INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and USA - Existence of permanent establishment - Period of 120 days as per article 5(2)(k), whether should fall in any 12 months period or in 'A' in question--Installation PE

Assessee challenged order of CIT(A) holding that assessee constituted a PE in India under article 5 of the India-USA Double Taxation Avoidance Agreement for assessment year 2002-03. Assessee contended that it did not undertake any installation activities during assessment year 2002-03 and therefore, CIT(A) erred in holding that installation PE, as existed in earlier years, continued during assessment year 2002-03.Held: In instant case, there existed installation PE in preceding assessment years. Thus, requirements of article 5(2)(k) for existence of PE were satisfied. Original installation project remained in existence during the period under consideration and it had undisputedly continued for a period exceeding 120 days in preceding assessment years. Argument of the assessee that period of stay of its employees in India was only 54 days during the period under consideration was also not relevant as requirement of the relevant article is that installation project should continue for a period of more than 120 days in any 12 month period. Therefore, assessee was having PE in India within the meaning of article 5(2)(k). Period of 120 days as per article 5(2)(k) should fall in any 12 month period and period of 120 days is not to be seen during the financial year only relevant to assessment year under consideration. Once there is an installation project which continues for a period of 120 days in any 12 month period, then there exists PE within the meaning of article 5(2)(k) of DTAA even if there is no installation activity carried on in the subsequent period.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2002-03

INCOME TAX ACT, 1961

Section 90

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