Permanent establishment and treaty relief govern taxability of offshore vessel hire charges under the income-tax framework.

Hire charges for a time-chartered offshore services vessel were examined under section 44BB of the Income-tax Act alongside the India-Singapore DTAA. The text states that section 44BB operates only as a computation provision, while sections 4, 5 and 9 continue to govern chargeability; in the absence of a permanent establishment in India, the treaty benefit was available. It also notes that the assessee had no office, branch, project office or liaison office in India, and that the lower deduction certificate under section 197 did not estop correct tax determination. On that basis, the hire charges were held not taxable under section 44BB and the addition was deleted.

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Issues: Whether hire charges received for a time-chartered offshore services vessel were taxable in India under section 44BB of the Income-tax Act, 1961 despite the absence of a permanent establishment in India, and whether the receipts could be characterised as royalty or otherwise taxed ignoring the India-Singapore treaty.

Analysis: The assessee was found not to have any office, branch, project office or liaison office in India, and the vessel's stay in India for the relevant period was supported by the record. The contractual arrangement was a project time charter for a diving support vessel, and the receipts were examined against the treaty framework and the domestic deeming provisions. The reasoning accepted that sections 4, 5 and 9 of the Income-tax Act, 1961 continue to operate even where a presumptive provision such as section 44BB is involved, and that section 44BB is only a computation provision. It was further held that, in the absence of a permanent establishment, the assessee was entitled to the benefit of the India-Singapore DTAA. The reliance placed on the lower deduction certificate under section 197 was held not to create an estoppel against the correct determination of tax liability.

Conclusion: The hire charges were not taxable under section 44BB in the absence of a permanent establishment, the treaty benefit applied, and the addition was deleted in favour of the assessee.

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