DDIT(IT) 1(2), MUMBAI V. CLOUGH PROJECTS INTERNATIONAL PTY. LTD, MUMBAI

ITA 2546/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2086 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 07-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Assessee Lawyers: R MURALIDHAR MR DEVESH K S HAH
• Keywords: Double taxation relief; Permanent establishment; Advance ruling
• Section: 5(2); 234B; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, L BENCH, MUMBAI. BEFORE SHRI T.R.SOOD, AM & SMT ASHA VIJAYRAGHAVAN, ,JM I.T.A NO.2546/MUM/2009 ASSESSMENT YEAR:2005-06 THE DDIT (IT)1(2), V. CLOUGH PROJECTS INTERNATIO NAL P. LTD. SCINDIA HOUSE, 1 ST FLOOR, BALLARD ESTATE, C/O. DEVESH K.SHAH & CO., 106, N.M.ROAD, MUMBAI. BALAJI HOUSE, 1 ST FLOOR, 361, DR. D.N.ROAD, FLORA FOUNTAIN, MUMBAI-01. PA NO.AACCC 6057 C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NARENDRA SINGH RESPONDENT BY : SHRI R.MURALIDHAR, MR DEVESH K.S HAH O R D E R PER T.R.SOOD, AM THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30.1.2009 OF LD CIT (A)-XXXI, MUMBAI FOR THE ASSESSMENT YEAR 2005-06. IN THIS APPEAL, THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT THE ASSESSEE HAD NO P E IN INDIA BY RELYING UPON ARTICLE 5(2)(J) AND (K) OF THE DTAA BETWEEN IN DIA AND AUSTRALIA WITHOUT PROPERLY APPRECIATING THE FACT AND THE PROV ISIONS OF THE TREATY THAT THE CASE OF THE ASSESSEE WAS COVERED BY ARTICL E 5(2)(F) OF THE TREATY WHICH PROVIDES THAT MERE EXISTENCE OF AN OIL AND G AS WELL CONSTITUTE PERMANENT ESTABLISHMENT (PE) AND IT IS NOT NECESSAR Y TO USE THE SAME FOR EXTRACTION BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT (A) ERRED IN HOLDING THAT THE PAYMENTS RECEIVED BY THE ASSESSEE OUTSIDE INDIA COULD NOT BE SUBJECT TO TAX UNDER SECTION 44B B(2) OF THE I.T.ACT, KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAD PE I N INDIA AND ERRED IN DELETING THE ADDITION OF RS.98,00,60,397/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) RELYING UPON THE FINDINGS OF ITAT ERRED IN HOLDING THAT INTEREST UNDER SECTION 234B WAS NOT CHARGEABLE IN THE CASE O F NON-RESIDENT ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 2 ASSESSEE WHOSE INCOME ARE LIABLE TO DEDUCTION OF TA X AT SOURCE UNDER SECTION 195 OF THE ACT. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE (CLOUGH PROJECTS INTERNATIONAL PVT.LTD), IS A COMPANY INCORPORATED U NDER THE LAWS OF WESTERN AUSTRALIA AND IS ENGAGED IN THE BUSINESS OF PROVIDING ENGINEE RING AND CONSTRUCTION SERVICES TO VARIOUS OIL AND GAS COMPANIES. THE ASSESSEE COMPAN Y ENTERED INTO A CONTRACT WITH BG EXPLORATION AND PRODUCTION INDIA LTD (FOR SHORT BG ) VIDE AGREEMENT DATED 5.11.2004 FOR CARRYING OUT ENGINEERING, PROCUREMENT, INSTALLATION AND COMMISSIONING OF THREE WELLHEAD PLATFORMS AND MODIFICATIONS TO EXISTING PLATFORMS A ND INTER FIELD PIPELINES IN THE PANNA OIL FIELD AND THE SOUTH TAPTHI GAS FIELD LOCATED NO RTH WEST OF MUMBAI, INDIA. THE ASSESSEE COMPANY FILED RETURN DECLARING NIL INCOME ON THE BASIS THAT IN VIEW OF THE PROVISIONS UNDER DTAA, THE ASSESSEE COMPANY DOES NO T HAVE A PERMANENT ESTABLISHMENT (PE) IN INDIA AND HENCE, ITS BUSINESS PROFITS WERE NOT TAXABLE IN INDIA. 3. THE ASSESSING OFFICER EXAMINED THE SCOPE OF WORK DONE BY THE ASSESSEE, WHICH INCLUDED PROJECT MANAGEMENT, ENGINEERING, PROCUREME NT, FABRICATION, TRANSPORTATION, INSTALLATION, PRE-COMMISSIONING AND COMMISSIONING O F THREE FOUR LEGGED JACKETS AND TOP SIDES PLATFORMS, FOUR INFIELD PIPELINES AND ASSOCIA TED RISERS AND MODIFICATIONS TO THREE EXISTING PLATFORMS. ACCORDING TO THE ASSESSING OFF ICER, CLAUSE 14 OF THE CONTRACT PROVIDES AN OBLIGATION ON THE ASSESSEE IN RESPECT OF DESIGN, EXECUTION AND COMPLETION OF WORK INCLUDING TESTING AND INSPECTION AND TO PROVIDE TEC HNICAL INFORMATION, SPECIFICATION AND DRAWING. ACCORDING TO CLAUSE 1.1.4, THE ASSESSEE W AS ALSO TO DO PRE-ENGINEERING SURVEY OF THE EXISTING PPA PLATFORM TO ASCERTAIN THE INTEG RATION OF PH & PJ PLATFORMS COMMUNICATION AND SCADA SYSTEM WITH MAIN PLATFORM A ND SAID WORK ALSO INCLUDED PROVIDING OF ADDITIONAL AND DETAILED ENGINEERING DE SIGN AND PROCUREMENT SERVICES NECESSARY FOR THE COMPLETION OF WORK. THE ENGINEER ING DESIGN ALSO INCLUDED SITE VISITS/SURVEYS. FOR ALL THESE SERVICES, THE CONTRA CT WAS DIVIDED INTO FOUR STAGES AND THE ASSESSEE WAS TO BE GRANTED LUMP SUM PAYMENTS FOR EN GINEERING AND DETAIL DESIGN AND ALSO FOR PROJECT MANAGEMENT AND PROCUREMENT OF EQUI PMENT AND MATERIALS. THE ASSESSING OFFICER REFERRED TO ARTICLE 5(2)(F) OF DT AA, WHICH REFERS TO OIL GAS WELL AS UNDER:- 1. FOR THE PURPOSES OF THIS AGREEMENT, THE TERM P ERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS, THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. 2. THE TERM PERMANENT ESTABLISHMENT SHALL INCLUDE SPECIALLY: ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 3 A TO (E). (F) A MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTH ER PLACE OF EXTRACTION OF NATURAL RESOURCES. (G) TO J). (K) A BUILDING SITE OR CONSTRUCTION, INSTALLATION O R ASSEMBLY PROJECT, OR SUPERVISION ACTIVITIES IN CONNECTION WITH SUCH A SI TE OR PROJECT, WHERE THAT SITE OR PROJECT EXISTS OR THOSE ACTIVITIES ARE CARR IED ON (WHETHER SEPARATELY OR TOGETHER WITH OTHER SITES, PROJECTS OR ACTIVITIE S) FOR MORE THAN SIX MONTHS. ACCORDING TO THE ASSESSING OFFICER, KEEPING THE NAT URE OF THE BUSINESS OF THE ASSESSEE IN VIEW, THE ASSESSEE WOULD BE COVERED BY SUB-ARTICLE 2(F) OF ARTICLE 5 AND, ACCORDINGLY, HE CONCLUDED THAT SINCE THE ASSESSEE WAS TO INSTALL NE W PLATFORM AND TO UPGRADE EXISTING PLATFORM ASSOCIATED IN THE FIELD PIPELINE WITH GAS OR WELL IN THE PANNA OIL FIELD, THEREFORE, THE ASSESSEE HAS PE WITHIN THE MEANING OF ARTICLE 5 (2)(F) OF INDIA-AUSTRALIA DTAA. THE ASSESSING OFFICER ALSO OBSERVED THAT SINCE THE ASSE SSEE WAS EXCLUSIVELY DEALING WITH COMMISSIONING OF PLATFORMS MEANT FOR OIL WELLS, THE REFORE, THE ASSESSEE WAS DEFINITELY HAVING A PE KEEPING IN VIEW THE NATURE OF WORK WHIC H RELATED TO OIL WELLS. IN THIS BACKGROUND, THE AO SUBJECTED TO INCOME OF THE ASSES SEE @ 10% IN TERMS OF SECTION 44BB(2) OF THE ACT. 4. BEFORE THE CIT (A), IT WAS MAINLY CONTENDED THA T THE ASSESSEE WAS MAINLY REQUIRED TO DO THE FOLLOWING: * THREE FOUR LEGGED JACKETS AND TOPSIDE PLATFORMS (PH, PJ AND STD) IN WATER DEPTHS RANGING FROM 23M TO 52M. FOUR INFIELD PIPELINES AND ASSOCIATED RISERS RANGIN G FROM 4 TO 18 DIAMETER FOR A ROUTE LENGTH OF APPROXIMATELY 30 KM. MODIFICATIONS TO THREE EXISTING PLATFORMS (PPA, PB AND TPP). THUS, IT WAS ARGUED THAT THE CONTRACT WAS TO DEVELO P THREE NEW PLATFORMS, UPGRADE THREE EXISTING PLATFORMS AND FOUR INFIELD PIPELINES AND ASSOCIATED RISERS IN THE PANNA, MUKTA AND TAPTI FIELDS OF THE WEST COAST OF INDIA. IT WAS FURTHER STATED THAT DURING F.Y. 2004-05, THE ASSESSEE COMPANY WAS ONLY ENGAGED IN T HE PREPARATORY JOB FOR ITS OUTSIDE INDIA OPERATIONS RELATED ACTIVITY I.E. CONTRACTING WITH THE FABRICATING SUBCONTRACTOR, IDENTIFYING THE VENDOR FOR THE PURPOSE OF PROCUREME NT OF NECESSARY MATERIALS AND EQUIPMENTS ETC. THUS, THE ONLY WORK DONE DURING F. Y. 2004-05 WAS LIMITED TO PLACING OFF-SHORE SUB-CONTRACTORS, PLACING SUB-CONTRACTS WI TH OFFSHORE PARTIES FOR FABRICATION OF TOPSIDES AND JACKETS. IN THIS REGARD, NECESSARY COP IES OF THE PURCHASE ORDERS AND ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 4 FABRICATION ORDERS WERE ALSO PLACED ON RECORD. THE N, IT WAS ARGUED THAT THE ASSESSEE WOULD FALL AT BEST UNDER ARTICLE 5(2)(K) BECAUSE TH E ASSESSEE WAS NOT THE OWNER OF THE OIL WELLS AS ENVISAGAED BY ARTICLE 5(2)(F). RELIAN CE WAS PLACED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF (ADVAN CE RULING A. NO.P-11 OF 1995, RE.) AND BROWN & ROUT INC V. CIT (1999) 237 ITR 156(AAR) . 5. THE CIT (A) EXAMINED THE ISSUE IN DETAIL AND HEL D THAT VIDE PARAS 2.3.1 TO 2.3.2 THAT THE ASSESSEE DID NOT HAVE PE IN INDIA. RELEVA NT PARAS ARE AS UNDER:- 2.3.1 I HAVE CONSIDERED THE FACTS, FINDINGS AND SUBMISSIO N OF LD AR. IT IS SEEN THAT THE ASSESSEE HAS ENTERED INTO A TURNKEY CONTRA CT ON 5 TH NOVEMBER, 2004 WITH BRITISH GAS EXPLORATION & PRODUCTION INDIA LTD (IN SHORT BG). THE SCOPE OF WORK SHOWS THAT THE APPELLANT WAS ENGAGED IN INSTAL LATION AND ASSEMBLY PROJECT UNDER A COMPOSITE TURNKEY CONTRACT WHICH PERTAINED TO INSTALLATION OF THREE NEW FOUR LEGGED JACKET PLATFORMS AND FOUR INFIELD PIPEL INES AND ASSOCIATED RISERS AND MODIFICATION OF THREE EXISTING PLATFORM. IT IS ALS O SEEN THT THE APPELLANT HAS RAISED 1 ST INVOICE ON 17 TH DECEMBER, 2004 ON BG FOR LUMP SUM MILES STONE PAYMENT US $ 11,303,398.60 AND SECOND ONE ON 3 RD MARCH 2005 OR PURCHASE ORDER OF STEEL AMOUNTING TO US 11,1444,196.00 AND T HE PAYMENT WAS RECEIVED ON 15 TH FEBRUARY 2005 AND SECOND PAYMENT WAS RECEIVED ON 1 ST MAY, 2005. IT IS NOW WELL SETTLED IN LAW THAT THE TERM PERMANENT EST ABLISHMENT (PE) MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF THE ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. IN THIS CONNECTION, ARTICLE 5(1 ) TO 5(4) OF THE AUSTRALIA INDIA DOUBLE TAX TREATY READS AS FOLLOWS: 1. FOR THE PURPOSES OF THIS AGREEMENT, THE TERM PE RMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS THRO UGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. 2. THE TERM PERMANENT ESTABLISHMENT SHALL INCLUDE ESPECIALLY: A) A PLACE OF MANAGEMENT. B) A BRANCH; C) AN OFFICE; D) A FACTORY; E) A WORKSHOP; F) A MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTHE R PLACE OF EXTRACTION OF NATURAL RESOURCES; G) A WAREHOUSE IN RELATION TO A PERSON PROVIDING ST ORAGE FACILITIES FOR OTHERS; H) A FIRM, PLANTATION OR OTHER PLACE WHERE AGRICULT URAL, PASTORAL, FORESTRY OR PLANTATION ACTIVITIES ARE CARRIED ON; ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 5 I) PREMISES USED AS A SALES OUTLET OR FOR RECEIVING OR SOLICITING ORDERS; J) AN INSTALLATION OR STRUCTURE , OR PLANT OR EQUIP MENT, USED FOR THE EXPLORATION FOR OR EXPLOITATION OF NATURAL RESOURCE S; K) A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR ASSEMBLY PROJECT, OR SUPERVISORY ACTIVITIES IN CONNECTION WITH SUCH A SI TE OR PROJECT, WHERE THAT SITE OR PROJECT EXISTS OR THOSE ACTIVITI ES ARE CARRIED ON (WHETHER SEPARATELY OR TOGETHER WITH OTHER SITES, P ROJECTS OR ACTIVITIES) FOR MORE THAN SIX MONTHS. 2.3.2 THE LD AR HAS CONTENDED THAT THE WORK PERFORM ED AND TO BE PERFORMED BY THE APPELLANT IS IN THE NATURE OR AN INSTALLATIO N PROJECT, THEREFORE, THE RELEVANT ARTICLE OF DTAA IN RELATION TO PE WOULD BE 5(2)(K) AND NOT ARTICLE 5(2)(F) AS APPLIED BY THE AO. THE AR SUBMITTED THAT THE ARTIC LE 5(2)(F) OF DTAA WITH AUSTRALIA, WOULD APPLY TO A PERSON ACTUALLY OPERATI NG THE MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTHER PLACE OF EXTRACTION OF NATURA L RESOURCES. I HAVE EXAMINED THIS ISSUE. IT IS SEEN THAT OIL OR GAS WELL BELONG S TO BG, WHERE THE APPELLANT WOULD BE INSTALLING PLATFORMS. THE APPELLANT HAS N O RIGHT OVER THE GAS OR OIL WELL. THE APPELLANT IS AN ENGINEERING COMPANY AND NOT A N ATURAL RESOURCE COMPANY. THEREFORE, I INCLINED TO AGREE WITH APPELLANT THAT ITS INSTALLATION PROJECT IS NOT COVERED BY ARTICLE 5(2)(F) OF INDIA-AUSTRALIA TAX T REATY. THE CASE OF THE APPELLANT IS ALSO NOT COVERED BY ARTICLE 5(2)(J) AS THE APPELLANT HAS NOT INSTALLED ANY PROJECT OFFICE, SITE NOR CARRYING ON ANY BUSINE SS OF EXPLORATION OF NATURAL RESOURCES NOR THE APPELLANT IS OWNER OF INSTALLATIO N PROJECT. THEREFORE, THE CASE OF APPELLANT IS COVERED BY ARTICLE 5(2)(J) OF DTAA. THE LD AR HAS PLACED RELIANCE ON AAR RULING IN P.NO.11 OF 1995 (228 ITR) (AAR) WH EREIN INSTALLATION OR PIPELINE AND SUBMARINE CABLE SEA-BED IN BOMBAY HIGH SEA ARE CLAIMED TO HAVE BEEN COVERED BY OIL AND GAS WELL UNDER ARTICLE 5(2)(F) O F DTAA, WHEREAS THE AAR HELD THAT THE ARGUMENT OF DEPARTMENT CANNOT BE ACCEPTED BECAUSE THE APPLICANT HAS ONLY WORKED ON THE OIL OR GAS WELL AND THE OIL WELL IN QUESTION WAS NOT OWNED OR OPERATED BY THE APPLICANT. THE FACTS OF APPLICANT CASE ARE SIMILAR, HENCE, I AM OF THE VIEW THAT APPELLANTS CASE IS NOT COVERED BY AR TICLE 5(2)(F) OF DTAA. THE AAR IN P.NO.11 OF 1995 (SUPRA) FURTHER HELD THAT SINCE, THE APPLICANT WAS ENGAGED IN THE INSTALLATION AND ASSEMBLY PROJECT THEREFORE SUC H ACTIVITIES ARE COVERED BY PARA 3 OF ARTICLE 5 OF THE INDIA-SINGAPORE DTAA. T HE ARTICLE 5(3) OF INDIA SINGAPORE DTAA IS SIMILAR TO ARTICLE 5(2)(K) OF IND IA-AUSTRALIA DTAA. SINCE, THE APPELLANT S CONTRACT WITH BG RELATES TO INSTALLATI ON AND COMMISSIONING OF THREE WELL HEAD PLATFORM AND MODIFICATIONS OF EXISTING PL ATFORMS, ITS CASE WOULD BE COVERED BY ARTICLE 5(2)(K) OF INDIA-AUSTRALIA DTAA. NOW, IT IS TO BE EXAMINED WHETHER APPELLANT HAD A PE DURING THE A.Y. UNDER CO NSIDERATION. THE ARTICLE 5(2)(K) WHICH PROVIDES THAT AN INSTALLATION PROJECT SHALL BE PE ONLY IF THE SITE EXISTS FOR MORE THAN SIX MONTH. IT IS SEEN THAT TH E APPELLANT HAS ENTERED INTO CONTRACT FOR INSTALLATION AND ASSEMBLY PROJECT WITH BG ON 5 TH NOVEMBER, 2004. THUS, THE SIX MONTH PERIOD HAS NOT BEEN COMPLETED D URING FINANCIAL YEAR, THEREFORE, THERE IS NO PE EXISTED IN TERMS OF ARTIC LE 5(2)(K). FURTHER, IT IS SEEN THAT DURING THE A.Y UNDER CONSIDERATION, THE WORK P ERFORMED WAS LIMITED TO PLACING ORDERS FOR OFFSHORE SUPPLY OF STEEL AND FAB RICATION OUTSIDE INDIA. IT IS ALSO SEEN THAT THE FIRST DELIVERY OF SUPPLY OF STEEL WAS STARTED ON 30 TH APRIL, 2005, THEREFORE, THE INSTALLATION PE WOULD COMMENCED FROM THE ARRIVAL OF STEEL AT THE ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 6 OIL WELL SITE WHICH FALLS IN THE NEXT FINANCIAL YEA R. IT IS ALSO SEEN THAT DURING THE YEAR THE APPELLANT HAS NOT SET UP ANY PROJECT SITE OFFICE IN INDIA IN CONNECTION WITH THE CONTRACT UNDER CONSIDERATION. EVEN NO BAN K ACCOUNT HAS BEEN OPENED DURING THE YEAR. THE PAYMENT IS RECEIVED IN US DOL LAR OUTSIDE INDIA. THE ENTIRE WORK DURING THE YEAR HAS BEEN DONE OUTSIDE INDIA T HE AO HAS ALSO RECORDED THIS FAT IN HIS ASSESSMENT ORDER. CONSIDERING THESE FAC TS, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT DO NOT HAVE ANY PE IN INDIA , BECAUSE ENTIRE OPERATION RELATING TO FABRICATION, SUB-CONTRACTOR, IDENTIFYIN G VENDOR FOR THE PURPOSE OF PROCUREMENT OF NECESSARY MATERIALS AND EQUIPMENT HA S BEEN DONE OUTSIDE INDIA. THE AR HAS PLACED RELIANCE ON SUPREME COURT DECISIO N IN THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES CO. LTD., 288 ITR 408(SC) AND HYUNDAI HEAVY INDUSTRIES CO. LTD,., (2007) 291 ITR 482(SC) WHICH ALSO SUPPORTS HIS CASE. IN THE CASE OF HYUNDAI HEAVY INDUSTRIES, IT WAS HEL D THAT THE PROFIT EARNED BY THE APPELLANT ON SUPPLIES OF FABRICATED PLATFORM CO ULD NOT BE ATTRIBUTED TO THE PERMANENT ESTABLISHMENT IN INDIA AS THE INSTALLATIO N OF THE PERMANENT ESTABLISHMENT EMERGED ONLY AFTER THE CONTRACT WITH ONGC STOOD CONCLUDED. THEREFORE, THE PROFITS ON SUCH SUPPLIES OF FABRICAT ED PLATFORM COULD NOT BE SAID TO BE ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. TH US, THE RATIO OF HONBLE APEX COURT DECISION IS SQUARELY APPLICABLE IN THE CASE O F THE APPELLANT. THE PE IN CASE OF APPELLANT WOULD COMMENCE WHEN SUPPLY OF EQUIPMEN TS REACHED IN INDIA TERRITORIAL WATERS, AND THAT FALLS IN SUBSEQUENT YE AR. I, THEREFORE, HOLD THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS NO PE EXISTED IN THE CASE OF APPELLANT. THE AR PLACED RELIANCE ON AAR RULING AS CITED IN ABOVE PARA WHICH ALSO SUPPORTS THE VIEW THAT NO PE EXISTED DURING YE AR AS THERE WAS NO INSTALLATION EVENT TOOK PLACE IN INDIA NOR THE TIME PERIOD OF SI X MONTHS COMPLETED DURING THE YEAR. 6. BEFORE US, LD D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE S UBMITTED THAT DURING THE YEAR, THE ASSESSEE WAS DOING WORK ONLY OUTSIDE INDIA BY P LACING ORDERS OF FABRICATION AND OTHER PREPARATORY WORK. IN ANY CASE, THE ASSESSEE WAS NOT THE OWNER OF THE OIL WELLS AND, THEREFORE, THE ASSESSEE COULD NOT BE COVERED B Y ARTICLE 5(2)(F). AT BEST THE ASSESSEE COULD BE COVERED UNDER ARTICLE 5(2)(K) SIN CE THE ASSESSEE DID NOT HAVE ANY SITE OR BUILDING OR INSTALLATION OF ASSEMBLY OF PROJECT FOR MORE THAN 6 MONTHS DURING THE YEAR. THE ASSESSEE CANNOT BE SAID TO HAVE PE IN INDIA. H E STRONGLY RELIED ON THE DECISIONS WHICH WERE RELIED ON BEFORE THE CIT (A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. ARTICLE 5 READS AS UNDER: 1. FOR THE PURPOSES OF THIS AGREEMENT, THE TERM P ERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE B USINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 7 2. THE TERM PERMANENT ESTABLISHMENT SHALL INCLUDE ESPECIALLY: A) A PLACE OF MANAGEMENT. B) A BRANCH; C) AN OFFICE; D) A FACTORY; E) A WORKSHOP; F) A MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTHE R PLACE OF EXTRACTION OF NATURAL RESOURCES; G) A WAREHOUSE IN RELATION TO A PERSON PROVIDING ST ORAGE FACILITIES FOR OTHERS; H) A FIRM, PLANTATION OR OTHER PLACE WHERE AGRICULT URAL, PASTORAL, FORESTRY OR PLANTATION ACTIVITIES ARE CARRIED ON; I) PREMISES USED AS A SALES OUTLET OR FOR RECEIVING OR SOLICITING ORDERS; J) AN INSTALLATION OR STRUCTURE , OR PLANT OR EQUIP MENT, USED FOR THE EXPLORATION FOR OR EXPLOITATION OF NATURAL RESOURCE S; K) A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR ASSEMBLY PROJECT, OR SUPERVISORY ACTIVITIES IN CONNECTION WITH SUCH A SI TE OR PROJECT, WHERE THAT SITE OR PROJECT EXISTS OR THOSE ACTIVITI ES ARE CARRIED ON (WHETHER SEPARATELY OR TOGETHER WITH OTHER SITES, P ROJECTS OR ACTIVITIES) FOR MORE THAN SIX MONTHS. 9. AS POINTED OUT BY LD COUNSEL FOR THE ASSESSEE, T HE ASSESSEE IS ONLY DOING PROJECT WORK FOR BG BY PROVIDING NEW PLATFORMS AND UPGRADIN G EXISTING PLATFORMS. THE ASSESSEE IS NOT THE OWNER OF THE OIL WELLS OR MINES, AND, TH EREFORE, CANNOT BE COVERED BY CLAUSE (F) OF ARTICLE 5(2). WE AGREE WITH LD COUNSEL FOR THE ASSESSEE THAT AT BEST THE ASSESSEE COULD HAVE BEEN COVERED UNDER CLAUSE (K) OF ARTICLE 5(2) BUT FOR THAT THE ASSESSEE NEEDS TO HAVE A BUILDING OR SITE FOR MORE THAN SIX MONTHS AND AS POINTED OUT BY THE CIT (A), THE ASSESSEE DID NOT HAVE SITE FOR MORE THAN SIX MO NTHS. 10. IN CASE OF BROWN AND ROOT INC (SUPRA), THE AS SESSEE COMPANY WAS INCORPORATED AND EXISTING UNDER THE LAWS OF THE USA . DURING THE PREVIOUS YEAR ENDING ON MARCH 31, 1997, THE APPLICANT ENTERED INTO A SUB -CONTRACT WITH A KOREAN COMPANY IN RELATION TO THE INSTALLATION OF THE 12 SHG GAS PIP ELINE BETWEEN B121 PLATFORM AND THE SHG PLATFORM OFFSHORE INDIA BY MOBILIZING THE EIGHT POINT MOORING VESSEL SUBTEC 1 AND ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 8 THE TEST SUPPORT VESSEL CAPTAIN BO. IT WAS COMPL ETED IN 39 DAYS FROM THE DATE OF COMMENCEMENT I.E. FROM NOVEMBER 30, 1996 TO JANUARY 7, 1997. THE APPLICANT IN AN APPLICATION SOUGHT AN ADVANCE RULING ON WHETHER THE AMOUNTS EARNED BY IT WOULD BE TAXABLE IN INDIA. ON THE STATED FACTS, THE ADVANCE RULING AUTHORITY HELD AS UNDER: THE ACTIVITY OF INSTALLATION OF THE PIPELINE COULD NOT BE BROUGHT UNDER OTHER CLAUSES OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT SUCH AS CLAUSE (A), (E) OR (F) OF ARTICLE 5(2) OR UNDER ARTICLE 12(3)(B) OF TH E DOUBLE TAXATION AVOIDANCE AGREEMENT. A SPECIFIC PROVISION WILL OVERRIDE A GE NERAL ONE AND THE ASSESSEE/SUBJECT IS ENTITLED TO INVOKE THE PROVISIO N MOST BENEFICIAL TO HIM, BE THEY THE PROVISIONS OF A TREATY OR STATUTE. SINCE THE ACTIVITY FELL SHORT OF 120 DAYS, THE APPLICANT COULD NOT BE SAID TO HAVE A PER MANENT ESTABLISHMENT IN INDIA. THE ELEMENT OF PERMANENCE IN RELATION TO AN ESTABLISHMENT, IF ANY, WOULD BE ATTRACTED UNDER ARTICLE 5(2)(K) ONLY IF THE INST ALLATION PROJECT CONTINUES FOR A PERIOD OF MORE THAN 120 DAYS AND THAT CONDITION WAS NOT SATISFIED HERE. IT WAS NOT DISPUTED THAT EARNINGS FROM THE WORK PERFORMED BY THE APPLICANT CONSTITUTED BUSINESS PROFITS. HOWEVER, IN THE ABSENCE OF A PER MANENT ESTABLISHMENT, ARTICLE 7 OF THE DTAA WOULD NOT BE ATTRACTED. AS SUCH, THE RE WAS NO TAX LIABILITY ON THE APPLICANT FOR THE BUSINESS PROFITS EARNED BY IT. THUS, THE RATIO OF THIS DECISION IS SQUARELY APPLIC ABLE TO THE FACTS OF THE ASSESSEE. THEREFORE, WE FIND NOTHING WRONG IN THE ORDER OF LD CIT (A) AND, ACCORDINGLY, UPHOLD THE SAME. 11. IN THE RESULT, APPEAL FILED BY THE REVENUE STAN DS DISMISSED. PRONOUNCED ON 14 TH MAY, 2010 SD/- (ASHA VIJAYRAGHAVAN) (JUDICIAL MEMBER) SD/- (T.R.SOOD) (ACCOUNTANT MEMBER) MUMBAI, DATED 14 TH MAY, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXXI, MUMB AI 4. THE DIT(INTERNATIONAL TAXATION), MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH L, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 9 DATE INITIALS 1. DRAFT DICTATED ON 12.5.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 12.5.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.2546/M/2009 M/S. CLOUGH PROJECTS INTERNATIONAL P.LTD . 10