Offshore supply receipts in a turnkey contract are not taxable in India when separately identifiable and performed outside India.

Offshore supply receipts under a separately identifiable component of a turnkey power project, performed outside India, were not taxable in India merely because the overall contract was turnkey. The note states that such offshore receipts could not be clubbed with the onshore segment, and section 44BBB could not apply once the receipts were outside the normal charging provisions. The revisionary view treating the offshore supply receipts as taxable in India was reversed, and the assessee succeeded.

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Issues: Whether the offshore supply receipts arising from the turnkey power project contract were taxable in India and whether section 44BBB of the Income-tax Act, 1961 applied to those receipts.

Analysis: The contract documents showed that the offshore supply component was separately identified and was to be performed outside India, while the onshore component covered local services and incidental activities. The offshore receipts were therefore not to be clubbed with the onshore segment for Indian tax purposes. In view of the earlier settled position on offshore supply taxation in turnkey contracts, the receipts from offshore supplies could not be brought to tax in India merely because the overall project was a turnkey arrangement. Once the offshore receipts were not taxable under the normal charging provisions, the special presumptive regime under section 44BBB also could not be applied to them.

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

Final Conclusion: The revisionary direction treating the offshore supply receipts as taxable in India was reversed, and the appeal was allowed.

Ratio Decidendi: Offshore supply receipts under a separately identifiable contract for work performed outside India cannot be taxed in India by recharacterising the arrangement as a composite turnkey contract, and a special presumptive provision applies only where the underlying receipts are otherwise within the taxable base.

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