Taxability of drawings, reimbursements and non-resident interest turns on contractual linkage, offshore supply, and revisionary scrutiny.

Receipts for drawings and designs, where contractually and commercially inseparable from offshore supply of plant and equipment, could not be taxed independently as fees for technical services; the offshore supply was treated as completed outside India and the additions were deleted. Reimbursements of SAP, intranet and related charges were not fees for technical services or royalty, so the addition was deleted. For the non-resident assessee, section 234B interest was held not leviable for the relevant years, but the section 263 revision for AY 2007-08 was sustained because the original assessment had not examined the contracts and agreements in detail.

---

---

Issues: (i) Whether consideration received for supply of drawings and designs, and offshore supply of plant and equipment, was taxable in India as fees for technical services or business income; (ii) Whether reimbursement of SAP, intranet and related charges was taxable as fees for technical services; (iii) Whether interest under section 234B was chargeable in the case of the non-resident assessee, and whether the revision under section 263 for AY 2007-08 was sustainable.

Issue (i): Whether consideration received for supply of drawings and designs, and offshore supply of plant and equipment, was taxable in India as fees for technical services or business income.

Analysis: The receipts from drawings and designs were held to be inextricably linked with the supply of plant and equipment and not capable of being viewed in isolation. The contracts were examined as a whole, and the earlier coordinate bench rulings on identical facts were followed. The offshore supply of plant and equipment was treated as completed outside India and not taxable in India. The Tribunal also directed verification only to reconcile the project-wise linkage of drawings and designs, with the assessee bearing the burden of proof in consequential proceedings.

Conclusion: The issue was decided in favour of the assessee, and the impugned additions on drawings, designs and offshore supply were deleted.

Issue (ii): Whether reimbursement of SAP, intranet and related charges was taxable as fees for technical services.

Analysis: The Tribunal followed the assessee's earlier year directions of the DRP and found that the reimbursements did not involve rendering of technical services and were also not royalty. In the absence of any distinguishing fact or contrary material from the Revenue, judicial consistency was applied.

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

Issue (iii): Whether interest under section 234B was chargeable in the case of the non-resident assessee, and whether the revision under section 263 for AY 2007-08 was sustainable.

Analysis: For the non-resident assessee, the Tribunal followed the Supreme Court ruling that section 234B interest is not attracted for the relevant years. For AY 2007-08, the revision under section 263 was upheld because the original assessment had not examined the relevant contracts and agreements in detail, making the assessment order erroneous and prejudicial to the interests of the Revenue.

Conclusion: Interest under section 234B was held not leviable in the assessee's favour for the relevant appeals, while the section 263 revision for AY 2007-08 was sustained against the assessee.

Final Conclusion: The common order substantially accepted the assessee's challenge on the core taxability issues, granted relief on reimbursements and interest, upheld the revisionary action for one assessment year, and disposed of the batch of appeals by partially allowing most of them.

Ratio Decidendi: Where drawings and designs are contractually and commercially inseparable from offshore supply of equipment, the receipts cannot be assessed independently as fees for technical services; ancillary reimbursements without technical element are not taxable as FTS, and section 234B does not apply to the relevant non-resident assessments.

---