ACIT Vs Degolyer and Macnaughton Corporation (ITAT Delhi)
In ACIT Vs Degolyer and Macnaughton Corporation, the Delhi ITAT held that for determining the existence of a Service Permanent Establishment (PE) under Article 5(2)(l) of the India-USA DTAA, only “unique solar days” of employee presence in India are to be counted and not cumulative man-days of multiple employees. The assessee, a US-based petroleum consulting company, had earned revenue from ONGC and Oil India Ltd. for consultancy services rendered in India. The Assessing Officer treated the assessee as having a Service PE because the cumulative stay of employees exceeded 90 days and taxed the receipts under Section 44BB. However, the CIT(A) found that although cumulative man-days were 181, the actual unique solar days of presence were only 72. Relying on earlier judicial precedents, including Clifford Chance Pte. Ltd., the Tribunal upheld the CIT(A)’s view and ruled that no Service PE existed in India. Consequently, the assessee’s business income was held not taxable in India under Article 7 of the DTAA.
Solar Days Not Man Days- To Decide Service PE Under India–US DTAA And If no Fixed place PE or any other type of PE of the appellant exists in India during the year under consideration, the Business income of the appellant is not taxable in India.
