“construction PE”
The decision most relied on for construction PE is National Petroleum Construction Company v. DIT (383 ITR 648), cited in 69 judgments on BharatTax.
Leading authorities on construction PE
An Indian agent providing marketing services, without the authority to conclude contracts on behalf of a foreign company, does not constitute a Dependent Agent Permanent Establishment (DAPE) for the foreign company in India under DTAA provisions.
A non-resident entity's activities in India are assessed for Permanent Establishment (PE) under Double Taxation Avoidance Agreements, considering types like fixed place, construction, and agency PE, and the applicability of presumptive taxation under sections such as 44BBB.
When an assessee is a sub-contractor, a net profit rate of 7% applied by the CIT(A) is justified.
When multiple provisions of Article 5 of a Double Taxation Avoidance Agreement (DTAA) might apply to determine a Permanent Establishment (PE), the specific provision concerning a 'Service PE' (Article 5(3)) related to construction, installation, or assembly projects exceeding 183 days takes precedence.
The case is authority for the principle that where an Indian entity is given authority to execute local work but overall responsibility remains with a foreign entity, this does not necessarily constitute a consortium, and the foreign entity's liability should be assessed based on the specific contractual terms.
A non-resident company may not have a Permanent Establishment (PE) in India if its activities at the project site are limited and do not satisfy the 'business test' under the relevant Double Taxation Avoidance Agreement (DTAA). This is especially true if the entire work is carried out by a subcontractor.