Kreuz Subsea Pte. Ltd. vs. DDIT [2015] 58 taxmann.com 371 (Mumbai – Trib.) A.Ys.: 2010-11, Dated: June 12, 2015

Facts:
The taxpayer was tax resident of Singapore. It had undertaken installation and construction activity in respect of certain projects. The DRP held that the presence of taxpayer in India in excess of 90 days constituted PE in India under Article 5(6) of India-Singapore DTAA .

According to the taxpayer, it was purely into installation and construction activity, which would clearly fall within Article 5(3) of treaty. Consequently, its activities would not constitute PE due to its presence in India for less than 183 days under Article 5(3) of DTAA .

Held:

• Article 5(3) is a specific provision dealing with ‘Service PE’, on account of construction, installation or assembly project. Under this Article, service PE would be constituted if project continues for a period of more than 183 days in any fiscal year.
• Article 5(6) provides that, if an enterprise is “furnishing services” in the contracting State through its employees for a period of 90 days or more, then it is deemed to have Service PE.
• The threshold period under Article 5(6) is 90 days. If such activities are carried out for a related enterprise, then threshold period is 30 days. Article 5(6) explicitly provides that it applies to “services” other than those covered by Articles 5(4) and 5(5). However, it is silent as regards its relationship with Article 5(3). Thus, Article 5(6) covers various services which are not covered by paras 4 and 5 of article 5 and technical services as defined in Article 12.
• In contradistinction, Article 5(3) is a specific provision. Therefore, such specific activities cannot be read into Article 5(6). There cannot be overlapping of activities carried out within the ambit of Article 5(3) and furnishing of services as stated in Article 5(6).
• Both the Articles should be read independent of each other, or else there would be no requirement of making separate provisions. If the activities related to construction or installation are specifically covered under Article 5(3), then one need not to go to Article 5(6). Hence, purely installation services should be covered under Article 5(3) only and not under Article 5(6).