The assessee, a Korea based company, entered into a contract with O.N.G.C. and L&T as consortium partners. The Assessee set up a Project Office in Mumbai, India, which, as per the Assessee, was to act as “a communication channel” between the Assessee and ONGC in respect of the Project. Pre- engineering, survey, engineering, procurement and fabrication activities which took place abroad, all took place in the year 2006. Commencing from November, 2007, these platforms were then brought outside Mumbai to be installed at the Vasai East Development Project. The Project was to be completed by 26.07.2009. the AO held that the work relating to fabrication and procurement of material was very much a part of the contract for execution of work assigned by ONGC. The work was wholly executed by PE in India and it would be absurd to suggest that PE in India was not associated with the designing or fabrication of materials. Accordingly attributed 25% of gross  receipts  of the assessee outside India was attributable to the business carried out by the Project Office of the assessee.  revenue .  The DRP and also Appellate Tribunal confirmed the order of the AO . On appeal by the assessee the High Court held that the question as to whether the Project Office opened at Mumbai cannot be said to be a “permanent establishment” within the meaning of Article 5 of the DTAA would be of no consequence. The High Court then held that there was no finding that  25% of the gross revenue of the Assessee outside India was attributable to the business carried out by the Project Office of the Assessee. According to the High Court, neither the AO nor the ITAT made any effort to bring on record any evidence to justify this figure.  Accordingly the appeal of the assessee was allowed . On appeal by the revenue the Court held that , Project office in India cannot be construed as fixed place hence cannot be considered as permanent establishment . The condition precedent for applicability of “fixed place” permanent establishments under Article 5(1) of the Double Taxation Avoidance Treaties is that it should be an establishment “through which the business of an enterprise” is wholly or partly carried on. Further, the profits of the foreign enterprise are taxable only where the said enterprise carries on its core business through a permanent establishment. The maintenance of a fixed place of business which is of a preparatory or auxiliary character in the trade or business of the enterprise would not be considered to be a permanent establishment under Article 5. Also, it is only so much of the profits of the enterprise that may be taxed in the other State as is attributable to that permanent establishment ( CA No 12183 of  2016  dt 24 -07 -2020   ( AY. 2007 -08)