The Delhi High Court held that No Permanent Establishment (PE) under Article 5(2)(g) of India Cyprus Treaty when threshold period of twelve months not exceeded.
The present appeal has been filed challenging the orders of the income Tax Appellate Tribunal (ITAT). The Petitioner in the present appeal is the Commissioner of Income Tax – International Taxation -1 and the writ petition has been filed against Bellsea Ltd, the respondent.
The Counsel for the petitioner contended that the Income Tax Appellate Tribunal (ITAT) has erred in disregarding the fact that activities of the assessee at the site had started in September, 2007 i.e., prior to the contract date and that the finding of the ITAT suffers from perversity as it ignores that the assessee did not provide any details of arrival of stay etc. of the employees visiting India prior to the date of contract thereby seeking to avoid the rigours of Article 5(2)(g) of India Cyprus Treaty.
Article 5(2)(g) of the India Cyprus Treaty reads that “A building site, construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continues for a period of more than twelve months.” Article 5(2)(g) of the India Cyprus Treaty refers to PE as construction, assembly or installation project or supervisory activities in connection therewith where such activities continue for a period of more than twelve months.
The Income Tax Appellate Tribunal observed that “the threshold period of 12 months has not exceeded in the present case and consequently no PE can be said to have been established in Article 5(2)(g). Accordingly, we hold that no income of the assessee on the Contract executed by assessee in India can be held to be taxable in terms of Article 7.”
A Bench consisting of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “This Court is of the view that no material has been placed before us to impugn the Tribunal’s finding that work had commenced at the site only on or after 4th January, 2008. It is settled law that preparatory work like travelling for obtaining tender/contract cannot be deemed to be the starting point of the contract. Consequently, this Court finds no perversity in the findings of fact rendered by the Tribunal.”
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