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2014 (5) TMI 151 - HC - Income TaxEstablishment of Permanent Establishment Rig operated for the clients in India - Held that - The Tribunal rightly was of the view that the word used has been sufficiently explained in the Agreement requiring no further explanation - there is no scope of entering into the Income Tax Act as the word used has been used in conjunction of an installation or structure for exploration or exploitation of natural resources and only if so used for a period of more than 120 days in 12 month period - it is absolutely clear that the Agreement meant user of installation and structure for exploration or exploitation of natural resources and not merely being ready for use the order of the Tribunal is upheld Decided against Revenue.
Issues: Interpretation of 'permanent establishment' under Double Taxation Avoidance Agreement
Analysis: 1. Issue: Whether the assessee had a permanent establishment in India during the relevant assessment years. - The Tribunal dealt with three Appeals involving a similar question for three different assessment years. The Assessing Officer believed that the rig, even during maintenance and repair, was ready for use, constituting a permanent establishment in India as per the Double Taxation Avoidance Agreement between India and the United States. - The First Appellate Authority accepted this argument, but the Tribunal disagreed. Article 5(2)(j) of the Agreement defines 'permanent establishment' to include an installation used for exploration or exploitation of natural resources for more than 120 days in a year. - The Tribunal concluded that the word 'used' in the Agreement does not require further explanation and specifically refers to the actual use of the installation, not just being ready for use. Therefore, the Tribunal overturned the decisions of the Assessing Officer and the First Appellate Authority. 2. Judgment: - The Court, led by Barin Ghosh, C.J., upheld the Tribunal's decision. They found no reason to deviate from the Tribunal's interpretation of the term 'permanent establishment' under the Double Taxation Avoidance Agreement. - Consequently, the Appeals were dismissed, affirming that the assessee did not have a permanent establishment in India during the relevant assessment years based on the specific interpretation of 'used' in the Agreement.
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