Offshore supply receipts outside India held not taxable and excluded from section 44BBB business receipts.

Offshore supply receipts from goods supplied and paid for outside India were treated as not accruing or arising in India because the offshore supply activities were concluded outside India and no income was deemed taxable under section 9(1)(i) or the DTAA. Applying the same view taken in the assessee's earlier years, the ITAT held that such receipts could not be included in business receipts for estimation of income under section 44BBB. The addition was directed to be deleted, giving the assessee relief on the taxability of offshore supply contract receipts.

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Issues: Whether receipts from offshore supply contracts were taxable in India and liable to be included in business receipts for estimation of income under section 44BBB of the Income-tax Act, 1961.

Analysis: The receipts related to supply of goods made outside India and the payments were also received outside India in foreign currency. An identical controversy in the assessee's own case for earlier years had been decided by the coordinate bench in favour of the assessee on the footing that the offshore supply activities were concluded outside India, so no income therefrom could be deemed to accrue or arise in India under section 9(1)(i) of the Income-tax Act, 1961 and the DTAA. Following that consistent view, the receipts from offshore supply contracts were held not to form part of the business receipts for computation under section 44BBB.

Conclusion: The receipts from offshore supply contracts were not taxable in India and could not be included for estimation of income under section 44BBB; the addition was directed to be deleted.

Final Conclusion: The appeal was allowed and the assessee obtained complete relief on the taxability of offshore supply contract receipts.

Ratio Decidendi: Where offshore supply of goods is carried out and concluded outside India and the income is not deemed to accrue or arise in India under section 9(1)(i), such receipts cannot be brought to tax in India or included in the business receipts for computation under section 44BBB.

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