Mere leasing of dredger (equipment) does not give rise to a permanent establishment

DDIT Vs. Nederlandsche Overzee Baggermaatschappiji BV. [2010-TII-78-ITAT-MUM-INTL]- Mumbai Income Tax Appellate Tribunal

Mumbai Income Tax Appellate Tribunal (“the Tribunal”), in the case of DDIT Vs. Nederlandsche Overzee Baggermaatschappiji BV. [2010-TII-78-ITAT-MUM-INTL] (“the assessee”), has analyzed whether the lease of a dredger would be considered a bare boat charter or a wet lease. After analysis of the facts of the case, it held that the lease was a bare boat lease, and that a dry lease of equipment does not result in a permanent establishment (“PE”).

Facts

• The assessee, a company incorporated in Netherlands, was a tax resident of Netherlands for the purposes of a Double Taxation Avoidance Agreement (“tax treaty”) between India and the Netherlands. The business of the company was to provide dredgers on charter hire to other parties.

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