TaxTMI 
TaxTMI 
2016 (2) TMI 229
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....tain equipments and installation of automation systems. During the year under consideration, the assessee received a sum of Rs. 9,77,59,979/- towards sale of equipments and Rs. 81,48,650/- under the head "Service Revenue" on account of installation and commissioning charges. The aggregate of both the amounts was Rs. 10,59,08,629/-. The assessee claimed equal amount as "Project cost" and in the result, it did not declare any income against the receipt of Rs. 10.59 crores cited above. 4. The assessee explained before the AO that the project consisted of two parts, viz., (a) supply of equipments from Israel to HPCL sites and (b) installation of systems at the HPCL sites. It was further explained that the assessee has entered into a sub-contracting agreement with Honeywell Automation India Ltd (HAIL) for installation and commissioning of equipments in the automation system. The assessee submitted that, as per the sub-contracting agreement, it has supplied the equipments to HAIL outside India and the payments relating to the same was also received outside India. Accordingly, the assessee has claimed that the income relating to supply of equipments is not taxable in India, since ....
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....a and the assessee's permanent establishment in India had no role to play in the transaction. Accordingly the Hon'ble Supreme Court held that the income arising without any activity of permanent establishment is not liable for taxation in India. 7. Accordingly, the Ld A.R contended that the it has supplied the necessary equipments offshore and has also received the payment offshore. The assessee has sub-contracted the work of installation and Commissioning only to HAIL. He further submitted that the assessee has opened the Project Office in India only to co-ordinate the activities carried on by HAIL. Accordingly he submitted that the project office cannot be considered to be a permanent establishment also. 8. On the contrary, the Ld D.R submitted that the assessee has received only composite contract to install and commission the automated systems and it did not contemplate the splitting of the contract into two components as contended by the assessee. It is the only the assessee, who has split the contract into two at its own convenience. Further, the equipments were supplied to the sub-contractor, but the invoices were raised upon HPCL. He submitted that the sub-c....
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.... Thus it is seen that the liability for implementation of the project is fully placed upon the vendor, i.e., the assessee herein. Following clause further reiterates this point:- "10.0 VENDORS RESPONSIBILITY:- 10.1 Vendor will be wholly and solely responsible and liable for all the jobs carried out by them / services provided by them. HPCL acceptance having signed off a particular milestore will not exonerate the vendor from his prime responsibilities to have done a correct job as per the requirement of the job/contract and as per international practices in the first instance itself. If required, vendor will be required to revisit those milestores which are already signed off and will be required to make suitable correctness at no extract cost to HPCL." It is further stated as under in clause 14.0 of the tender document:- "14.1 The vendor shall indemnify HPCL and every member, officer and employee of HPCL also the Project team and his staff against all the actions, proceedings, claims, demands, costs, expenses, whatsoever arising out of or in connection with the works and all actions, proceedings, claims, demands, costs, expenses which may be made agains....
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....e contract is placed upon the assessee. Further, we notice that the HPCL has not entered into any separate contract with the assessee and it has given only a "Purchase Order" to the assessee and it only envisages supply of products named as "Core automation" of various functions. Thus the HPCL has intended to purchase products (equipments as well as the softwares) relating to automation of various functions relating to petrol pumps through the tender and it did not intend to split up the purchase order into supply of equipments and installation of the same, as contended by the assessee. 14. Further, we notice that the assessee has supplied the equipments to HIAL, who in turn has installed the same in the petrol pumps of HPCL. The payments towards the contract has been received by the assessee from the HPCL and it has compensated the HAIL for the works carried out by it. Thus, in our view, the Ld D.R was right in contending that the sub-contracting of work is only one of the methods of executing the contract undertaken by the assessee, since it is the assessee which has taken up full responsibility for executing the contract. Hence there is no merit in the contentions of the....