Permanent establishment under India-US DTAA requires actual use of the rig, not mere readiness during repairs.

A treaty permanent establishment under Article 5(2)(j) of the India-US DTAA requires actual use of an installation or structure for exploration or exploitation of natural resources for more than 120 days in a twelve-calendar-month period. Mere readiness for use during repair or maintenance is not enough, and the meaning of "used" is to be taken from the treaty text without importing a broader definition from the Income-tax Act. On that interpretation, the assessee was not treated as having a permanent establishment in India on the basis alleged, and the finding in favour of the assessee was upheld.

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Issues: Whether the assessee had a permanent establishment in India under Article 5(2)(j) of the Double Taxation Avoidance Agreement between India and the United States on the footing that the rig was merely ready for use during periods of repair and maintenance.

Analysis: The relevant treaty provision treated as a permanent establishment an installation or structure used for the exploration or exploitation of natural resources, but only if so used for more than 120 days in any twelve-calendar-month period. The Assessing Officer and the First Appellate Authority proceeded on the basis that "used" could include being ready for use and that the Income-tax Act could be consulted to expand that meaning. The Tribunal held that the treaty language itself was clear, that no further importation of meaning from the Income-tax Act was warranted, and that the provision referred to actual use of the installation or structure for exploration or exploitation purposes, not mere readiness for use during maintenance or repair. The High Court found no reason to take a different view.

Conclusion: The assessee did not have a permanent establishment in India on the basis alleged, and the finding in favour of the assessee was upheld.

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