TaxTMI 
TaxTMI 
2014 (8) TMI 312
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....sues of jurisdiction and direction of the Ld. CIT in bringing to tax the profits of off-shore contracts. 3. Briefly stated, assessee company, Prysmian Cavi e Sistemi Telecom S.P.A. (Formerly Pirelli Cavi e Sistemi S.P.A.) Milan, Italy had entered into three different contracts with Power Grid Corporation of India Limited (PGCI) on February 6, 1998 for setting up a Fiber Optic system for Southern Region. a. Off-shore supply contract Number C-50901- 9/546/I for all works to be performed in countries outside India covering, inter alia, the offshore supply of equipments required for the complete execution of the Project. b. On-shore supply contract Number C-50901-S859- 9/547/II for the supply of equipments from within India required for the complete execution of the Project. c. On-shore services contract Number C-50901- S858-9/548/III for all the services including port clearance (in case of supplies from Offshore) inland transit insurance, handling and transportation to site, unloading at site, storage, preservation, insurance, erection, installation, testing, commissioning and integration at site of the complete Fiber Optic System including associated civil works etc., ca....
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....nce income from such sale shall be deemed to accrue or arise in India, through or from a business connection in India. 3. In the present case procurement of fibre optic cable etc., was done abroad, laying of cables, testing, commissioning was done in India. Without procurement of fibre optic etc., there was no question of laying cables, testing etc., by Pirelli in India. In otherwords, procurement of cables is a pre condition to the laying of cables. Therefore, profit that arises on procurement of the cables is totally attributable to the Indian project which has done laying of cables, testing etc., 4. There is a business connection in India. The contract was awarded in India and the project is situated in India. The contract was signed in India and the business was done in India as is evident from the sanction letter of the Ministry of Power, Global tender, tender documents submitted by the assessee. Income from off shore supply would be governed by Article 7 of the Treaty which deals with business profits. There is no denying the fact that the assessee has been in India since 1998-99 and has been offering its business income from on shore supply and on shore services. Th....
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....rdinate Bench of the Delhi Tribunal in the case of Pasco Engineering & Construction Co. Ltd., ITA.No.5787/Del/2013 dated 26.02.2014 with reference to tax of offshore contract. He also relied on the decision of Madras High Court in the case of Ansaldo Italian Spa 310 ITR 237 and decision of Authority for Advanced Rulings in the case of Roxar Maximum Reservoir Performance WLL, in RE (2012) 349 ITR 189 (AAR). He also relied on the case law discussed by the Ld. CIT to submit that offshore contract income was to be taxed. 5.1. The issue of taxability of off shore contracts was elaborately discussed in the earlier assessment year 2000-01 in ITA.No. 160 & 254/Hyd/2006 vide order dated 28.05.2014 wherein similar issue was raised by the A.O. consequent to the orders under section 263 by the Ld. CIT in this year. The ITAT considered the issue elaborately and decided in favour of the assessee as under : "13. We have considered the issue and examined the facts and rival contentions. There are two issues for consideration in this appeal on off- shore contract. The first issue is about the taxability of the income stated to have been earned on offshore contract in India and second estimati....
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....9;price schedules' includes all installation, hardware, approach cable etc., required towards sag, service loops, waste and other such considerations. This only indicates that the cable required for various services in India were also included in the price quoted but that does not indicate the price quoted includes the installation cost, which the Ld. CIT(A) interpreted wrongly. The word 'Installation' there is not pertaining to the service of installation but inclusion of length of cable lines required for installation activity. Therefore, we are of the opinion that Ld. CIT(A) erred in considering this as part of onshore supply. C) The third aspect is with reference to part of training imparted to personnel in India. It was explained by the assessee that this training is incidental to supply of material offshore and even if it were to be considered as part of PE operations, assessee has not earned any income as explained earlier. Further as no profit was earned on the said activity in India, no income can be deemed to accrue or arise in India. We are of the opinion that the Ld. CIT(A) wrongly considered all the three aspects in confirming the estimation at 1% on the....
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....s above, the principles laid down therein are equally applicable to the appeal in the impugned year A.Y. 2001-02. Accordingly, we uphold the contention of the assessee and set aside the order of the Ld. CIT. In fact, Ld. CIT passed her findings purely on the basis of the judgment of AAR which was reversed by the Hon'ble Supreme Court. In view of that also, the order of the Ld. CIT cannot be sustained. Assessee's grounds are accordingly allowed. 7. In the result, ITA.No.916/Hyd/2006 of the assessee is allowed. ITA.No.246/Hyd/2012 - A.Y. 2001-02: 8. This appeal is on the consequential orders passed by the A.O. under section 143(3) read with section 263. Even though, Ld. CIT(A) dismissed the appeal on the reason that this impugned assessment order did not survive because notice under section 148 was issued on 31.03.2006 and fresh assessment order was passed on 20.12.2006, we are not concerned with order under section 143 read with section 147 subsequently passed. Ld. CIT(A), should have adjudicated the issue separately or should have stated that this order was consequent to the order passed under section 263, therefore, not maintainable. Be that as it may, since the o....