Offshore supply receipts taxable only for India-linked operations; consequential assessment falls once revisionary order is set aside.

Offshore supply receipts under a distinct supply contract were held taxable in India only to the extent attributable to operations actually carried out in India; the mere fact that equipment was procured and supplied outside India did not, on these facts, make the entire receipt taxable. The earlier administrative approach based on advance ruling was treated as unsustainable in light of the later Supreme Court position. Once the revisionary order under section 263 was set aside, the consequential assessment order could not survive, and the connected appeal was restored for fresh adjudication on merits. The assessee thus obtained relief on the substantive tax issue.

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Issues: (i) Whether the receipts from the offshore supply contract were taxable in India or only such income as was attributable to operations carried out in India could be brought to tax; (ii) Whether the consequential assessment order and the dismissal of the connected appeal as not maintainable could survive after the revisionary order was set aside.

Issue (i): Whether the receipts from the offshore supply contract were taxable in India or only such income as was attributable to operations carried out in India could be brought to tax.

Analysis: The offshore supply contract was distinct from the onshore supply and service contracts. The equipment was procured and supplied outside India, and the Tribunal followed the earlier order in the assessee's own case holding that, on the facts, the mere offshore supply could not be treated as income accruing in India. The earlier administrative view based on the advance ruling was found unsustainable in light of the later Supreme Court position, and the principle applied was that only income reasonably attributable to operations actually carried out in India can be taxed where the offshore element is executed outside India.

Conclusion: The offshore supply receipts were not taxable in India except to the extent, if any, attributable to operations carried out in India; the issue was decided in favour of the assessee.

Issue (ii): Whether the consequential assessment order and the dismissal of the connected appeal as not maintainable could survive after the revisionary order was set aside.

Analysis: Once the revisionary order under section 263 was annulled, the consequential assessment made pursuant to that order could not stand independently. The connected appeal, which had been rejected as not maintainable on the premise that the original assessment had ceased to survive, required restoration so that the merits of the assessment could be examined afresh by the first appellate authority.

Conclusion: The consequential assessment order did not survive, and the appeal was restored for fresh adjudication on merits.

Final Conclusion: The revisionary basis for taxing the offshore receipts was rejected, the assessee obtained relief on the substantive tax issue, and the connected appellate proceedings were either annulled or restored for reconsideration.

Ratio Decidendi: In the case of an offshore supply contract, income is taxable in India only to the extent it is attributable to operations actually carried out in India; a consequential assessment founded on an unsustainable revisionary order cannot survive.

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