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Basic international taxation vol II book covers the practical guidance on international tax planning techniques, an analysis of anti avoidance rules and their use.
Table of contents

Before us, the Ld. DR referred to records of several assessment years and on that basis, alleged that in the absence of reliable and authentic details regarding number of days spent in India article 5 1 will apply instead of article 5 2 h. We would like to mention here that the DRP has concluded that days were spent in India during assessment year In our considered opinion, the Ld. DR, at this stage, cannot improve the findings of the DRP.

Another objection of the Ld. DR was that the assessee indulged in ongoing projects and, therefore, it cannot be said that the state is less than 9 months. We are of the opinion that the establishment of PE in India is in respect of each assessment year only. Moreover there is no bar in carrying on the activities year after year. In our considered opinion the Ld.

The Ld. DR also contended that the matter should be sent back to the assessing officer for the determination of the period of stay in India. In our considered opinion, multiple opportunities are not permissible to any authority to experiment in setting up case as held by the Hon'ble Gujarat High Court in the case of Rajesh Babubhai the Damania ITR Considering the facts of the case in totality, in 19 ITA Nos.

First grievances accordingly, allowed. At this stage it is necessary to analyse scope of work carried out by assessee within Indian territories under contract with all contractors entered into by assessee for years under consideration. We refer to agreement placed at page of paper book.

Roy Rohatgi (Author of Basic International Taxation Second Edition Volume I)

In the agreement, work performed by assessee has been more particularly explained in schedule at page as under:. In connection with the project the utilisation of specialised grouting equipment and bulk cement storage vessels to store a part of the required materials and including the specialised personnel to operate the equipment to perform the prescribed requirement of mixing and pumping cementitious grout. To include for all the testing of the grout materials and reporting on tested materials" 5.

None of these activities in our opinion seemingly indicate to be construction activity. Further, as per contracts entered into by assessee with various parties, assessee is to ensure personnel and equipments. It has been submitted that equipments and personnel come to India as and when they required by main contractor. Assessee performs work and goes back till, the next requirement of Main Contractor. From these arguments advanced by Ld. Counsel, he admits before us that there is Construction PE of assessee in India. We shall analyse Article 5 2 h of the treaty, to the specific activity carried out by assessee, in case of assessee for Assessment Years under consideration in light of observations made by Coordinate bench of this Tribunal for assessment year supra.

Thus, activity carried on by assessee does not fall under category of Construction project, as sub-sea activities that can be treated as 'Construction" are "laying of pipe-lines and excavating and dredging". Taking into consideration specific activity of grouting carried out by assessee for, Main Contractors in Indian territories, being pipelines and cable crossing, pipeline and cable stabilisation, Pipeline cable protection, stabilisation and protection of various subsea structures, Anti-scour protection etc. Assessee has not been able to establish before authorities below and before us, how the activities carried out by it, amounts to construction or assembly project to fall under Article 5 2 h of the treaty for years under consideration.

Further, in order to bring any other establishment which is not specifically mentioned in Article 5 2 , requirements laid down in Article 5 1 are to be satisfied. The two conditions that need to be satisfied are:. Thus, the place of business, generally should be intangible form such as an office, a factory, and equipment, etc " OECD model Convention , as well as UN model Convention , defines key features for determining 'place of business' as under:.

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In other words, such a place of business may comprise of an equipment for instance, a computer server and need not be manned with the Enterprises personnel. A 'place of 23 ITA Nos. Before us, Ld. Counsel did not argue, on as to whether equipments 'through' which, assessee carried out its business activity, constituted fixed place PE under Article 5 1 of India UAE treaty for assessment years under consideration. Instead, he placed reliance upon observations of this Tribunal for assessment year in assessee's own case regarding applicability of Article 5 2 h of treaty, and that activities carried out by assessee amounts to 'construction' and since duration test of each contract is not satisfied, as per requirement under sub clause h of clause 2 of Article 5 , no PE could be made out.

On the basis of discussion hereinabove we have already rejected submission of Ld. There is no dispute that, assessee's equipments as well as Personnel, were stationed on the vessel of Main Contractor, for carrying out grouting. It is also an admitted fact that equipment is the main place of business to assessee.

Further, on analysis of the Clause 7. It cannot be denied that the 'vessel', on which equipments were placed and personnel was stationed, as fixed place of business through which business is carried on by assesse. For every assessment year under consideration assessee, has a fair amount of permanence through its personnel and its equipments, within territorial limits of India, to perform its business activity for Contractors with whom it has entered into agreements.

Having regard to OECD commentary and Klaus Vogel's commentary on general principles applicable that as long as presence is in a physically defined geographical area, permanence in such fixed place could be relative having regard to the nature of business, it is hereby held that the equipment along with the personnel on vessel of the contractor itself constitutes a fixed place of assessee's business in India.

On perusal of draft assessment order, as well as DRP order, we have observed certain discrepancies. For instance for assessment year Ld. AO held that assessee has a PE in India in the form of equipment. However DRP proceeded by observing that Ld. AO treated income from grouting services as fees for technical services.

Basic International Taxation (Vol II)

In our opinion, findings of DRP to this extent is incorrect, as Ld. AO has never treated income earned by assessee from contracto's to be FTS. Assessee placed heavy reliance on the order passed by Coordinate bench in its own case for assessment year We very carefully perused the same to follow the view taken therein, however we fail to do so in view of the fact that existence of a fixed 25 ITA Nos. Some of the examples of fixed place of business given by Baker are the following: The place of business must be fixed and permanent.

Similarly, a writer's study has been held to constitute a PE [Georges Simenon v. A stand at a trade fair, occupied regularly for three weeks a year, through which the enterprise obtained contracts for a significant part of its annual sales, has also been held to constitute a PE [Josepn Fowler v. R [] 90 DTC ]. A temporary restaurant operated in a mirror tent at a Dutch flower show for a period of seven months was held to constitute a PE1. An office, workshop and storeroom for the maintenance of aircraft, which were leased out by the enterprise, has been held to constitute a PE2.

On the other hand, possession of a mailing address in a state - without an office, telephone listing or bank account - has been held not to constitute a PE [Commissioner of Internal Revenue v. Consolidated Premium Iron Ores [] F 2d ]. The mere supply of skilled labour to work in a country did not give rise to a PE of the company supplying the labour [ Tekniskil Sendirian Berhal v. A drilling rig which, although anchored while in operation, was moved to a new site every few months, has been held not to constitute a PE3.

Similarly, a remotely operated vessel which was used to inspect and repair submarine pipelines was held not to constitute a PE because a moving vessel is not a fixed place of business [ Dy. CIT v.

Double Tax Avoidance Agreement - Commerce - UGC NET/JRF - Paper 2 - Panaceatutor

Subsea Offshore Ltd. The principal test, in order to ascertain as to whether an establishment has a fixed place of business or not, is that such physically located premises have to be 'at the disposal' of the enterprise. For this purpose, it is not necessary that the premises are owned or even rented by the enterprise. It will be sufficient if the premises are put at the disposal of the enterprise. However, merely giving access to such a place to the enterprise for the purposes of the project would not suffice. The place would be treated as 'at the disposal' of the enterprise when the enterprise has right to use the said place and has control thereupon.

Account Options

Some of the illustrative cases decided by courts of different jurisdictions given by Baker in his commentary are contained in the following passages from that book:. R [] 99 DTC , the taxpayer was a resident of the United States who was contracted to supply training to employees of a Canadian company. For the purposes of the training contract, the taxpayer was given various offices at the premises of the Canadian company, which he was only allowed to enter at normal office hours. He was allowed to use the client's telephone only on client's business.

He spent days in one tax year and 40 in the subsequent year at the premises.

Basic International Taxation Second Edition Volume I: Principles

The Tax Court of Canada and the Federal Court of Appeal confirmed that he had no fixed base - which was treated as having the same meaning as PE - at the premises since he had no right to use the premises as the base for the operation of his own business. The agreement required the UK company to supply a general manager: the general manager's office constituted the PE and not the entire hotel since the UK company had a secured right to use this office for the purposes of the agreement.

No employees of the Swiss company were present at the production facility to supervise production5. The Bundestinanzhof has also held that a scene painter who was commissioned to carry out a work in France for six weeks, and given special rooms for the purpose, did not have a fixed base at those premises. A travel agency in Paris had made an office available to the German company from time to time, and the manager of the German company had a flat in Paris; the Court held that the German company had no PE at its disposal in France.

The taxpayer had an office 3m by 6m at his disposal on the premises of his principal supplier in Belgium, together with telephone and telex, where the taxpayer and four of his staff worked. According to Philip Baker, the aforesaid illustrations confirm that the fixed place of business need not be owned or leased by the foreign enterprise, provided that is at the disposal of the enterprise in the sense of having some right to use the premises for the purposes of its business and not solely for the purposes of the project undertaken on behalf of the owner of the premises.

According to him, the crucial element is the term 'place'. Importance of the term 'place' is explained by him in the following manner:. This territorial link serves as the basis not only for the distributive rules which are tied to the existence of PE but also for a considerable number of other distributive rules and, above all, 28 ITA Nos.

We would also like to extract below the definition to the expression 'place' by Vogel, which is as under: "A place is a certain amount of space within the soil or on the soil.

This understanding of place as a three-dimensional zone rather than a single point on the earth can be derived from the French Version 'installation fixe' as well as the term 'establishment'. As a rule, this zone is based on a certain area in, on, or above the surface of the earth. Rooms or technical equipment above the soil may quality as a PE only if they are fixed on the soil. This requirement, however, stems from the term 'fixed' rather than the term 'place', given that a place or space does not necessarily consist of a piece of land. On the contrary, the term 'establishment' makes clear that it is not the soil as such which is the PE but that the PE is constituted by a tangible facility as distinct from the soil.

The term 'place' is used to define the term 'establishment'. Therefore, 'place' includes all tangible assets used for carrying on the business, but one such tangible asset can be sufficient.