Offshore supply receipts under a composite contract are not taxable in India when the supply component and payment are separately identified.

Income attributable to offshore supplies under a composite contract was not taxable in India where the contract separately identified the offshore supply obligations and the related payment was made outside India. On those facts, the income did not accrue or arise in India, and the treaty provision invoked had no independent application once the offshore receipts were found outside Indian tax net. The revenue's challenge failed.

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Issues: Taxability in India of consideration received for offshore supplies under a composite contract.

Analysis: Where the contract specifically segregated the offshore supply obligations and the corresponding payment was made outside India, the income attributable to such offshore supplies did not accrue or arise in India. Once the offshore receipts were held not taxable in India, the treaty provision pressed into service had no independent application.

Conclusion: The offshore supply receipts were not taxable in India, and the revenue's challenge failed.

Ratio Decidendi: Income from offshore supplies under a composite contract is not taxable in India when the contract clearly identifies the offshore supply component and the related payment is made outside India.

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