Law:

Section:

2007] 291 ITR 482 [2007] 161 TAXMAN 191 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax, Meerut v. Hyundai Heavy Industries Co. Ltd. S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ. CIVIL APPEAL NOS. 2734 AND 2735 OF 2007 MAY 18, 2007 Section 9, read with section 4, of the Income-tax Act, 1961 read with article 7 of Convention for Avoidance of Double Taxation between India and Korea - Income - Deemed to accrue or arise in India - Assessment years 1987-88 and 1988-89 - Whether in case of foreign enterprise, an income which accrues or arises to a foreign enterprise in India can be only such portion of income accruing or arising to such a foreign enterprise as is attributable to its business carried out in India - Held, yes - Whether since there is no specific provision under Act to compute profits accruing in India in hands of foreign entities, profits attributable to Indian PE of foreign enterprise are required to be computed under normal accounting principles and in terms of general provisions of Act and, therefore, ascertainment of a foreign enterprise's taxable business profits in India involves an artificial division between profits earned in India and profits earned outside India - Held, yes - Whether computation of profits in each PE decides quantum of income on which source country can levy tax, and, therefore, it is necessary that profits of PE are computed as independent units - Held, yes - Whether unless PE is set up, question of taxability does not arise irrespective of whether transactions are direct or they are through PE - Held, yes - Assessee, a Korean company, entered into an agreement with ONGC for designing, fabrication, hook-up and commissioning of a platform in Bombay High in India - Contract was in two parts; one was for fabrication of platform in Korea and other was installation and commissioning of said platform in Bombay High - Whether since installation PE in India came into existence only on conclusion of transaction giving rise to supplies of fabricated platforms; it emerged only after contract with ONGC stood concluded; and fabricated platform was delivered in Korea to agents of ONGC, profits that accrued to assessee for Korean…

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