PLAN EXECUTE AND COMPLETE THE WORK IN A TIMELY AND EFFICIENT MANNER. RESPONSIBILITY FOR THE TIMELY SPECIFICATION AND DE LIVERY OF ALL INTERFACE REQUIREMENTS INCLUDING THOSE LISTED IN THE INTERFACE MATRIX APPENDIX 3 TO THIS EXHIBIT TO THE COMPANY AND THE COMPANYS OTHER CONTRACTORS. THE CONTRACTOR SHALL FURTHER NOTIFY THE COMPANY OF ALL OVERDUE INCOMPLETE OR MISSING INTERFACE INFORMATI ON. CO-ORDINATION AND INTERFACE WITH THE COMPANY AND T HE COMPANYS OTHER CONTRACTORS AND SUPPLIERS AS DIR ECTED BY THE COMPANY INCLUDING: ITA NO. 5686(DEL)/2010 7 CO-ORDINATION WITH THE MARINE WARRANTY SURVEYOR REG ARDING VERIFICATION AND APPROVAL OF ALL SEA TRANSPORTS A ND PIPELAY ACTIVITIES INCLUDING ALL ITEMS RELATING TO SYSTEM S EQUIPMENT AND VESSELS. CO-ORDINATION INTERFACE AND COOPERATION WITH CO MPANYS OTHER MARINE CONTRACTORS PERFORMING ONGOING MARIN E OPERATIONS E.G. DECK AND JACKET (FACILITIES) INST ALLATION DRILLING ETC. PREPARATION AND CO-ORDINATION OF ALL DOCUMENTATIO N REQUIRED BY THE COMPANY TO OBTAIN THE NECESSARY APPROVALS BY THE AUTHORITIES RELEVANT TO THE WORK. PROCUREMENT OF ALL ITEMS REQUIRED INCLUDING PROVI SION OF ALL NECESSARY MATERIALS SYSTEMS EQUIPMENT SERVICES PERSONNEL AND FACILITIES RELEVANT TO THE WORK EXCEPT WHERE SPECIFIED AS BEING PROVIDED BY THE COMPANY. ALL RELEVANT PRE-COMMISSIONING INSPECTION TESTI NG AND SURVEYS ON HIS OWN EQUIPMENT AND VESSELS AND ALLO WING SURVEYS BY THE COMPANY OR ITS AUTHORIZED REPRES ENTATIVES OF CONTRACTORS EQUIPMENT VESSELS ETC. AT ANY REAS ONABLE TIME. PARTICIPATION WITH EXPERIENCED OPERATIONS PERSONNE L FOR ACCEPTANCE OF RELEVANT SYSTEMS AND EQUIPMENT DURING PRE- COMMISSIONING AND INSPECTIONS OF THE COMPANY PROVI DED ITEMS AT THE COMPANY NOMINATED FABRICATION SITES AND AT ANY RELEVANT SUPPLIERS PREMISES. SUPPLY PIPELINE MARINE SPREAD INCLUDING PIPELAY B ARGE/RISER INSTALLATION CARGO BARGES DIVING SUPPORT VESSELS SUPPLY BOATS ANCHOR HANDLING TUGS SURVEY VESSELS DREDGING/ PRE-SWEEPING SPREAD ETC. 3. ACCORDING TO THE AO THE ASSESSEE HAS A PE IN INDIA IN TERMS OF PARAGRAPH NO. 1 OF ARTICLE 5 OF THE DOUBLE TAXAT ION AVOIDANCE AGREEMENT ITA NO. 5686(DEL)/2010 8 BETWEEN INDIA AND MAURITIUS (DTAA FOR SHORT). ON THE OTHER HAND THE CASE OF THE ASSESSEE IS THAT IT IS A WORK OF ASSEMBLY OR INSTALLATION AND THEREFORE CLAUSE (I) OF PARAGRAPH NO. 2 OF ARTI CLE 5 IS APPLICABLE. SINCE THE WORK HAS NOT BEEN CARRIED OUT FOR MORE THAN 9 MONTHS THE ASSESSEE DOES NOT HAVE A PE IN INDIA. IN THIS CONNECTION IT HAS BEEN SUBMITTED THAT THE WORK WAS CARRIED OUT BETWEEN 01.12.2006 1 0.08.2007 AS PER SUBMISSIONS MADE BEFORE THE AO WHICH HAVE NOT BE EN DISPUTED BY HER. THIS PERIOD FALLS SHORT OF THE PRESCRIBED PERIOD BY ABOUT 20 DAYS. THEREFORE THE ASSESSEE DOES NOT HAVE A PE IN I NDIA. THE PROFIT FROM LAYING THE PIPE LINES IS BUSINESS PROFIT. IN ABS ENCE OF PE IN INDIA SUCH PROFIT IS NOT TAXABLE IN THE SOURCE COUNTRY. 4. THE LD. COUNSEL HAS DRAWN OUR ATTENTION TOWAR DS PARAGRAPH NOS. 1 AND 2 OF ARTICLE 5 OF THE DTAA MENTIONED ON PAGE 2 OF THE ASSESSMENT ORDER. THESE PARAGRAPHS READ AS UNDER:- ARTICLE 5- PERMANENT ESTABLISHMENT- 1. FOR THE PURPOSES OF THIS CONVENTION THE TERM PERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS T HROUGH WHICH THE BUSINESS OF THE ENTERPRISE IS WHOLLY OR PAR TLY CARRIED ON. 2. THE TERM PERMANENT ESTABLISHMENT SHALL INCLUD E- ITA NO. 5686(DEL)/2010 9 A. A PLACE OF MANAGEMENT; B. A BRANCH; C. AN OFFICE; D. A FACTORY; E. A WORKSHOP; F. A WAREHOUSE IN RELATION TO A PERSON PROVIDING STORAGE FACILITIES FOR OTHERS; G. A MINE AN OIL OR GAS WELL A QUARRY OR ANY OTHE R PLACE OF EXTRACTION OF NATURAL RESOURCES; H. A FIRM PLANTATION OR OTHER PLACE WHERE AGRICULTURAL FORESTRY PLANTATION OR RELA TED ACTIVITIES ARE CARRIED ON; I. A BUILDING SITE OR CONSTRUCTION OR ASSEMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTIO N THEREWITH WHERE SUCH SITE PROJECT OR SUPERVISORY ACTIVITY CONTINUES FOR A PERIOD OF MORE THAN NINE MONTHS. 4.1 THE LD. COUNSEL SUBMITS THAT THE ASSESSEE HAS ITS ASSETS AND PERSONNEL IN INDIA FOR LAYING PIPE LINES OF ABOUT 21 KMS. LENGTH SO AS TO CONNECT THEM WITH THE EXISTING PIPE LINES. THEREF ORE IF WE LOOK TO THE PROVISION CONTAINED IN PARAGRAPH 1 ONLY IT MAY P OSSIBLY BE INFERRED THAT THE ASSESSEE HAS A PE IN INDIA. HOWEVER IT M AY BE CONSIDERED AT THIS STAGE WHETHER A MOVING SHIP COULD BE SAID TO BE A FIXED PLACE OF BUSINESS EVEN UNDER THIS PARAGRAPH. NEVERTHELESS THE WORK CARRIED OUT BY ITA NO. 5686(DEL)/2010 10 THE ASSESSEE IS A CONSTRUCTION OR ASSEMBLY PROJ ECT UNDER WHICH PIPE LINES ARE ASSEMBLED LAID AND CONNECTED WITH THE EXIST ING PIPE LINES. THEREFORE THE PROVISION CONTAINED IN PARAGRAPH 5(2)(I) OF THE DTAA IS APPLICABLE. UNDER THIS PROVISION THE PE COMES INTO EXISTENCE ONLY IF THE CONSTRUCTION OR ASSEMBLY PROJECT CONTINUES FOR A PERIOD OF M ORE THAN NINE MONTHS. THE CONSTRUCTION OR ASSEMBLY PROJECT OF THE ASSESSEE HAD ACTUALLY BEEN CARRIED OUT FOR LESS THAN NINE MONTHS. THEREFORE THE ASSESSEE DOES NOT HAVE A PE IN INDIA. 5. IN REPLY THE LD. CIT DR SUBMITS THAT THE PROVISIONS CONTAINED IN ARTICLE 5 HAVE TO BE READ CHRONOLOGICALLY. UNDE R PARAGRAPH NO. 1 THE PE HAS BEEN DEFINED TO MEAN IN AN EXHAUSTIVE MAN NER TO BE A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF THE ENTER PRISE IS WHOLLY OR PARTLY CARRIED ON. ADMITTEDLY THE ASSESSEE HAS CARRIE D OUT THE WORK OF LAYING PIPE LINES FROM THE VESSEL WHICH HOUSES THE PE RSONNEL MACHINES AND MATERIAL. THE SHIP IS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF THE ASSESSEE-COMPANY HAS BEEN PARTLY CARRIED ON. IN THIS CONNECTION IT HAS BEEN STRESSED THAT UNDER THIS PARAGRAPH THE REQUIREMENT IS ABOUT PERMANENCY OF THE ESTABLISHMENT AS COMMONLY UNDER STOOD BUT NO TIME PERIOD HAS BEEN FIXED ON EXPIRY OF WHICH THE PE WILL COME INTO EXISTENCE. ITA NO. 5686(DEL)/2010 11 ONCE THE CONDITIONS OF THIS PARAGRAPH ARE SATISFI ED THE PE COMES INTO EXISTENCE AND THEREAFTER ONE NEED NOT GO TO ANY O THER PARAGRAPH OF THIS ARTICLE. PARAGRAPH NO. 2 CONTAINS ILLUSTRATIONS OF THE PE AND THAT IS WHY IT HAS BEEN WORDED IN AN INCLUSIVE MANNER. UNDER THI S PARAGRAPH A CONSTRUCTION OR ASSEMBLY PROJECT ALSO CONSTITUTES THE PE PROVIDED THAT THE ACTIVITY CONTINUES FOR A PERIOD OF MORE THAN 9 MO NTHS. THIS PARAGRAPH DOES NOT OVERRIDE PARAGRAPH NO. 1 WHICH CONTAINS THE BASIC RULE REGARDING EXISTENCE OF THE PE. THERE IS NO WORD IN IT TO S HOW THAT IT OVERRIDES PARAGRAPH NO. 1. THE OECD COMMENTARY CLEARLY S TATES THAT A FIXED PLACE OF BUSINESS DOES NOT REQUIRE ITS EXISTENCE FOR ANY SPECIFIED LENGTH OF TIME. HOWEVER IF THE PLACE OF BUSINESS IS MOVING SAY AS IN THE CASE OF A ROAD CONSTRUCTION THE PERIOD OF EXISTENCE OF THE PROJ ECT COMES INTO PICTURE. IN THE CASE OF FUGRO ENGINEERING BV A SHIP HAS B EEN HELD TO BE A FIXED PLACE OF BUSINESS EVEN IF IT HAS TO MOVE ALONG TH E SITE OF WORK. THEREFORE AS PER DECISION OF THE TRIBUNAL IN THE AFORESAID CASE THE ASSESSEE HAS A FIXED PLACE OF BUSINESS WHICH CONSTITUTES PE U NDER PARAGRAPH NO. 1. 6. IN THE REJOINDER THE LD. COUNSEL SUBMITS THAT THE AO HAS NOT DOUBTED THAT THE WORK OF ASSESSEE CONSISTS OF CONSTRUCT ION OR ASSEMBLY PROJECT. ITA NO. 5686(DEL)/2010 12 PARAGRAPH NO. 5(2)(I) SPECIFICALLY DEALS WITH SUCH A PROJECT AND THEREFORE IT OVERRIDES PARAGRAPH NO. 1. 7. COMING TO THE DECIDED CASE THE LD. COUNSEL H AS DISTINGUISHED THE FACTS OF THE CASE OF FUGRO ENGINEERING BV (122 TTJ 655). THE FACTS ARE THAT THE ASSESSEE IS A NON-RESIDENT COMPANY I NCORPORATED UNDER THE LAWS OF NETHERLAND. THE ASSESSEE EARNED REVENUE AMOU NTING TO RS. 7 52 08 201/- FROM THREE PARTIES ONGC CAIRN EN ERGY AND GANESH BENZO PLAST. IT CARRIED OUT GEO-TECHNICAL INVES TIGATION AT DRILLING LOCATIONS WHICH INCLUDED DRILLING AND SAMPLING FO R THE ONGC. IT CARRIED OUT GEO-PHYSICAL AND GEO-TECHNICAL SITE INVESTIGAT ION FOR CAIRN ENERGY. IT ALSO PROVIDED SKILLED FACILITIES AND CAPACITY T O PERFORM WORK FOR GANESH BENZO PLAST. THE WORK IN RESPECT OF ONGC INVOLVED DRILLING AND SAMPLING OF TWO BORE HOLES ON-BOARD LABORATORY TESTING AND SPECIALIZED ANALYSIS THROUGH RISK ASSESSMENT TECHNIQUE. THE WORK CONT INUED FOR A PERIOD OF 13 DAYS IN FINANCIAL YEAR 2000-01. THE WORK IN RE SPECT OF CAIRN ENERGY WAS TAKEN UP AT EIGHT SITES IN THE GULF OF KHAMBAT INVOLVING INVESTIGATIONAL APPROACH. IT MOBILIZED ITS OWN RIG AND VESSEL FROM SINGAPORE FOR THIS PURPOSE. THE WORK CONTINUED FOR A PERIOD OF 41 DAYS. THE WORK IN RESPECT OF GANESH BENZO PLAST ALSO I NVOLVED GEO-TECHNICAL ITA NO. 5686(DEL)/2010 13 INVESTIGATION AND GEO-TECHNICAL SERVICES ON-BOARD SAMUNDRA SARVESHAK VESSEL. THIS WORK CONTINUED FOR 37 DAYS. IT IS MENTIONED THAT THE ASSESSEE HAS BEEN UNDERTAKING THESE ACTIVITIES ON AN ON-GOING BASIS AND NOT AS ISOLATED WORKS. IT IS FURTHER MENTIONED THAT NO LENGTH OF TIME IS PRESCRIBED UNDER PARAGRAPH NO. 1. IT HAS BEEN HE LD THAT IN SUCH A SITUATION IF THE PLACE OF BUSINESS IS AVAILABLE TO THE ASSESSE E FOR THE PERIOD IN WHICH THE WORK CAN BE COMPLETED IT SHALL CONSTITUTE THE PE. THE CASE OF THE LD. COUNSEL IS THAT THE WORK CARRIED BY FUGRO ENGINE ERING BV WAS NOT REGARDING CONSTRUCTION OR ASSEMBLY PROJECT. THE WORK INVOLVED TAKING SAMPLES FROM VARIOUS PLACES AND TESTING THEM SO AS TO DECIDE WHETHER THE SITE WAS SUITABLE FOR EXTRACTION OF HYDR OCARBON. ON THE OTHER HAND THE ASSESSEE IS CARRYING ON THE BUSINESS OF LAYIN G PIPE LINES WHICH IS IN THE NATURE OF CONSTRUCTION OR ASSEMBLY PROJECT. SUCH A PROJECT IS SPECIFICALLY COVERED UNDER ARTICLE 5(2)(I) THER EFORE THE RATIO OF THE CASE OF FUGRO ENGINEERING BV IS NOT APPLICABLE. 7.1 FURTHER RELIANCE HAS BEEN PLACED ON THE DECIS ION IN THE CASE OF DCIT VS. SUBSEA OFFSHORE LTD. (1998) 66 ITD 29 6. IN THAT CASE THE ASSESSEE RECEIVED A SUM OF RS. 1 58 48 719/- FR OM MAZAGAON DOCK LTD. AND RS. 98 39 380/- FROM ONGC. IN AGREEMENT WITH BOTH THE PARTIES THE ITA NO. 5686(DEL)/2010 14 ASSESSEE UNDERTOOK THE WORK OF INSPECTION AND RE PAIRING OF SUBMARINE PIPELINES NETWORK USED IN CONNECTION WITH OIL AND G AS EXPLORATION. THE WORK WAS UNDERTAKEN WITH THE HELP OF A SPECIAL REMOTE CONTROLLED VEHICLE. THE TRIBUNAL REFERRED TO THE PROVISIO NS OF PARAGRAPH NO. 1 OF ARTICLE 5 AS EXISTING AT THE RELEVANT TIME WHER E THE PE HAS BEEN DEFINED TO MEAN A FIXED PLACE OF BUSINESS IN WHICH THE B USINESS OF THE ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. IT HAS BEEN H ELD THAT THE PE DENOTES SOME FIXED PLACE OF BUSINESS WHICH HAS SOME PER MANENCY AND IT DOES NOT INCLUDE IN ITS AMBIT A MOVING VESSEL WHICH O PERATES NEAR A FIXED PLACE AND WHICH DOES NOT BELONG TO THE ASSESSEE. THE LD. DR DISTINGUISHES THE CASE BY MENTIONING THAT THE PROVISION OF PARAG RAPH NO. 1 AS EXISTING THEN USED THE WORD IN WHILE THE WORD USED IN THE DTAA IS THROUGH. THE DECISION IN RESPECT OF FIXITY OF PLACE IN TH E CASE OF A VESSEL COMES IN CONFLICT WITH THE DECISION IN THE CASE OF FUG RO ENGINEERING BV. 7.2 THE LD. COUNSEL ALSO RELIES ON THE RULING OF T HE AUTHORITY FOR ADVANCE RULINGS IN P. NO. 24 OF 1996 (1999) 237 ITR 7 98. RELYING ON THE MEANING OF THE WORD FIXED IN SHORTER OXFORD DICT IONARY IT IS MENTIONED THAT THE WORD CONTAINS IN ITSELF THE INDICATION O F A TIME LIMIT FOR THE EXISTENCE OF A PLACE OF BUSINESS. THIS IS QUITE INDEPENDENT OF THE ITA NO. 5686(DEL)/2010 15 SPECIFICATION OF A TIME LIMIT UNDER PARAGRAPH NO . 5(2)(I) AND 5(3). THE MEANING OF THIS WORD HAS ALSO BEEN CONSIDERED IN FUGRO ENGINEERING BV IN WHICH IT HAS BEEN HELD THAT IF A PLACE MADE AVAILABLE FOR SUFFICIENT TIME TO CARRY ON THE WORK IN WHICH IT CAN BE COMP LETED THE PLACE WILL BE THE FIXED PLACE OF BUSINESS. THE AUTHORITY RUL ED THAT PARAGRAPH NO. 1 SETS OUT A GENERAL DEFINITION AND PARAGRAPH NO. 2 FURNISHES AN INCLUSIVE DEFINITION OF THE PE. SOME OF THE ITEMS MENTION ED IN PARAGRAPH NO. 2 DO NOT MAKE A REFERENCE TO THE TIME PERIOD BUT PARAG RAPH NO. 5(3) OF THE U S MODEL IN REGARDING TO A BUILDING SITE CONSTRUCT ION INSTALLATION PROJECT ETC. CONTAINS TIME LIMIT OF MORE THAN 12 MONTHS FOR CONSTITUTING THE PE. SUCH A PROJECT CANNOT BE TREATED AS A PE UNLESS THE TIME CRITERION IS SATISFIED EVEN THOUGH IT MAY FULFILL THE CONDITIO N MENTIONED IN PARAGRAPH NO. 1. IT MAY BE MENTIONED HERE THAT IN THE CAS E OF BROWN & ROOT INC. (1999) 237 ITR 156 THE LD. AAR RULED THAT THE ELEMENT OF PERMANENCE IN RELATION TO AN ESTABLISHMENT IF ANY WOULD BE A TTRACTED UNDER ARTICLE 5(2)(K) OF THE INDO-USA TREATY ONLY IF THE INSTALL ATION PROJECT CONTINUES FOR A PERIOD OF 120 DAYS. 7.3 RELIANCE HAS BEEN PLACED ON THE CASE OF CAL DIVE MARINE CONSTRUCTION (MAURITIUS) LTD. IN AAR NO. 789 OF 200 8 DATED 26.06.2009. ITA NO. 5686(DEL)/2010 16 THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH HI NDUSTAN OIL EXPLORATION CO. LTD. (HINDUSTAN OIL FOR SHORT) FOR LAYING PI PE LINES UNDER THE SEA AND CONSTRUCTING THE STRUCTURES INCLUSIVE OF PRE-COM MISSIONING OF THE PIPE LINES FOR A LUMP SUM CONSIDERATION OF US$ 5 91 7 4 200/-. HINDUSTAN OIL WANTED TO SET UP GAS PROCESSING FACILITY IN THE K AVERI BASIN. ACCORDINGLY IT AWARDED CONTRACT TO THE ASSESSEE FOR CARRYING O UT THE WORK OF LAYING PIPE LINES UNDER THE SEA. THE WORK CONSISTED OF TRANS PORTATION AND INSTALLATION ENGINEERING TRANSPORTATION PRE-TRENCHING PIPE LAYING BACK FILLING INSTALLATION PRE-COMMISSIONING SURVEY ERECTION CONSTRUCTION TESTING AND HANDING OVER SERVICES. THE WORK WAS TO BE EXECUT ED BOTH WITHIN THE OUTSIDE INDIAN TERRITORIAL WATERS. THE ASSESSEE HIRED BARGES AND TUGS FOR CARRYING OUT THE PROPOSED WORK. IT ENTERED INTO CONTRACT WITH RESIDENT AND NON-RESIDENT CONTRACTORS FOR SUPPLY OF EQUI PMENTS LABOUR AND SERVICES. THE APPENDIX TO THE CONTRACT FURNISHED THE DESCRIPTION OF MILESTONES AND DATES BY WHICH THE SAME SHOULD BE ACHIEVED. THE SCHEDULE OF PAYMENT WAS IN TERMS OF PERCENTAGE O F CONTRACT PRICE BASED ON PROGRESS OF WORK. THE QUESTIONS BEFORE THE LD . AUTHORITY INTER-ALIA WERE- (A) WHETHER THE WORK UNDERTAKEN CAN BE SA ID TO BE CONSTRUCTION OR ASSEMBLY PROJECT AND (B) IF SO WHETHER IT SHO ULD NECESSARILY CONTINUE FOR A PERIOD OF MORE THAN NINE MONTHS IN ORDER TO CO NSTITUTE PE UNDER ARTICLE ITA NO. 5686(DEL)/2010 17 5 OF THE DTAA? IT HAS BEEN HELD THAT THE ACTIVI TIES OF WELDING THE PIPES BROUGHT TO THE SITE AND LAYING THEM INTO THE SEA SO AS TO ESTABLISH CONNECTIVITY FROM THE WELL-HEAD TO THE SHORE WIL L FALL WITHIN THE DESCRIPTION OF BOTH CONSTRUCTION AND ASSEMBLY PROJE CT. IN THIS CONNECTION A REFERENCE HAS BEEN MADE TO PARAGRAPH NO. 17 OF OECD COMMENTARY TO THE EFFECT THAT THE TERM BUILDING SITE OR CONSTRUCTI ON OR INSTALLATION PROJECT INCLUDES NOT ONLY THE CONSTRUCTION OF BUILDING BU T ALSO CONSTRUCTION OF ROADS BRIDGES OR CANALS THE RENOVATION OF BUILDI NGS ROADS BRIDGES OR CANALS THE LAYING OF PIPELINES AND EXCAVATING AND DREDGING. COMING TO THE INTERPLAY OF PARAGRAPH NOS. 5(1) AND 5(2)(I) IT W AS ARGUED THAT THE INCLUSIVE DEFINITION WILL ONLY EXPAND RATHER THA N RESTRICT THE MEANING AND AMPLITUDE OF THE PRECEDING GENERAL EXPRESSION OR TERM. IN OTHER WORDS PARAGRAPH NO. 1 CANNOT BE DOWN SIZED BY REFERRIN G TO PARAGRAPH NO. 2. HOWEVER HAVING REGARD TO THE CONTEXTUAL SETTING OF THE TWO PARAGRAPHS IT HAS BEEN HELD THAT TOO MUCH EMPHASIS CANNOT BE PLACED ON THE FACT THAT DEFINITION IN PARAGRAPH NO. 2 IS INCLUSIVE IN NATUR E. THEREFORE THIS INCLUSIVENESS OF THE DEFINITION IN PARAGRAPH NO. 2 SHOULD NOT COME IN THE WAY OF HARMONIOUS CONSTRUCTION AND CONTEXTUAL IN TERPRETATION OF THE TWO PARAGRAPHS. ACCORDINGLY IT HAS BEEN FURTHER HELD THAT THE INGREDIENT OF FIXED PLACE OF BUSINESS IN PARAGRAPH NO. 1 RUNS T HROUGH THE ENTIRE GAMUT OF ITA NO. 5686(DEL)/2010 18 PARAGRAPH NO. 2 WHILE THE PARTICULAR INSTANCES OF SUCH FIXED PLACES ARE SET OUT IN THE INCLUSIVE DEFINITION WITH A VIEW TO DISPEL ANY DOUBT AS WELL AS TO MAKE IT MORE COMPREHENSIVE IN SCOPE. THEREFOR E IF THE FIXED PLACE IS IN THE NATURE OF A BUILDING SITE OR A PLACE CONNEC TED WITH CONSTRUCTION OR ASSEMBLY PROJECT THE MINIMUM DURATION WAS ADVIS EDLY PRESCRIBED BY THE SIGNATORIES TO THE TREATY. THE CASE OF THE LD. COUNSEL IS THAT THE FACTS OF THIS CASE ARE IN PARI-MATERIA WITH THE FACTS IN THE CA SE OF THE ASSESSEE. 7.4 RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF MUMBAI BENCH OF THE ITAT IN THE CASE OF POOMPUHAR SHIPPING CORPN . LTD. VS. ITO ( 109 ITD 226). THE ASSESSEE IS A COMPANY INCORPORATED IN AND THE TAX RESIDENT OF MAURITIUS. IT IS ENGAGED IN THE BUSINESS O F MARINE AND GENERAL ENGINEERING AND CONSTRUCTION. DURING THE YEAR IT EXECUTED THREE PROJECTS FOR ARCADIA SHIPPING LTD WHICH INTER-ALIA INCLUDED REPLACEMENT OF B 121 MAIN DECK WITH TEMPORARY DECK FOR A CONSIDERATION OF US$ 5 50 000. IT WAS SUBMITTED THAT THE INCOME FROM THIS PROJECT W AS IN THE NATURE OF BUSINESS PROFIT WHICH COULD ONLY BE TAXED IF TH E ASSESSEE HAD A PE IN INDIA. SINCE IT DID NOT HAVE A PE IN INDIA THE PROFIT WAS NOT TAXABLE IN INDIA. IT WAS FURTHER SUBMITTED THAT THE DURATION OF THE CONTRACT WAS ONLY 100 DAYS WHICH WAS LESSER THAN THE PRESCRIBED TI ME LIMIT OF NINE MONTHS. ITA NO. 5686(DEL)/2010 19 THE TRIBUNAL CAME TO THE CONCLUSION THAT THE TRUE TESTS FOR FINDING OUT THE PRESCRIBED TIME LIMIT MUST LIE IN EXAMINING WHET HER OR NOT THE ACTIVITIES PERFORMED BY THE ENTERPRISE IN VARIOUS PROJECTS OR SITES ARE INTER-CONNECTED AND HAVE TO BE NECESSARILY REGARDED AS A COHERE NT WHOLE. UNLESS THE ACTIVITIES ARE OF SUCH A NATURE AS TO BE VIEWE D ONLY IN CONJUNCTION AND AS A COHERENT WHOLE THERE IS NO JUSTIFICATION IN AGGREGATION OF TIME SPENT ON VARIOUS BUSINESS ACTIVITIES SITES OR PROJEC TS OF THE ENTERPRISE. FOR THIS PURPOSE IT IS IMMATERIAL WHETHER THE ACTIVITIE S ARE CARRIED OUT FOR THE SAME OR DIFFERENT PRINCIPALS. THE RELEVANT CONSI DERATION IS THE NATURE OF ACTIVITIES THEIR INTER-CONNECTION AND INTER-RE LATIONSHIP AND WHETHER THE ACTIVITIES ARE REQUIRED TO BE REGARDED AS A COHERENT WHOLE IN CONJUNCTION WITH EACH OTHER. SINCE THE PROJECT DI D NOT SATISFY THE TIME CRITERION IT HAS BEEN HELD THAT THE PROFITS CAN NOT BE BROUGHT TO TAX. 7.5 AS MENTIONED EARLIER THE LD. DR HAD RELIE D ON THE DECISION IN THE CASE OF FUGRO ENGINEERING BV AND ACCORDING TO HIM EVEN IF THE SHIP IS MOVING ALONG THE PATH OF PIPELINES IT WOULD STI LL BE A FIXED PLACE OF BUSINESS. HE ALSO RELIED ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT & ANOTHER VS. HYUNDAI HEAVY IN DUSTRIES CO. LTD. (2007) 291 ITR 482. HE STRESSED ON THE FINDIN G RECORDED IN PARAGRAPH ITA NO. 5686(DEL)/2010 20 NO. 12 THAT WHEN AN ENTERPRISE SETS UP A PE IN A NOTHER COUNTRY IT BRINGS ITSELF WITHIN THE FISCAL JURISDICTION OF THAT COUN TRY TO SUCH A DEGREE THAT SUCH OTHER COUNTRY CAN TAX ALL PROFITS THAT THE ENTERPRISE DERIVED FROM THE SOURCE COUNTRY. IT IS THE ACT OF SETTING UP A P E WHICH TRIGGERS THE TAXABILITY OF A TRANSACTION IN THE SOURCE STATE . IT IS ALSO MENTIONED THAT NOT ALL PROFITS OF THE ENTERPRISE WOULD BE TAX ABLE IN INDIA BUT ONLY SO MUCH OF PROFITS HAVING ECONOMIC NEXUS WITH THE PE IN INDIA WOULD BE TAXABLE IN INDIA. THE DECISION WAS RENDERED IN A DIFFERENT CONTEXT OF TAXATION OF PROFIT FROM A TURN-KEY PROJECT YET WE THINK IT FIT TO REPRODUCE THE PORTION OF THE JUDGMENT RELIED UPON BY THE LD . DR:- 12. THERE IS ONE MORE ASPECT TO BE DISCUSSED. THE ATTRACTION RULE IMPLIES THAT WHEN AN ENTERPRISE (GE) SETS UP A PE IN ANOTHER COUNTRY IT BRINGS ITSELF WITHIN THE FISCAL JURISDICTION OF THAT ANOTHER COUNTRY TO SUCH A DEGREE THAT SUCH ANOTHER COUNTRY CAN TAX ALL PROFITS THAT THE GE DERIVES FROM THE SOURCES COUNTRY- WHETHER THROUGH A PE OR NOT. IT IS THE ACT OF SETTING OUT A PE WHICH TRIGGERS THE TAXABILITY OF TRANSACTIONS IN THE SOURCE STATE. THEREFORE UNLESS THE PE IS SET UP THE QUESTION OF TAXABILITY DOES NOT ARISE- WHETHER THE TRANSACTIONS ARE DIRECT OR THEY ARE THROUGH THE PE. IN THE CASE OF A TURNKEY PROJECT THE PE IS SET UP AT THE INSTALLATION STAGE WHILE THE ENTIRE TURNKEY PROJECT INCLUDING THE SALE OF EQUIPMENT IS FINALIZED BEFORE THE INSTALLATION STAGE. THE SETTING UP OF PE ITA NO. 5686(DEL)/2010 21 IN SUCH A CASE IS A STAGE SUBSEQUENT TO THE CONCLUSION OF THE CONTRACT. IT IS AS A RESULT OF THE SALE OF EQUIPMENT THAT THE INSTALLATION PE COMES INTO EXISTENCE. HOWEVER THIS IS NOT AN ABSOLUTE RULE. IN THE PRESENT CASE THERE WAS NO ALLEGATION MADE BY THE DEPARTMENT THAT THE PE CAME INTO EXISTENCE EVEN BEFORE THE SALE TOOK PLACE OUTSIDE INDIA. SIMILARLY IN THE PRESENT CASE THERE WAS NO ALLEGATION MADE BY THE DEPARTMENT THAT THE PRICE AT WHICH ONGC WAS BILLED/INVOICED BY THE ASSESSEE FOR SUPPLY OF FABRICATED PLATFORMS INCLUDED ANY ELEMENT FOR SERVICES RENDERED BY THE PE. IN THE PRESENT CASE WE ARE CONCERNED WITH ASSESSMENT YEARS 1987-88 AND 1988-89. THEREFORE WE ARE NOT INCLINED TO REMIT THE MATTER TO THE ADJUDICATING AUTHORITY. WE REITERATE IN THE CIRCUMSTANCES NOT ALL THE PROFITS OF THE ASSESSEE COMPANY FROM ITS BUSINESS CONNECTION IN INDIA (PE) WOULD BE TAXABLE IN INDIA BUT ONLY SO MUCH OF PROFITS HAVING ECONOMIC NEXUS WITH PE IN INDIA WOULD BE TAXABLE IN INDIA. TO THIS EXTENT WE FIND NO INFIRMITY IN THE IMPUGNED JUDGMENT OF THE TRIBUNAL. ACCORDINGLY WE ARE OF THE VIEW THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT PROFITS ATTRIBUTABLE TO THE KOREAN OPERATIONS WAS NOT TAXABLE IN VIEW OF ARTICLE 7 OF CADT. 8. WE MAY NOW EXAMINE THE FACTS OF THIS CASE IN THE LIGHT OF AFORESAID PROVISIONS AND DECISIONS. WE HAVE ALREA DY REPRODUCED THE SUMMARY OF THE WORK TO BE PERFORMED BY THE ASSESS EE TO BE CARRIED OUT THROUGH MARINE VESSEL SPREAD. THE WORK IS IN THE NATURE OF SERVICES FOR LAYING PIPELINES INCLUDING TEMPORARY WORK TO BE P ERFORMED AND IT HAS BEEN MORE PARTICULARLY DESCRIBED IN EXHIBIT-A. IT INC LUDES ALL WORKS WHICH ARE ITA NO. 5686(DEL)/2010 22 NECESSARY FOR STABILITY OR FOR THE COMPLETION O R SAFE OR PROPER OPERATION OF THE PROJECT AS PER SCOPE OF WORK IN ACCORDANCE WITH THE CONTRACT. THE SITE INCLUDES LAND WATER AND OTHER PLACES ON UND ER OVER IN OR THROUGH WHICH THE WORK OR ANY PART OF THE WORK IS TO BE P ERFORMED INCLUDING THE INSTALLATION SITE. THE WORK IS TO BE CARRIED OUT THROUGH THE MARINE VESSEL SPREAD WHICH MEANS ALL VESSELS USED IN THE PERFOR MANCE OF WORK INCLUDING BUT NOT LIMITED TO LAY-BARGE RISER INSTALLATION V ESSEL DIVING SUPPORT VESSELS PIPELINE TIE-IN VESSELS SURVEY VESSELS TUGS CARG O BARGES SUPPLY BOATS TESTING SPREAD INCLUDING DRYING EQUIPMENT AND P ERSONNEL. THE ASSESSEE HAS COMPLETED THE WORK IN LESS THAN 9 MONTHS. TH E QUESTION BEFORE US IS- WHETHER THE ASSESSEE HAS A PE IN INDIA. 8.1 IN THE CASE OF FUGRO ENGINEERING BV THE AS SESSEE WAS CARRYING ON THE BUSINESS OF TESTING THE MATERIAL OBTAINED FROM THE SITE FOR EXAMINING THE POSSIBILITY OF HAVING HYDROCARBONS. IT HAD INTER-ALIA TO DIG BORES FOR THE PURPOSE OF OBTAINING THE MATERIAL FO R TESTING. THE SAME WAS LATER ON TESTED ON-BOARD THE SHIP. THE WORK DID NOT INVOLVE ANY CONSTRUCTION OR ASSEMBLY PROJECT. THE PROJECT W AS IN THE NATURE OF CARRYING OUT CHEMICAL ANALYSIS TO DETERMINE THE EXTENT OF HYDROCARBONS AVAILABLE IN THE MATERIAL OBTAINED FOR TESTING. O BVIOUSLY PARAGRAPH NO. ITA NO. 5686(DEL)/2010 23 5(2)(I) OR SIMILAR PROVISION WAS NOT APPLICABLE T O THE FACTS OF THE CASE. THE TRIBUNAL HOWEVER RECORDED A FINDING THAT T HE SHIP WAS A FIXED PLACE OF BUSINESS. IT WAS AVAILABLE TO THE ASSESSEE F OR CARRYING ON THE BUSINESS OF CHEMICAL ANALYSIS WITHOUT LET OR HINDRANCE. THER EFORE IRRESPECTIVE OF TIME OF PRESENCE IN INDIA IT CONSTITUTED THE PE. ACCORDINGLY THE PROFIT ATTRIBUTED TO THE PE WAS HELD TO BE TAXABLE IN IN DIA. THE CASE DID NOT INVOLVE INTERPRETATION OF PARAGRAPH NO. 5(2)(I). THUS ON A PRIMA FACIE BASIS ONE CAN COME TO THE CONCLUSION THAT SINCE T HE ASSESSEE HAD TO CARRY OUT ITS WORK THROUGH THE SHIP WHICH COULD BE DON E WITHOUT LET OR HINDRANCE THEREFORE THE SHIP IS A FIXED PLA CE OF BUSINESS. HOWEVER THE CASE AT HAND INVOLVES CONSTRUCTION OF THE TREAT Y PROVISIONS CONTAINED IN PARAGRAPH NOS. 5(1) AND 5(2) WHEN THESE ARE REA D TOGETHER. 9. THE WORDS CONSTRUCTION AND ASSEMBLY HAVE NOT BEEN DEFINED IN THE TREATY. THEREFORE THE NATURAL MEANING OF THE WORDS WILL HAVE TO BE TAKEN FOR COMING TO A PROPER CONCLUSION. THE WORD CONSTRUCT IN SO FAR AS OUR CONTEXT IS CONCERNED HAS BEEN DEFIN ED IN THE NEW INTERNATIONAL WEBSTERS COMPREHENSIVE DICTIONARY O F THE ENGLISH LANGUAGE 2003 EDITION TO MEAN -(I) TO PUT TOGETHER AND SET UP; BUILD ARRANGE AND (II) TO DEVISE. THE WORD CONSTRUCTION THEREFOR E MEANS THE ACT OF ITA NO. 5686(DEL)/2010 24 CONSTRUCTION AND THE STYLE OF BUILDING. NORMALLY SPEAKING THE WORD CONSTRUCT IN RESPECT OF IMMOVABLE PROPERTY MEAN S THE CONSTRUCTION OF BUILDINGS DAMS ETC. IN THE CASE OF MOVABLE P ROPERTY IT MAY OR MAY NOT INCLUDE ASSEMBLING OF PIPE LINES. IN THIS VERY DICTIONARY THE WORD ASSEMBLE HAS BEEN DEFINED TO MEAN TO FIT OR J OIN TOGETHER AS THE PARTS OF MACHINE AND THEREFORE THE WORD ASSEMBLY M EANS THE ACT OR PROCESS OF FITTING TOGETHER THE PARTS OF A MACHI NE ETC. ESPECIALLY WHERE SUCH PARTS ARE MACHINE-MADE IN GREAT NUMBERS SO AS TO BE INTER- CHANGEABLE. THE ASSESSEE IS NOT ASSEMBLING PA RTS OF A MACHINE BUT TO OUR MIND THESE WORDS HAVE BEEN ADDED IN THE DICT IONARY BY WAY OF ILLUSTRATION. PUTTING TOGETHER THE PIECES OF PIP E LINES IN A DESIRED MANNER ACCORDING TO US WOULD AMOUNT TO ASSEMBLING. TH E LD. AAR HAS COME TO A SIMILAR CONCLUSION IN THE CASE OF CAL DIVE MARI NE CONSTRUCTION (MAURITIUS) LTD. (SUPRA). WE TEND TO AGREE WITH THIS INTERPRETATION. ACCORDINGLY IT IS HELD THAT THE ASSESSEE IS CAR RYING ON THE BUSINESS OF ASSEMBLING PIPE LINES. ITA NO. 5686(DEL)/2010 25 10. THE ONLY ISSUE NOW LEFT IS REGARDING THE INTE R-PLAY OF PARAGRAPH NOS. (1) AND (2). AS MENTIONED EARLIER THE SHIP REM AINED IN TERRITORIAL WATERS OF INDIA FOR SUCH LENGTH OF TIME IN WHICH THE WO RK OF ASSEMBLING THE PIPE LINES COULD BE COMPLETED. THE WORK ALSO CONTINU ED FOR SUFFICIENT LENGTH OF TIME BUT STATEDLY NOT EXCEEDING NINE MONTHS. THEREFORE IF THE RATIO OF THE DECISION IN THE CASE OF FUGRO ENGINEERING BV (SUPRA) ONLY IS TAKEN INTO ACCOUNT THIS WILL BE A FIXED PLACE OF BUS INESS UNDER PARAGRAPH NO. (1). THIS IS THE VIEW EXPRESSED BY THE LD. CI T DR. HIS FURTHER CASE IS THAT ONCE THE TEST OF FIXED PLACE OF BUSINE SS IS SATISFIED UNDER PARAGRAPH NO. (1) THERE IS NO NEED TO GO TO P ARAGRAPH NO. 2(I). THE DECISION OF THE LD. AAR IS IN CONTRADICTION OF TH E AFORESAID VIEW. IT HAS BEEN HELD THAT THE TWO PARAGRAPHS HAVE TO BE READ TOGETHER. PARAGRAPH NO. 2(I) SPECIFICALLY DEALS WITH CONSTRUCTION OR ASSEMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTION THEREWITH. IF THE MATTER IS CONCLUDED UNDER PARAGRAPH NO. (1) THIS PARAGRAPH BECOMES OTIOSE FOR THE REASON THAT ALL CONSTRUCTION OR ASSEMBLY PROJECTS WILL HAVE A FIXED PLACE OF BUSINESS. THEREFORE IT WOULD BE DIFFICULT TO RE AD ANY RESIDUARY MEANING IN THIS PARAGRAPH. THE LD. DR HAS ALSO DISTIN GUISHED THE DECISION IN THE CASE OF SUBSEA OFFSHORE LTD. (SUPRA) AS THE WORD USED IN THE TREATY AT THAT POINT WAS IN AND NOT THROUGH THEREFOR E IT WAS HELD THAT A ITA NO. 5686(DEL)/2010 26 MOVING SHIP OPERATING ALONG WITH THE FIXED PLACE OF BUSINESS DID NOT CONSTITUTE PE. IN THIS CONNECTION WE ARE OF T HE VIEW THAT THE WORDS FIXED PLACE DO NOT REPRESENT A POINT IN SPAC E BUT AN AREA IN SPACE WHICH IS AVAILABLE TO THE ASSESSEE FOR ASSEMBLIN G THE PIPE LINES. NONETHELESS THE WORK DONE BY THE ASSESSEE IS OF ASSEMBLING THE PIPE LINES AND THE ISSUE IS REGARDING HARMONIOUS INTERPRETA TION OF PARAGRAPH NOS. (1) AND (2). IN THIS SITUATION WE TEND TO AGREE W ITH THE LD. AAR THAT IF WE STOP AT PARAGRAPH NO. (1) PARAGRAPH 2(I) OF THE DTAA BECOMES OTIOSE. THIS WOULD NOT BE A PROPER WAY OF CONSTRUCTIO N OF THE DTAA. THE CONTRACTING PARTIES INCLUDED WITHIN THE DEFINITI ON OF THE PE ONLY THOSE ASSEMBLY PROJECTS WHICH LASTED FOR MORE THAN 9 M ONTHS. THIS HAS BEEN SPECIFICALLY PROVIDED IN THE TREATY. THIS LEADS TO AN INFERENCE THAT IF AN ASSEMBLY PROJECT LASTS FOR LESS THAN NINE MONTHS OR NINE MONTHS THERE WOULD BE NO INFERENCE OF PE. IT IS HELD ACCORD INGLY. 10.1 THE LD. CIT DR SUBMITTED THAT THE ISSUE REG ARDING THE PERIOD OF CONTINUATION OF THE ACTIVITIES HAS BEEN STATED TO BE LESS THAN NINE MONTHS BY THE ASSESSEE. ON THE BASIS OF DATA FURNISH ED BY IT THE PERIOD FALLS SHORT ONLY BY ABOUT 20 DAYS. THE LOWER AUTHOR ITIES HAVE NOT EXAMINED THIS FACT AS THEY HAVE NOT CONSIDERED THE PRO VISION CONTAINED IN ITA NO. 5686(DEL)/2010 27 PARAGRAPH NO. 5(2)(I). ACCORDINGLY IT IS ARGUE D THAT IN CASE THE MAIN QUESTION IS DECIDED IN FAVOUR OF THE ASSESSEE RE GARDING APPLICATION OF PARAGRAPH NO. 5(2)(I) THE EXACT PERIOD OF CONT INUATION OF ACTIVITIES WILL HAVE TO BE ASCERTAINED. THIS HAS NOT BEEN DONE BY ANY OF THE LOWER AUTHORITIES FOR THE SIMPLE REASON THAT THEY HAV E NOT GONE INTO THIS PROVISION AT ALL. ON THE OTHER HAND THE LD. COU NSEL REFERRED TO THE SUBMISSIONS MADE BEFORE THE AO ON 16.12.2009 THA T THE PRESENCE OF THE ASSESSEE IN INDIA WAS FOR A PERIOD OF LESS THAN NINE MONTHS. HAVING CONSIDERED THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT SINCE THIS SUBMISSION HAS NOT BEEN EXAMINED BY ANY OF THE LOWER AUTHORITY IT WILL HAVE TO BE DONE NOW AS THE QUESTION OF PE C RUCIALLY HINGES ON THE PERIOD OF EXISTENCE OF THE ASSESSEE IN INDIA. A CCORDINGLY THIS LIMITED ISSUE IS RESTORED TO THE FILE OF THE AO TO ASCER TAIN THE PERIOD OF THE EXISTENCE OF THE ASSESSEE IN INDIA AND THEREAFTER DECIDE THE EXISTENCE OF PE AS PER OUR FINDING FURNISHED IN PARAGRAPH NO. 10 (SUPRA). 11. SINCE QUESTION NO. (I) FRAMED BY US AT THE BEGINNING OF THIS ORDER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IT I S NOT NECESSARY FOR US TO GO INTO QUESTION NOS. (II) AND (III). ITA NO. 5686(DEL)/2010 28 12. IN THE RESULT THE APPEAL IS TREATED AS ALLOW ED AS INDICATED ABOVE. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- GIL MAURITIUS HOLDINGS LTD. C/O SR BATLIBOI & CO. GURGAON. ASSTT. DIRECTOR OF INCOME-TAX INTL. TAXATION DEHR ADUN. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.