Offshore supply taxation depends on Indian nexus, while subcontracted receipts and prior-year double taxation claims require careful attribution.

Only profits attributable to operations carried out in India can be taxed where a composite contract separates offshore supply from onshore work; on the stated facts, the offshore equipment supply was completed outside India and no sufficient nexus with the Indian presence was shown. Receipts from Glidepath were treated as subcontracted through the Indian subsidiary, which was remunerated on a cost-plus arm's length basis, so no further attribution was made. Receipts from KITCOL, TTD and CIAL required verification of invoices and year-wise taxability because the claim of prior-year offer to tax could not be decided conclusively on the existing record.

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Issues: (i) Whether offshore supply of equipment was taxable in India by treating the assessee as having a permanent establishment or business connection in India and by attributing profits to such alleged presence; (ii) Whether receipts from Glidepath could be brought to tax in the assessee's hands despite subcontracting and arm's length remuneration to the Indian subsidiary; (iii) Whether receipts from KITCOL, TTD and CIAL could be again taxed in the relevant years despite the claim that they were already offered to tax in earlier years.

Issue (i): Whether offshore supply of equipment was taxable in India by treating the assessee as having a permanent establishment or business connection in India and by attributing profits to such alleged presence.

Analysis: The offshore supply dispute was examined in light of the earlier year's decision in the assessee's own case and the governing principles that only income attributable to operations carried out in India can be taxed. The work orders and payment structure showed a pre-agreed division between offshore supply and onshore installation and commissioning, and the supply component was completed outside India. The alleged Indian presence was not shown to have participated in the offshore supply transactions so as to justify full attribution of profits. The approach of applying a force of attraction theory broadly was not accepted on these facts.

Conclusion: The addition on account of offshore supply of equipment was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether receipts from Glidepath could be brought to tax in the assessee's hands despite subcontracting and arm's length remuneration to the Indian subsidiary.

Analysis: The maintenance arrangement was accepted as having been subcontracted through the Indian subsidiary, which was remunerated on a cost-plus arm's length basis. The allegation of artificial splitting of contracts was rejected in view of the broader finding that the contract structure had been agreed with the customers and there was no basis for further attribution once the Indian enterprise had been duly compensated.

Conclusion: The addition on account of Glidepath receipts was deleted and the issue was decided in favour of the assessee.

Issue (iii): Whether receipts from KITCOL, TTD and CIAL could be again taxed in the relevant years despite the claim that they were already offered to tax in earlier years.

Analysis: On this limited issue, the assessee asserted double taxation and placed reconciliation material on record, while the department disputed the claim for want of proof. Instead of a final merits determination, the matter required verification of the receipts, invoices and year-wise offering to tax, which necessitated factual examination by the Assessing Officer.

Conclusion: The issue was remanded for verification and was allowed for statistical purposes.

Final Conclusion: The appeals were allowed on the principal transfer-pricing and offshore supply issues, relief was granted on the Glidepath receipt issue, and the remaining receipt-matching issue was sent back for verification; the overall disposal was partly in favour of the assessee.

Ratio Decidendi: For offshore supply under a composite contract, only the profits attributable to operations actually carried out in India or to the participation of the Indian permanent establishment can be taxed in India, and no broader attribution is permissible absent such nexus.

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