Technip – Delhi High Court finds that a major installation project is not a PE and that charges for use of the installer’s own equipment are not royalties for equipment use

A Singapore company (“Technip”) installed a marine crude oil receiving facility for an Indian company (“IOCL”) at a contract price of U.S.$18.6 million. Although the facility belonged to IOCL, its installation required Technip to use its own barges containing specialized equipment, with 68% of the contract price allocated to this use.

The definition of “royalties” in the Singapore-India Treaty (like the Canada-India Treaty) included payments for the use of industrial or commercial equipment. In rejecting the Indian authority’s argument that the barge charges were royalties, the Court stated:

There is a difference between the use of the equipment by [Technip] ‘for’ IOCL and the use of the equipment ‘by’ IOCL. Since the equipment was used for rendering services to IOCL, it could not be converted to a contract of hiring of equipment by IOCL.

Technip’s profit instead was exempt under Art. 7. The Court stated:

Under Article 5(3) [Technip] can be said to have a PE in India only if the installation or construction activity is carried on in India for a period exceeding 183 days in any fiscal year. [Technip] was … present in India… for 41 days during 2008-09 for rendering the contract of service to IOCL.

Neal Armstrong. Summaries of Technip Singapore Pte Ltd. v. Director of Income Tax, W.P (C) No. 7416/2012 (Del HC) under Treaties, Art. 12, Art. 5.