P.C. Verma, J.
1. All these appeals involving connected issues were heard together and are being disposed of by this common order.
2. Appeal No. 448 of 2001 (Old No. 326 of 2000) has been filed by the appellants against the judgment and order dated February 17, 2000, passed by the Income-tax Appellate Tribunal, New Delhi (in short 'the ITAT') in I.T.A. No. 8751(Del) of 92 (assessment year 1989-90), whereby the Income-tax Appellate Tribunal has allowed the appeal filed by the assessee in part.
3. Appeals Nos. 473 of 2001, 474 of 2001 and 475 of 2001 have been filed by the appellants against the common order dated May 3, 2000, passed by the Income-tax Appellate Tribunal, New Delhi (in short 'the ITAT') in I.T.A. Nos. 2494 of Del of 93 (assessment years 1986-87, 1987-88 and 1988-89), 5612 of Del of 91 and 5467 of Del of 91 respectively (both assessment years 1987-88 and 1988-89), whereby the learned Income-tax Appellate Tribunal has dismissed the cross objections of the Revenue on the agreement of the parties that the issue involved in the present cross objections stand covered in favour of the assessee by the decision of the Tribunal in I.T.A. Nos. 162 of 165 (Del) of 1998 dated March 29, 2000.
4. The brief facts are that the assessee is a non-resident foreign company incorporated in South Korea. It entered into an agreement with Oil and Natural Gas Commission (ONGC) on March 12, 1985, in respect of the South Bassein Field Central Complex Facilities (hereinafter referred to as the 'project'). The services under the contract comprised design, engineering, fabrication, installation, commissioning and the outside India portion of the work involved designing, engineering and fabrication. The company had filed returns for the assessment years 1987-88 and 1988-89 declaring 'nil' income. In the income of return the assessee claimed, inter alia, that it did not have a permanent establishment (hereinafter referred to as 'PE') in India, in terms of Article 5 of the Convention for Avoidance of Double Taxation between the Government of India and Government of Korea (hereinafter referred to as 'the CADT') and, therefore, in accordance with Article 7 it was not assessable to tax in India. It was claimed that the Indian operations, under the contract commenced on November 1, 1986, and these were completed on April 12, 1987, and since the period was less than 9 months, it would not constitute a 'permanent establishment' in India. The assessee also referred to a communication dated February 11,1987, from the ONGC which stated that the execution of work relating to the Indian portion had commenced from December 9,1986, at the off-shore location and tentative completion was scheduled by the end of March. The assessment for both the assessment years was completed on March 29, 1990, holding that the company was having a 'permanent establishment' for both the assessment years and assessed income taking 2 per cent, on receipts in respect of outside India activities. Notice was issued for the assessment year 1986-87 on March 30,1990, and assessment was completed on June 8,1992 under the Double Taxation Avoidance Agreement.
5. Aggrieved by the assessment orders, the assessee preferred appeals before the Commissioner of Income-tax (Appeals), Dehradun, who held that the assessee-company did have a 'permanent establishment' but reduced the income in respect of receipts for outside India operations to 1 per cent, and for inside operations to 10 per cent, taking the principle of Instruction No. 1767 dated July 1, 1987.
6. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee-company preferred second appeal for all the three years before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) as regards 'permanent establishment'' but reduced the income to 3 per cent. in respect of inside India activities and nil in respect of outside India activities. The Income-tax Appellate Tribunal in its judgment recorded a finding that no income accrued to the assessee in India in respect of the activities admittedly carried on in Korea. In respect of income for inside India activities the Income-tax Appellate Tribunal upheld the finding of the Assessing Officer for application of Section 145 rejecting the claim of the assessee to nil income. It was also recorded that Instruction No. 1767 is after all a guideline and computation can be made under the relevant provisions of the Act read with the guidelines.
7. We heard learned Counsel for the parties and perused the impugned judgment. Learned Counsel for the appellants raised a question whether the learned Income-tax Appellate Tribunal was correct in taking a contradictory approach. The learned Income-tax Appellate Tribunal has given a specific finding regarding permanent establishment in paragraph 44(B) of its judgment. On the question whether the assessee had a 'permanent establishment' in India, Article 5 of the CADT is being reproduced as under see [1987] 165 ITR 191:
(1) For the purposes of this Convention, the term 'permanent establishment' means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
(2) The term 'permanent establishment' shall include especially--
(a) a place of management;
(b) a branch;
(c) an office ;
(d) a factory;
(e) a workshop.; and
(f) a mine, an oil or gas well, a quarry of any other place of extraction of natural resources.
(3) The term 'permanent establishment' likewise encompasses a building site, a construction, assembly, or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more then nine months.
8. The Income-tax Appellate Tribunal in its judgment has recorded that learned Counsel stated that sub-paragraph 1 of the Article 5 of the CADT generally provided that affixed place of business would be regarded as a 'permanent establishment' if the assessee carried on his business wholly or partly from this fixed place. Article 5(2) provided that the term 'permanent establishment' would include six locations referred to therein. According to learned Counsel, the six locations, could becomes permanent establishments only if they satisfied the test laid down in Article 5(1), i.e. the business of the enterprise was wholly or partly carried on through such locations. Article 5(3) according to learned Counsel was a specific provision and it was well-settled that a specific provision overrides the general provision. The plea in concluding was that Article 5(3) was an exception to Article 5(1) and Article 5(2) and where a building, site or construction assembly or installation project does not exist for a period exceeding nine months, an office rendering support services to such project could not be regarded as a 'permanent establishment' within the meaning of Articles 5(1) and 5(2) since Article 5(3) was a specific provision. The Income-tax Appellate Tribunal has also recorded in its finding that we are not sufficiently convinced to treat the income from Indian operations at Rs. nil for the assessment year 1988-89, specially where the assessee had failed even before the tax authorities to support its facts and figures and we have upheld the application to Section 145. The Income-tax Appellate Tribunal was right in rejecting the argument of zero profit on the Indian operations and to accept the alternative argument holding that Instruction No. 1767 is after all a guideline and computation can be made under the relevant provisions of the Act read with the guidelines themselves.
9. The Income-tax Appellate Tribunal after detailed discussions held that Instruction No. 1767 is after all a guideline and computation can be made under the relevant provisions of the Act read with the guidelines themselves and further held that it would be fair and reasonable if profits from Indian operations are worked out by applying a rate of 3 per cent. With the agreement of learned Counsel for the parties, the Income-tax Appellate Tribunal has rightly held that a specific provision would override a general provision.
10. All the issues in the appeals are concluded by a finding of fact.
11. Thus, in our opinion, no substantial question of law arises to be answered in these appeals.
12. We find no illegality or infirmity in the order of the Income-tax Appellate Tribunal and we are in agreement with the orders passed by the Income-tax Appellate Tribunal. The impugned orders do not require any interference of this court in appeal.
13. All the appeals are dismissed accordingly. No order as to costs.