Rule of consistency and India-Thailand DTAA protection led to deletion of tax additions on offshore supplies and engineering services.

On identical facts, offshore supply and engineering service receipts that had been accepted as non-taxable in earlier and subsequent years could not be brought to tax by a different view in the year under consideration; the rule of consistency required the settled position to be followed, and the addition was deleted. Under the India-Thailand DTAA, offshore supplies completed outside India with title passing outside India, and engineering services treated as business profits in the absence of a permanent establishment in India, were not taxable in India; the Tribunal followed its coordinate decision on the same factual matrix and deleted the related additions.

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Issues: (i) Whether the addition made in respect of offshore supplies and engineering services could be sustained when the same receipts had been accepted as non-taxable in earlier and subsequent assessment years on identical facts; (ii) whether the receipts from engineering services and offshore supplies were taxable in India under the India-Thailand DTAA.

Issue (i): Whether the addition made in respect of offshore supplies and engineering services could be sustained when the same receipts had been accepted as non-taxable in earlier and subsequent assessment years on identical facts.

Analysis: The assessment records for the immediately preceding and succeeding years showed that the same nature of receipts had been examined and accepted as not taxable under the Act read with the DTAA. The facts were found to be unchanged, and no legally relevant departure in the assessee's business model or in the governing law was shown. The rule of consistency was applied to avoid unsettling an already accepted position on identical facts.

Conclusion: The addition could not be sustained on this ground and was liable to be deleted in favour of the assessee.

Issue (ii): Whether the receipts from engineering services and offshore supplies were taxable in India under the India-Thailand DTAA.

Analysis: The offshore supply receipts were found to arise from transactions completed outside India, with transfer of title occurring outside India. The engineering services were also held to fall outside taxable character in India under the treaty framework, as the India-Thailand DTAA did not contain a separate article taxing fees for technical services and the receipts were treated as business profits in the absence of a permanent establishment in India. The Tribunal also followed the earlier coordinate decision on similar facts, which held that the Indian tax authorities had proceeded on an erroneous factual premise in attributing taxability to these receipts.

Conclusion: The receipts were not taxable in India, and the additions on these counts were deleted in favour of the assessee.

Final Conclusion: The appeals were partly allowed, and the impugned additions relating to offshore supplies and engineering services were deleted on the facts and treaty position.

Ratio Decidendi: Where identical receipts have consistently been accepted as non-taxable in earlier and later years on the same facts, and the applicable DTAA does not tax such receipts in India in the absence of a permanent establishment, the Revenue cannot depart from the settled position without a change in facts or law.

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