Whether the different periods of the contracts are to be aggregated to reckon the threshold of 183 days under clause 5.3 of the DTAA with Singapore to determine PE?

In Re Tiong Woon Project & Contracting Pte. Limited Vs. ADIT (International Taxation), Chennai (AAR)- Whether the different periods of the contracts are to be aggregated to reckon the threshold of 183 days under Article 5.3 of the DTAA in a fiscal year in a case where the projects are not carried out for the same principal. We notice that Naftogaz India had given two orders: one order in FY 2009-10 and another in FY 2010- 11.

These are to carry out different work: one is for the erection of Coke Drum and Fractionators’column at Bina and other for erection of equipment at CDSP unit or GGSRL at Bhatinda. It can therefore be said that for FYs 2009- 10 and 2010-11 the parties are different. All these are independent projects and there is no interconnection and interdependence amongst them. None of them appears to be an extension of another. Therefore the duration test for installation and assembly projects provided under Article 5.3 of the DTAA cannot be construed to be read for all the projects that do not pass the test of cohesiveness, interconnection and interdependence. We therefore, hold that in the given facts of the case, aggregation of the periods of the contracts cannot be made for these four contracts and consequently the applicant cannot be said to have a PE in terms of Article 5.3 of the DTAA. We may clarify that it is based on the fact that the duration of each of the two projects executed in FY 2010-11 does not exceed 183 days.

 In view of the above, the income earned by the applicant from its activities of execution of four installation projects referred above is not liable to tax in India.