Offshore supply receipts outside India were not taxable, and arbitrary bifurcation into business income and technical services was rejected.

Offshore supply of equipment was treated as outside India where the contracts provided CIF terms, title passed outside India, and payment was received outside India, so the sale was completed abroad and no Indian tax event arose merely because separate onshore activities existed. The article also notes that an earlier coordinate bench in the assessee's own case had taken the same view on offshore supply receipts. A consolidated consideration could not be split into business income and fee for technical services on a 60:40 basis without contractual support, and such bifurcation was arbitrary. The presence of an Indian group entity or separate onshore operations did not, by itself, make the offshore supply taxable in India.

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Issues: Whether the receipts from offshore supply of equipment were taxable in India and whether the Assessing Officer could bifurcate the consolidated consideration into business income and fee for technical services.

Analysis: The contracts showed that the goods were supplied on CIF terms from outside India, the title in the goods passed outside India, and the payments were also received outside India. On those facts, the sale was completed outside India and no taxable event arose in India merely because related onshore activities existed under separate arrangements. The earlier coordinate bench decisions in the assessee's own case had already held that the offshore supply receipts could not be taxed in India. The allocation of the consolidated consideration in a 60:40 ratio between business income and fee for technical services had no contractual basis and was held to be arbitrary. The existence of an Indian group entity or separate onshore operations did not justify treating the offshore supply as a composite taxable receipt.

Conclusion: The offshore supply receipts were held not taxable in India, and the bifurcation into business income and fee for technical services was held impermissible. The addition was directed to be deleted, in favour of the assessee.

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