Attribution of offshore receipts to a permanent establishment fails where no evidence links the income to Indian operations.

Income of a non-resident can be attributed to a permanent establishment in India only where the Revenue proves, with evidence, that the income-generating operations were carried on through that establishment. The assessee showed that the Mumbai project office acted only as a communication channel and had no role in design, fabrication, procurement or offshore supply activities, while the Revenue failed to establish any nexus between those offshore receipts and the Indian office. On that factual and legal basis, attribution in India was not sustainable and the addition could not be upheld.

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Issues: Whether income arising from offshore supplies made outside India could be attributed to the assessee's alleged permanent establishment in Mumbai and taxed in India.

Analysis: The assessee produced material to show that the Mumbai project office functioned only as a communication channel and had no role in the design, fabrication, procurement, or supply of the offshore platforms. The Revenue did not bring any evidence to establish that any part of the offshore supply business was carried on through the project office. In the assessee's own earlier year, the jurisdictional High Court had held that taxability of such offshore receipts could not be sustained without evidence showing that the permanent establishment played a role in earning them. Applying that binding reasoning, and following the principle that a non-resident's income can be attributed only to operations carried out in India, the attribution made by the lower authorities could not be upheld.

Conclusion: No income from offshore supplies was attributable to the alleged permanent establishment in Mumbai, and the addition was unsustainable.

Final Conclusion: The appeal succeeded because the Revenue failed to prove any nexus between the offshore supplies and the Indian project office, so the offshore receipts could not be brought to tax in India on an attribution basis.

Ratio Decidendi: Income of a non-resident can be attributed to a permanent establishment in India only when the Revenue establishes, with evidence, that the relevant income-generating operations were carried on through that permanent establishment.

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