Treaty presence threshold for offshore drilling starts with preparatory activities in India, not only actual drilling.

For Article 5(5) of the India-Singapore DTAA read with section 44BB, the 183-day period begins when the rig enters India and starts connected preparatory and operational activities, not only when actual drilling commences. The court treated upgrades, repairs, positioning and other preparatory work as integral to the offshore drilling services linked to exploration or extraction of mineral oil, so the threshold was satisfied. On that basis, the assessee was treated as having a presence in India for more than 183 days, and the challenge to taxability failed.

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Issues: Whether the 183-day threshold under Article 5(5) of the India-Singapore DTAA, read in the context of section 44BB of the Income-tax Act, 1961, begins only when actual drilling operations commence or from the time the rig enters India and undergoes upgrades, positioning and preparatory work for the contract.

Analysis: The contractual and meeting records showed that the rig entered Indian waters in April 2010 and was immediately subjected to upgrades, repairs, positioning and other preparatory activities to meet the operator's requirements for the offshore drilling work. Those activities were integral to providing services or facilities in connection with the exploration, exploitation or extraction of mineral oil and could not be separated from the eventual drilling operations. The period for the treaty threshold therefore commenced when the rig entered India for those connected activities, not only from the later date on which actual drilling began.

Conclusion: The threshold period under Article 5(5) started from the rig's entry and preparatory operations in India, so the assessee was treated as having a presence in India for more than 183 days. The issue was decided in favour of the Revenue.

Final Conclusion: No substantial question of law arose, and the challenge to the taxability determination failed.

Ratio Decidendi: For purposes of Article 5(5) of the India-Singapore DTAA, the period is counted from the commencement of connected preparatory and operational activities in India, not merely from the date on which actual drilling begins.

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