Permanent establishment threshold not met where vessel-based pipeline inspection lacked a fixed and enduring business presence in India.

A foreign enterprise has a permanent establishment in India only where its activities amount to a fixed and enduring business presence under Article 5 of the Double Taxation Agreement. A vessel, remotely operated vehicles and related inspection arrangements used for limited inspection and repair work on submarine pipelines did not create such a fixed place of business, because the vessel was only a moving instrument of operations and no substantial, enduring projection into India was shown. The enterprise therefore had no permanent establishment in India, and its business profits remained taxable only in the United Kingdom under Article 7.

---

---

Issues: Whether the assessee had a permanent establishment in India under Article 5 of the Double Taxation Agreement, so that its business profits were taxable in India instead of only in the United Kingdom.

Analysis: Article 5 defines permanent establishment as a fixed place of business carrying on the enterprise's business, and includes specified establishments such as mines, extraction sites, and certain projects. The decisive inquiry was whether the assessee's vessel, remotely operated vehicles, and related inspection arrangements amounted to a fixed and enduring business presence in India. The arrangement was confined to inspection and repair work on submarine pipelines for a limited period, and the vessel was a moving instrument of operations rather than a fixed place of business. The concept of permanent establishment requires a substantial, enduring projection of the foreign enterprise into the taxing State, which was not shown on the facts.

Conclusion: The assessee did not have a permanent establishment in India, and its profits were taxable only in the United Kingdom under Article 7 of the Double Taxation Agreement.

---