2018 (1) TMI 852 - AT - Income Tax

Foreign Company's Offshore Income Not Taxable in India: Tribunal Dismisses Revenue's Appeal

The Tribunal held that income from offshore supply of cables by a foreign company in India is not taxable in India, following consistent judicial ... Income deemed to accrue or arise in India - Holding the income from offshore supply of cables not taxable in India - effective rate on payment made to the assessee under offshore supply contracts - PE in India - Held that:- AO brought to tax the Revenues from offshore supply by considering profit rate of 10% and attributing 25% of profits to operations carried out in India. While doing so, the AO has followed the orders of his predecessors as well as the order of the Ld.CIT passed u/s 264 for the FY 2015-16 i.e. A/y 2016-17. We find the Ld.CIT(A) deleted the addition made by the AO by following order of the Tribunal in assessee’s own case in the preceding years as well as the decision of the Jurisdictional High Court in assessee’s own case. [2016 (1) TMI 1126 - DELHI HIGH COURT] Nothing contrary was brought to our notice by the Ld.CIT DR against the finding of the Ld.CIT(A) except stating that the Ld.CIT(A) has not considered the order passed by the Ld.CIT u/s 264 of the I.T.Act, 1961. The same, in our opinion, cannot be a ground to take a different view than the view taken by the Ld.CIT(A) who has followed the decision of the Tribunal in assessee’s own case in the preceding assessment year as well as the decision of the Hon’ble jurisdictional High Court in assessee’s own case - Decided against revenue Issues Involved:1. Taxability of income from offshore supply of cables by a foreign company in India.Issue-wise Detailed Analysis:1. Taxability of Income from Offshore Supply of Cables:Facts of the Case:The assessee, a company incorporated in Korea, executed 29 projects in India during FY 2013-14 and filed its return of income declaring taxable income of Rs. 49,88,35,664/-. The assessee claimed that income from offshore supply of materials, which were supplied from outside India, is not taxable in India. However, tax was deducted at source by Indian concerns on payments made to the assessee, for which the assessee claimed a refund.Assessment Proceedings:The Assessing Officer (AO) asked the assessee to submit agreements and show cause why additions for offshore supply should not be made, as done in previous years. The AO noted that predecessors had attributed 50% of income to operations in India with a profit rate of 20% on an estimated basis. For FY 2015-16, certificates were issued at an effective rate of 4% on payments under offshore supply contracts. The AO attributed 25% of income to operations in India with a profit rate of 10%, resulting in a final tax liability of 1% of the receipts, determining the total income at Rs. 52,91,43,096/-.CIT(A) Order:The CIT(A) held that the income from offshore supply of cables is not taxable in India, referencing multiple judgments in the assessee’s own case for various assessment years. The CIT(A) noted that the issue is covered by the Hon'ble High Court's decisions, which consistently held that offshore supply is not taxable in India as the title and risk in goods passed outside India.Tribunal's Findings:The Tribunal reviewed the orders of the authorities below and the Paper Book filed by the assessee. The AO's approach of taxing revenues from offshore supply by attributing 25% of profits to operations in India was based on previous orders and CIT's order u/s 264. However, the CIT(A) deleted the addition by following the Tribunal's and High Court's decisions in the assessee’s own case for preceding years. The Tribunal found no contrary evidence from the Revenue and upheld the CIT(A)’s order, dismissing the Revenue's appeal.Conclusion:The Tribunal concluded that offshore supply income is not taxable in India, affirming the CIT(A)'s decision based on consistent judicial precedents in the assessee’s own case. The appeal filed by the Revenue was dismissed.Pronouncement:The judgment was pronounced in the open court on 12.01.2018.