Justice P.V. Reddi, Chairman - The applicant is a Company incorporated in Mauritius. The following facts are stated in the application seeking advance ruling under section 245Q(1) of the Income-tax Act, 1961 and the written submissions.

1.1 The applicant entered into an agreement on 4-12-2007 with Hindustan Oil Exploration Company Ltd. (hereafter referred to as "HOEC"), an Indian company for laying pipelines under the sea and constructing the structures inclusive of pre-commissioning of the pipelines for a fixed and lump sum consideration of USD 59,174,200. HOEC wants to set up gas processing facility at PY-1 gas field located in the northern offshore portion of the Kaveri basin (in the State of Tamil Nadu). Accordingly, HOEC has given the contract to the applicant to carry out the work of laying pipelines under the sea. The work consists of transportation and installation engineering, transportation, pre-trenching, pipe laying, back filling, installation, pre-commissioning and surveys (pre-construction/pre-installation and post-installation), erection, construction, testing and handing over services. The contract for the aforesaid services/facilities will be executed both within and outside the Indian territorial waters. The contract document is at Annexure-A to the application. The applicant will hire barges and tugs for carrying out the proposed work. The applicant will enter into contracts with resident/non-resident contractors for supply of equipment, labour and services. Employees will be deputed to India either by the applicant or any other group entity in order to carry out the construction activity. The applicant will compensate the group entity for such supply of personnel. The lump sum contract price will be paid based on the progress of the work. Appendix A-I to the contract gives the description of the milestones and the dates by which the same should be achieved. Appendix A-II to the contract gives the schedule of payments in terms of percentage of the contract price based on the progress of work.

1.2 The applicant in its written submissions dated 25-2-2009 has furnished a tabular statement containing the nature of activity (‘milestone description’), the place of execution, the milestone dates specified in the agreement and the actual dates. This is in modification of the statement furnished in the original application. The items listed under the head ‘Milestone description’ are as follows : (1) Confirmation/Information required as per Minutes of Interface meeting; (2) Submission of PEP, HSE & Quality Plan; (3) Completion & Approval of transportation & installation analysis & design of the various structures; (4) Completion of Submission of approval for installation procedures, Drawings, Sketches, Documents, Installation aids; (5) Completion of welding specifications, Procedures, Qualifications & Tests; (6) Completion of importation and arrival of both dredging spread at site; (7) Completion of mobilization of transportation spread to the fabrication yard in Thailand; (8) Completion of importation and mobilization of transportation spread to the coating yard in Vizag, India; (9) Completion of Pre-construction survey; (10) Completion of importation and mobilization of the DLB spread to Site; (11) Completion of Installation of pipeline; (12) Completion of Jacket and deck installation; (13) Completion of testing of trap-to-trap Pipeline and Riser system; (14) Demobilisation of DLB Spread from Site; (15) Submission of As-Built Documentation.

1.3 The applicant has categorized the above activities into those which will be performed wholly outside India and those which will be carried out in India. The activities listed at 1-8, 10 and 15 which relate to planning, follow-on engineering, mobilization and rig-up of equipment etc. will be performed wholly outside India, according to the applicant. The other activities listed at Sl. Nos. 9 to 11 and 14 will be executed within India. As far as items 6 to 8 and 10 are conce