| The Tax Publishers2020 TaxPub(DT) 2937 (SC) : (2020) 426 ITR 0001 : (2020) 315 CTR 0622 INCOME TAX ACT, 1961
Section 90
Maintenance of a fixed place of business which is of a preparatory or auxiliary character in the trade or business of enterprise would not be considered to be permanent establishment in india.
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Double Taxation Avoidance Against - Between India and Korea - Permanent establishment - Fixed place of business which is of a preparatory or auxiliary character
ONGC awarded a 'turnkey' contract to a consortium comprising of assessee, i.e., Samsung Heavy Industries Co. Ltd. based at South Korea), and Larsen & Toubro Limited,being a contract for carrying out the 'work', inter alia, of surveys, design, engineering, procurement, fabrication, installation and modification at existing facilities, and start up and commissioning of entire faciliteis covered under the 'Vasai East Development Project'. AO held that project office Mumbai constituted assessee's permanent establishment in India and gross revenue of assessee outside India attributable to business carried out by the Project Office were to be taxed here. Held: Ascertainment of a 'permanent establishment' is that it should be an establishment through which the business of an enterprise' is wholly or partly carried on. Accordingly, maintenance of a fixed place of business which is of a preparatory or auxiliary character in the trade or business of enterprise would not be considered to be permanent establishment. In the instant case, Project Office was established to coordinate and execute 'delivery documents in connection with construction of offshore platform modification of existing facilities for ONGC and there were only two persons working in Mumbai office, neither of whom was qualified to perform any core activity of assessee. Accounts of Mumbai office showed that no expenditure relating to execution of contract was incurred. Accordingly, Mumbai office was a mere liaison office, not involved in the core activity of execution of project itself and not, therefore, PE of assessee in India.
REFERRED : Referred :Asstt. DIT-I, New Delhi v. M/s. E-Funds IT Solution Inc. (2018) 13 SCC 294 : 2017 TaxPub(DT) 4562 (SC), Director of Income Tax (International Taxation) v. Morgan Stanley and Company Inc. (2007) 7 SCC 1 : 2007 TaxPub(DT) 1354 (SC) and CIT & Anr. v. Hyundai Heavy Industries Company Limited (2007) 7 SCC 422 : 2007 TaxPub(DT) 1249 (SC).
FAVOUR : In assessee's favour.
A.Y. :
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