1 Article 5(2)(g) of India-Cyprus DTAA – auxiliary and preparatory activity undertaken prior to awarding of the contract cannot be reckoned for computing threshold for existence of PE.
Geeta Jani , Dhishat B. Mehta, Chartered Accountants
Bellsea Ltd vs.
A.Y: 2008-09, Date
of Order: 6th July, 2018
Article 5(2)(g) of
India-Cyprus DTAA – auxiliary and preparatory activity undertaken prior to
awarding of the contract cannot be reckoned for computing threshold for
existence of PE.
The Taxpayer was a
company incorporated in Cyprus mainly engaged in the business of dredging and
pipeline related services for oil and gas installations. During the year under
consideration, Taxpayer was awarded a contract by another foreign entity (FCo)
for placement of rock in seabed for protection of gas pipelines and umbilical1 of subsea structures in oil and gas field developed in
On the basis that
construction work had started on 4th January 2008 as per the
contractual terms, and was completed on 30th September 2008 (i.e the
date of issuance of completion certificate as per the contract), the taxpayer
contended that it did not have any PE in India. Accordingly, it did not meet
the 12-month threshold for creation of installation PE under Article 5(2)(g) of
India- Cyprus DTAA.
However, the AO
contended that 12-month threshold should be computed from September 2007, when
one of the employees of the Taxpayer visited India for the purpose of
collecting information, until November 2008 (as the formalities of final
completion certificate had extended upto November 2008, even though the date
mentioned in the completion certificate is 30th September 2008).
According to the AO, the presence was for a project which lasted for more than
12 months and triggered Installation PE.