Independent Professional Diver Did Not Have a Fixed Base in India

Independent Professional Diver Did Not Have a Fixed Base in India 

The taxpayer, in the case in question, was an individual who resided in the Netherlands. He was a professional diver who worked on an independent basis, deriving income from independent professional services under article 14 of the India-Netherlands Income and Capital Tax Treaty (1988) (the Treaty).

In the tax year concerned (2009) he carried out repair work at a floating tank storage facility (a ship) situated at a fixed location within the territorial waters of India. He worked for a consecutive period of 89 days in India (from 15 December 2008 to 13 March 2009, inclusive). During the period during which the taxpayer provided services in India, he lived on the ship. He carried out the repair work on a contract and project basis, meaning that the work was not contracted out for a fixed period of time but until the project in question was finished.

Article 14(1)(a) of the Treaty provides that income derived by a resident of one of the states (the Netherlands) in respect of professional services or other services of an independent character are taxable only in that state (the Netherlands) unless he has a fixed base regularly avail- able to him in the other state (India) for the purpose of performing his activities. In that event, the income that is attributable to the fixed base located in India may be taxed in India. The Netherlands is required to eliminate double taxation via the exemption method (article 23(2) of the Treaty).

It was not under dispute before the Supreme Court that the income generated by the diver from his services provided in India had to be classified under article 14 of the Treaty. It was also not under dispute that article 14(1)(b) of the Treaty was inapplicable; according to article 14(1)(b), the taxpayer’s income from independent personal services is taxable in India if the taxpayer’s stay in India exceeds, in the aggregate, 183 days in the tax year concerned (the tax- payer did not meet this 183-day threshold). What was in dispute was whether or not the taxpayer in question was entitled to relief from double taxation. In particular, the Netherlands tax inspector maintained that the taxpayer had no fixed base regularly available to him in view of the short duration and non-recurrent nature of his work in India. Consequently, the tax inspector denied the taxpayer relief from double taxation pursuant to the Treaty. The tax- payer was of the view that he had a fixed base regularly available to him in India and that he was entitled to relief from double taxation as regards the income that was attributable to that fixed base.