Offshore supply receipts not taxable in India absent PE or business connection; duty drawback write-off allowed and MAT credit remanded.

Offshore supply receipts under a THDC contract were held not taxable in India because the supply contract was distinct, title passed outside India on FOB terms, consideration was received outside India, and the Revenue failed to prove a fixed place or construction PE or any business connection; section 44BBB was therefore inapplicable. The write-off of a rejected duty drawback claim was allowed as a business or trading loss. Interest under sections 234B and 234C was sustained only to the extent applicable on income subject to advance tax principles and tax deduction at source, with the taxpayer not treated as in default where TDS applied. MAT credit under section 115JAA for AY 2019-20 was remitted to the AO for factual verification.

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Issues: (i) Whether receipts from offshore supply under the THDC contract were taxable in India, including whether the arrangement created a business connection or Permanent Establishment in India and whether section 44BBB could be applied; (ii) Whether the write-off of duty drawback claim was allowable as a deduction; (iii) Whether interest under sections 234B and 234C was chargeable; (iv) Whether MAT credit under section 115JAA for AY 2019-20 required reconsideration.

Issue (i): Whether receipts from offshore supply under the THDC contract were taxable in India, including whether the arrangement created a business connection or Permanent Establishment in India and whether section 44BBB could be applied.

Analysis: The offshore contract was held to be a distinct supply contract, with title to the goods passing outside India on FOB basis and consideration received outside India. The arrangement was not treated as an artificial split of a single composite contract. No material was brought to establish a fixed place PE or construction PE in India, and the onus to prove PE was not discharged by the Revenue. In the absence of a taxable nexus in India, income from offshore supplies could not be brought to tax under section 9(1)(i), and section 44BBB was held inapplicable to such offshore supply receipts.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the write-off of duty drawback claim was allowable as a deduction.

Analysis: The duty drawback amount had earlier been shown as recoverable, and upon rejection of the refund claim it was written off as irrecoverable in the normal course of business. Such write-off was treated as a business loss or trading loss allowable in computation of income.

Conclusion: The issue was decided in favour of the assessee.

Issue (iii): Whether interest under sections 234B and 234C was chargeable.

Analysis: Since tax was deductible at source from the relevant payment stream, the assessee could not be treated as being in default for non-payment of advance tax to the extent covered by tax deduction at source. Interest under section 234C was also held to be chargeable only on returned income and not on the assessed figure in the manner adopted below.

Conclusion: The issue was decided in favour of the assessee.

Issue (iv): Whether MAT credit under section 115JAA for AY 2019-20 required reconsideration.

Analysis: The claim required factual verification and was therefore restored to the Assessing Officer for decision in accordance with law.

Conclusion: The issue was remitted for fresh consideration.

Final Conclusion: The addition relating to offshore supply was deleted, the duty drawback write-off and interest challenges were accepted, and the remaining MAT credit issue for AY 2019-20 was sent back for verification, resulting in a partial grant of relief.

Ratio Decidendi: Offshore supply receipts are not taxable in India where the sale is completed outside India, title passes outside India, no operations attributable to India are established, and no PE or business connection is proved; section 44BBB cannot be invoked for such non-taxable offshore supply income.

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