Offshore supply receipts not taxable in India where supplier performed no Indian operations and title passed abroad.

Offshore supply receipts under contracts for elevators and escalators were held not taxable in India where the supplier's role was confined to design, manufacture and offshore supply, and onshore work was separately assigned to the Indian consortium member. The contracts showed clear segregation of obligations, consideration and payment currency, and title in the goods passed outside India on CIF terms. The Tribunal applied the principle that only income attributable to operations carried out in India can be taxed under section 9(1)(i) and Article 7 of the India-China DTAA. As no taxable operations by the supplier in India were shown, the addition was deleted.

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Issues: Whether receipts from offshore supply of elevators and escalators under the contracts with the Indian project entities were taxable in India under section 9(1)(i) of the Income-tax Act, 1961, and Article 7 of the India-China DTAA.

Analysis: The assessee's scope was confined to design, manufacture and offshore supply, while the onshore activities were separately assigned to the Indian consortium member. The contracts and related documents showed a demarcation of work, consideration and currency of payment. The supplies were on CIF basis and the title in goods passed outside India. Following the decision in the assessee's own earlier years, the Tribunal held that only income attributable to operations carried out in India can be taxed in India, and no such taxable operations were shown in the assessee's scope of work.

Conclusion: The offshore supply receipts were not taxable in India, and the addition was deleted.

Ratio Decidendi: In the case of offshore supply under a contract with separately demarcated obligations, where the supplier performs no operations in India and title to the goods passes outside India, no income is taxable in India merely because the contract is part of a broader composite arrangement.

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