2023 (11) TMI 192 - AT - Income Tax

Offshore supply receipts not taxable in India, no supervisory permanent establishment under India-Thailand Tax Treaty Article 5.

Alstom (Thailand) Ltd. (formerly known as Bombardier Transportation Signal (Thailand) Limited Thailand Versus ACIT, Circle 1 (1) (2), International Taxation, Delhi.

ITAT Delhi held that offshore supply receipts were not taxable in India, rejecting revenue's claim of supervisory permanent establishment under ... Income accrued in India - taxability of receipts from offshore supplies - allegation of the revenue authorities that the assessee has a supervisory permanent establishment (PE) under the provisions of Article 5 of India-Thailand Tax Treaty - HELD THAT:- There being no difference in the factual position in the current assessment year, respectfully following the decision of coordinate Bench [ [2023 (8) TMI 1372 - ITAT DELHI]] we hold that the addition made by the Assessing Officer on account of attribution of profit in relation to receipts from offshore supplies is not taxable in India. Accordingly, the Assessing Officer is directed to delete the addition. Taxability of receipts from engineering services as royalty - Addition has been made by the departmental authorities on a completely factual misconception that the receipts from BTIN towards engineering services is royalty income for use of process of equipment. We find, while deciding assessee’s appeals for assessment year 2016-17, 2018-19 and 2019-20 [2023 (8) TMI 1372 - ITAT DELHI] the coordinate Bench has also addressed this issue and held that the receipts are not in the nature of royalty. Appeal of assessee allowed. Issues Involved:1. Taxability of receipts from offshore supplies.2. Taxability of receipts from engineering services as royalty.Summary:1. Taxability of Receipts from Offshore Supplies:The assessee, a non-resident corporate entity from Thailand, engaged in manufacturing train control and signaling systems, formed a consortium with an Indian company and entered into a contract with Delhi Metro Rail Corporation (DMRC). The assessee received Rs. 21,02,08,336/- for offshore supplies and claimed it was not taxable in India as the transfer of title occurred outside India and there was no Permanent Establishment (PE) in India. The Assessing Officer attributed 10% of these receipts as profits of the PE and taxed Rs. 2,10,20,833/-. The Dispute Resolution Panel (DRP) upheld this in line with previous assessments. However, the Tribunal, referencing prior years' decisions and the principle of consistency as per Radhasoami Satsang Vs. CIT, directed the deletion of the addition, stating that the offshore supplies are not taxable under the India-Thailand DTAA.2. Taxability of Receipts from Engineering Services as Royalty:The departmental authorities treated the receipts from Bombardier Transportation India Limited (BTIN) for engineering services as royalty income for the use of process or equipment. The Tribunal, following its previous rulings for assessment years 2016-17, 2018-19, and 2019-20, found that these receipts do not constitute royalty. Consequently, the Tribunal directed the deletion of the additions made on this account.Conclusion:The Tribunal allowed the appeal, holding that the receipts from offshore supplies and engineering services are not taxable in India. The final assessment order was set aside, and the additions made by the Assessing Officer were deleted. The order was pronounced in the open court on 30/10/2023.