Law:

Section:

Section 90 of the Income-tax Act, 1961 read with articles 5 and7 of the Double Taxation Avoidance Agreement between India and Mauritius - Double taxation relief - Where agreement exists - Whether clause (i) of para 2 of article 5, which defines expression 'permanent establishment', ought to be treated as a provision complementary to para 1 of article 5 - Held, yes - Whether, therefore, when clause (i) of para 2 sets out a minimum period for continuance of construction or installation project, it stands to reason that said period has to be projected in para 1 of article 5 for purpose of judging whether there is a 'fixed place of business' within meaning of para 1 of article 5 - Held, yes - Whether starting point of time-limit contemplated by clause (i) of article 5.2 has to be reckoned from effective date, i.e., date of signing contract - Held, no - Whether preliminary work performed outside India can be taken into account for purpose of identifying starting point of time of 9 months - Held, no - Applicant, a company incorporated in Mauritius, entered into an agreement on 4-12-2007 with an Indian company, 'HOEC' for laying pipelines under sea and constructing structures inclusive of pre-commissioning of pipelines for a fixed and lump sum consideration - Contract would be executed both within and outside Indian territorial waters - Pre-construction survey in November, 2008 and arrival of members of Project Management Team (PMT) in mid-November 2008 to monitor shore approach activities are earliest events that would come within fold of project work - Whether on facts, starting point of project cannot be earlier than October, 2008 and since project was expected to be completed in all respects by March, 2009, applicant cannot be said to have a PE in India within meaning of para 1 of article 5, read with clause (i) of article 5.2, of DTAA - Held, yes - Whether, therefore, business profits arising to applicant in India are not taxable in India in view of clear provisions of article 7.1 of DTAA - Held, yes FACTS The applicant is a company incorporated in Mauritius. It entered into an agreement on 4-12-2007 with an Indian company, 'HOEC', for laying pipelines under the…

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