Offshore supply receipts not taxable in India where title passes abroad and consideration is separately identifiable.

Receipts from offshore supply contracts were stated to be outside India's taxing jurisdiction where title to goods passed outside India and the supply consideration was separately identifiable. The presence of onshore obligations did not, by itself, make the offshore receipts taxable in India, and a permanent establishment for onshore activities did not alter that result when it had no role in the offshore sale portion. The analysis applied the settled principle that offshore supply income is not taxable in India when the sale is completed outside India and the consideration is independently ascertainable.

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Issues: Whether the amounts receivable under the offshore supply contracts for supply of equipments and materials were liable to tax in India under the Income-tax Act, 1961 and the India-Korea tax treaty.

Analysis: The offshore supply arrangements provided for separate consideration, transfer of title outside India, payment through foreign currency remittance, and insurance and delivery terms consistent with a sale concluded outside India. The presence of onshore obligations did not convert the offshore supply into income accruing in India. The existence of a permanent establishment for onshore activities did not, by itself, make offshore supply receipts taxable where the PE had no role in the offshore sale portion. The ruling followed the settled position that income from offshore supplies is not taxable in India when the sale is completed outside India and the consideration is independently ascertainable.

Conclusion: The receipts from offshore supplies were not taxable in India and the question was answered in the negative, in favour of the applicant.

Final Conclusion: The offshore supply component of the contracts was held to be outside India's taxing jurisdiction on the facts presented, and the applicant succeeded on the taxability issue.

Ratio Decidendi: Where title to goods passes outside India and the offshore supply consideration is separately identifiable, receipts from such supplies are not taxable in India merely because the overall project includes onshore activities or a permanent establishment exists for those activities.

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