COURT: | ITAT Delhi |
CORAM: | Amit Shukla (JM), O. P. Kant (AM) |
SECTION(S): | Article 12, Article 5 |
GENRE: | International Tax |
CATCH WORDS: | India-Cyprus DTAA, Permanent Establishment |
COUNSEL: | Ravi Sharma |
DATE: | July 6, 2018 (Date of pronouncement) |
DATE: | August 4, 2018 (Date of publication) |
AY: | 2008-09 |
FILE: | Click here to view full post with file download link |
CITATION: | |
Article 5 Permanent Establishment (PE): The duration of 12 months specified to constitute a PE is activity specific qua the site, construction, assembly or installation project. Preparatory work for tendering of contract cannot be included in the period. The activity qua the project comes to an end when the work gets completed and the responsibility of the contractor with respect to that activity comes to end. Onus is heavily upon the revenue to establish that that assessee’s activity had crossed the threshold period of 12 months |
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 any activity as stipulated in this clause. Hence, in this case all such preparatory work for tendering purpose before entering into contract cannot be counted while calculating the threshold period.
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