2019 (11) TMI 1833 - AT - Income Tax

Offshore Supply Payments Not Taxable in India: ITAT Rules in Favor of Assessee Under I.T. Act and DTAA for AY 2015-16.

The ITAT ruled in favor of the assessee, a Russian joint stock company, regarding the taxability of payments received under offshore supply contracts for ... Income taxable in India or not - Taxability of payment received under Offshore supply contracts - DCIT/DRP held amounts received by the appellant company from f he Offshore Supply Contracts are covered by the provisions of section 44BBB and consequently liable to tax in India. HELD THAT:- The coordinate bench of ITAT in assessee’s own case for AY 2007-08 to 2011-12 [2017 (4) TMI 758 - ITAT MUMBAI] had considered an identical issue and after considering relevant facts held that offshore supply contracts were carried out and concluded outside and hence, no income there-from deemed to accrue or arise in India in terms of section 9(1)(i) of the I.T.Act, 1961 and DTAA provisions and accordingly, not chargeable to tax. We, further noted that an identical issue has been considered for AY 2014-15 [2018 (9) TMI 2119 - ITAT MUMBAI], where by following the earlier order of the Tribunal, the coordinate bench held that amount received towards supply of material and equipment under offshore supply contracts would not form part of the business receipts for the purpose of section 44BBB of the I.T.Act, 1961. Thus, amount received towards offshore supply contracts, in respect of goods supplied outside India is not liable to tax in India in terms of section 9(1) of the I.T.Act, 1961 and under DTAA provisions and accordingly, direct the AO to delete additions made towards estimation of income u/s 44BBB of the I.T.Act, 1961, in respect of offshore supply contracts. Appeal filed by the assessee is allowed. Issues involved: Taxability of payment received under Offshore supply contracts.Analysis:1. The appeal was against the final assessment order passed by the Ld. AO u/s 143(3) r.w.s. 144C (13) of the I.T.Act, 1961, concerning Assessment Year (AY) 2015-16, arising from the directions of the Dispute Resolution Panel (DRP)-1(WZ), Mumbai, u/s 144C(5) of the I.T.Act, 1961.2. The main issue was whether the amount received under offshore supply contracts was taxable in India under section 44BBB of the Act. The assessee argued that the supplies were made and payments received outside India, hence not taxable in India.3. The assessee contended that the receipts from the offshore supply contracts were not taxable in India, while the Revenue argued for taxability under section 44BBB.4. The assessee, a joint stock company from Russia, was involved in civil construction and power projects in India. The Ld. AO included the amount received from offshore supply contracts in the income, citing business connection in India.5. The Ld. AR relied on previous ITAT decisions in favor of the assessee for similar issues in earlier years. The Ld. DR supported the AO's order and DRP's directions.6. The Tribunal considered previous ITAT decisions and held that offshore supply contracts carried out outside India were not taxable in India under section 44BBB and DTAA provisions.7. The Tribunal referred to earlier decisions for AY 2014-15 and held that amounts from offshore supply contracts did not form part of business receipts for section 44BBB.8. Consequently, the Tribunal directed the AO to delete the additions made towards income estimation under section 44BBB for offshore supply contracts, following the view that such income was not taxable in India.9. The appeal by the assessee was allowed, and the additions towards offshore supply contracts were deleted.This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision regarding the taxability of payment received under offshore supply contracts.