Permanent establishment

When a project office (PO) was opened by a non-resident Korean company in India for the coordination and execution of a project in India/abroad and no restriction had been imposed by the RBI on the workings of the project office, the fixed place PE had come into existence in the shape of a project office and such project office is a PE within the meaning of Art 5.1 of the India and Korea DTAA as the assessee had wholly or partly carried out its business activity through it, as held by DelTrib in Samsung Heavy Industries Co Ltd v ADIT (International Taxation) — In favour of: The revenue (partly).

However, the AO was not justified in attributing 25% of the outside India revenue to the PE of the assessee in India, since there was a lack of material made available on record to ascertain as to what extent the activities of business were carried on by the assessee through its Mumbai project office and that such fact had to be determined before deciding the percentage of attribution of the outside India activity of the assessee to its PE in India. Thus, the matter was remitted to the AO.

Decided on: 30 August 2011.