Law:

Section:

Section 9 of the Income-tax Act, 1961, read with articles 5 and 7 of the Double Taxation Avoidance Agreement between India and Korea - Income - Deemed to accrue or arise in India - Applicant is a Korean company engaged in business of power stations - In year 2005, Power Grid invited bids for execution of works related to Tehri Pooling Station Package -Applicant became successful bidder - On applicant's request, Power Grid awarded to applicant an offshore contract covering all works to be performed outside India including supply of all offshore equipments and materials on CIF Indian port of disembarkation basis; and onshore supply contract and onshore services contract including civil works, training in India, etc., had been awarded to applicant's assignee 'L&T' in India - However, it was made clear in Letter of Award (LoA) that applicant shall be overall responsible to ensure execution of all three contracts to achieve successful completion of entire work - Whether, on facts, when each party, viz., applicant and L&T, performs obligations under respective contracts awarded to it separately and receives monies payable under contracts independent of each other, mere collaborative efforts and overall responsibility assumed by applicant for successful performance of project is sufficient to hold that applicant and L&T constitute an AOP and, accordingly, be assessed as such under Act - Held, no - Whether since title to and property in goods supplied by applicant at foreign port stood transferred at port of shipment or while goods were on high-seas, sale of equipments and materials by applicant took place outside territories of India and income in relation thereto cannot be said to accrue or arise in India - Held, yes - Whether applicant, in carrying out equipments to work site and in safeguarding same from any damage, is only carrying out contractual obligations incidental to offshore supplies of goods and it cannot be considered to be a supervisory activity contemplated by article 5.3 of Treaty - Held, yes - Whether, therefore, applicant cannot be said to have a permanent establishment in India within meaning of article 5.3 of DTAA - Held, yes - Whether,…

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