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Ground No. 2 - Erroneously profits attributed to alleged PE of the Appellant in India inspite of entity level operating losses 2.1. On the facts and in the circumstances of the case and in law and without prejudice to Ground No.1 above, the AO / DRP erred in arbitrarily adopting 25 percent of the gross receipts as taxable income attributable to the Appellant's alleged PE in India under Article 7 of the Tax Treaty.

2.2. The Appellant prays that it has incurred large operating losses as depicted by its Audited Financial Statements and therefore, no profit or taxable income is otherwise attributable to the Appellant's alleged PE in India under Article 7 of the Tax Treaty. Therefore, the highly excessive and arbitrary attribution of profits to the alleged PE adopted by the AO and upheld by the DRP be reversed and relief be allowed to the Appellant accordingly.

requested to please give a working of profit attributable to the PE, along company supporting evidences.
x.) Subsequently, our discussions suggests that the forms of Permanent Establishment ('PE envisaged in the Department's letter relates to fixed place PE under Article 5(1) and Service PE under Article 5(2)(i) of the Tax Treaty. Even otherwise, any other forms of PE under Article 5(1) or 5(2) (e.g. a place of management, branch, factory, etc) or under Article 5(4) - Dependant Agent PE have no relevance to the facts of our case.

his book "The OECD-Model-Convention and its update 2014" (Michael Lang and others, (edited) IFBD, Linde) observes-

"In the last decade the tendency to broaden the scope of Article-5(1) by extending the meaning of "at the disposal of"

could be observed. The result is lowering of the threshold for the creation of a fixed place, from a right to control a place/ location of business to a more factual based approach, focusing on the ability of the enterprise to use a certain place for its activities. In 2003, the OECD incorporated the painter example in the commentary. According to that example, a painter who, for two years, spends three days a week in the large office building of his main client will constitute a PE. The presence of the painter in that office building where he is performing the most important functions of his business for the client will be enough to establish a PE. That example indeed shows a very broad understanding of the concept of permanent establishment as defined in Article-5(1). It no longer refers to a certain room or location over with the painter can exercise a minimum degree of power or at least can store his equipment. Instead, just the activities and presence at certain place over a sufficiently long period will be the decisive factor to create a PE.

45 ITA No. 579/Del/2013, ITA No. 779/Del/2014, Hyatt International Southwest Asia Ltd.

42. As regards of existence of PE under Art-5(2)(i), the AO in para-5.2 [p.6-7] of his order has clearly proved that contention of the assessee is factually incorrect and the employees have stayed beyond the requisite period thereby establishing PE under Art-5(2)(i) as well.

43. It was argued that work-bench in a caravan, restaurants on a permanently anchored river boats, a transformer or generator on board, a railway wagon is also qualified as PE. Even a computer servicer and Satellite transponder can be treated as PE. Hence, keeping in view that the entire staff works from the premises from the Hotel in India, it can be safely presumed to be PE and fixed place of business in India.