DTAA prevails over retrospective tax amendment for offshore supply and services receipts, preserving non-taxability in India.

Receipts from offshore supply of equipment and offshore services were treated as not taxable in India where the India-Japan DTAA excluded such income under Article 7. The retrospective Explanation inserted into section 9(1) of the Income-tax Act, 1961 did not alter that position because a domestic amendment could not fasten tax on receipts already excluded by the applicable treaty. The challenge by the Revenue therefore failed, and the non-taxability of the offshore receipts was upheld.

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Issues: Whether receipts from offshore supply of equipments and offshore services were taxable in India under section 9(1) of the Income-tax Act, 1961 despite the retrospective Explanation inserted by the Finance Act, 2010 and the applicable treaty provisions.

Analysis: The issue stood covered by the decision in the assessee's own case, where it had been held that income attributable to offshore supply and offshore services was not taxable under section 9(1). The further ground urged by the Revenue based on the retrospective Explanation to section 9 did not alter the position because the court noted that Article 7 of the India-Japan DTAA was also applicable. Once the treaty position excluded taxability, the statutory amendment could not fasten tax on the impugned receipts.

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

Final Conclusion: The appeal was dismissed as the Tribunal's view on non-taxability of the offshore receipts was upheld.

Ratio Decidendi: Where the applicable DTAA excludes taxability of offshore receipts, a retrospective amendment to section 9(1) of the Income-tax Act, 1961 does not by itself create a taxable charge contrary to the treaty.

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