TaxTMI 
TaxTMI 
2016 (9) TMI 16
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.... based/ cable less and radio controlled seismic data acquisition systems, digital and analog geophone sensors. Vibroseis, vehicles and source controllers for detonator and vibrator energy sources. 2.1. During the year under consideration, the assessee was engaged in execution of contract with M/s ONGC Ltd. vide contract no. MAT/IMP/E-II/3(2735)/2005- 06/ZA23LO6004 dated 3.1.2006. The contract was for supply order wireline distributed telemetry data acquisition systems including sensors placed on M/s Input & Output Inc., Texas, USA (old name of assessee). 2.2. Under this contract, the assessee had made supplies to ONGC of equipment, material, general stores and services, as specified in Annexure 1 of the contract, which had been specifically mentioned in the contract. 2.3. As per the contract, certain indigenous items were also to be supplied in respect of each unit supplied by the assessee. These items were procured and supplied from India to ONGC at its various locations. The contract also included installations and commissioning of equipment supplied along with necessary hardware and software by third party in respect of both indigenous and foreign items, provision of tr....
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...., the order passed by the Ld. Assessing Officer ("AO") is bad in law and void ab-initio. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO has failed to carry out the assessment proceedings under section 147 of the Act in accordance with the provisions of the Income tax law read with judicial precedents. Reason being: (a) There was an unreasonable delay of more than 13 months in rejecting the objections filed by the Appellant against the reasons provided for opening of the assessment proceedings under section 147 of the Act. (b) Considering the objections were rejected by the AO after a long delay, the assessment was completed within a very short period of time without providing the Appellant adequate opportunity of being heard and opportunity to the Appellant to further challenge the rejection order. (c) The facts mentioned in the reasons to believe were erroneous. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO/ Ld. DRP has erred in treating the contract with Oil and Natural Gas Corporation ("ONGC") for supplies, installation and training as a composite contract and holding that the Appellant has a Per....
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....lant. 4. Apropos ground no. 2, relating to challenge to reassessment proceedings, ld. counsel pointed out that assessee is a tax resident of USA. It has no PE in India. Only the contract was signed in India. He referred to page 25 of the PB, wherein letter dated 1.3.2007 regarding "no objection certificate" in case of M/s Input/ Output Inc. USA, for releasing payment of USD 6101092672 only against purchase order no. MAT/IMP/E-II/3(2735)/2005-06/ZA23LO6004 dated 3.1.2007 is contained. He also filed copy of order passed u/s 195(2) dated 26.2.2007 in course of hearing wherein ONGC was, inter alia, directed to deduct TDS after applying DPR 2% on gross value of the supply of material inside India. However, ONGC was also directed to deduct TDS after applying DPR 105% on the installation and commissioning of 15% (including necessary chart) on 3rd party inspection charges, training charges inside India under the DTAA. Further, it was directed that no deduction of tax at source on the gross value of the supply of material outside India and training outside India. Thus, he pointed out that the AO had duly applied his mind and allowed the payment to be released without deduction of TDS in ....
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....ls system along with all necessary modules 10,483,172.92 2 2 units of complete 3D data acquisition analog 3000 channels system along with all necessary modules 6,959,453.98 3 1 unit of complete 3D data acquisition analog 4000 channels system along with all necessary modules 4,328,930.47 4 2 units of complete 3D data acquisition digital 2000 acquisition points (AP) system along with all necessary modules 7,966,969.47 5 2 units of complete 3D data acquisition digital 3000 acquisition points (AP) system along with all necessary modules 11,169,995.90 6 2 units of complete 3D data acquisition digital 3000 acquisition points (AP) system along with all necessary modules 14,270,065.90 7 1 unit of complete 3D data acquisition analog system with 4000 channels for Transition Zone along with necessary modules 4,643,827.73 Total 59,822,416.80 8.1. The assessee company also required to provide off shore and on shore training installation and third party inspection. Details of consideration for such services against each of the items mentioned in the above details were as under: S. No. Off-shore Training ....
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.... the items of telemetry systems belonging to that site to the supplier (i.e, M/s Input/ Output Inc., USA). b. Trainings: i. At Supplier's premises. USA: Supplier will impart training to 14 Geophysicists of ONGC for a period of four (4) weeks and 14 Engineers for a period of six weeks. Training will be completed before completion of delivery (dispatch) of all the systems. The schedule of training is given at Appendix-IM. ii. At five sites of ONGC in India Supplier will impart one training each for Geophysicists and Engineers for a period of 2 weeks each at ONGC-Jorhat, Chennai.Baroda, Kolkata and Dehradun for a batches of maximum of R Geophysicists & 8 Engineers for each site. The training will be completed during installation and commissioning of the systems at the concerned site. 8.5. He further referred to page 72 of the PB, wherein terms of delivery are contained, which are reproduced hereunder: "For imported items to airfreight : FCA, Dubai Airport. UAE For imported items to be sea-freighted: FOB, Dubai Seaport For indigenous items to be supplied from India: FOR destination BarodaiJorhatlChenoailKolkata1Dehradun (depending upon the destination)....
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....er's premise); at USA) by concerned Indentor or his auth. representative. 14.3 All foreign Bank Charges towards advising negotiations/cable charges and confirmations of Letter of Credit charges, if required, will be borne by the supplier. All Indian Bank Charges will, however be borne by ONGC. 14.4 The corporate &, personnel tax liability (imposed on his employees and the employees of his sub-contractor, vendors, bank-up consultants etc. on account of their association with or for performance of the work in India) against this order will be borne by Supplier. This is not a tax protected contract and ONGC will simply recover the tax assessed by tax authorities from the payment due to Supplier. 8.8. With reference to aforementioned covenants of the contract, ld. counsel pointed out that all the items were related to supply of equipment and installations and commissioning and training. Therefore, it was not a trunkey contract. The order was for supply/ purchase of equipment as contract refers to supplier and indentor. 8.9. Ld. counsel further submitted that the equipment being a scientific equipment, required proper training. The installation and trainings were, thus, ....
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....ndia. At page 82 of PB wherein the Annexure 1 to the supply order is contained, the contract clearly mentions the consideration in respect of equipment, installation and commissioning, third party charges, service tax charges for training for various services separately. As per the terms of delivery, reproduced earlier, it is evident that terms for imported items through sea was FOB and through air it was FCA. FCA implies that seller fulfills his obligations to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place of point and FOB implies that the seller fulfills his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. This means that the buyer is to bear all costs and risks of loss of or damage to the goods from that point. 10.2. Under both the circumstances, viz. through air or through sea, the title in goods passed off shore and, therefore, no part of the consideration could be attributed to the supplies in India. These aspects become further clear if we examine the dispatch instructions, packing and insurance covenant, shipping arrangement as per cove....
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....buted to the offshore supply. In the result ground nos. 3 & 4 are allowed. 11. Now coming to ground no. 5, ld. counsel pointed out that as far as onshore supply of equipment was concerned, it was sub-contracted to third party namely HGS (India) Sales and Services Private Limited ("HGS India"). Ld. counsel pointed out that HGS India supplied goods directly to ONGC amounting to USD 589,010. The same amount of invoices was raised by HGS India to the assessee company and by the assessee company to ONGC, hence, no profit was earned on this transaction. In support of his contention, ld. counsel referred to pages 315 to 321 of PB. At page 315, the quotation from HGS India, addressed to assessee is contained, in which it was clearly mentioned that the consignment will be dispatched from HGSISSPL to the respective ONGC Regions in India freight paid and insured upto each destination. 11.1. Ld. counsel pointed out that it was reimbursement to third party of actual value availed. In support of his contention, ld. counsel referred to page 96 of the PB, wherein total order value is contained, wherein in respect of indigenous items FOR destination value has been mentioned at USD 589010. Ld.....
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....same should not be taxed in AY 2008-09. He submitted that the matter may be referred back to the AO for verification so as to avoid any double taxation. 15.1. Having heard both the parties, we refrain from giving any direction as the ground is not pressed. In the result, this ground is dismissed. 16. Ground no. 8: AO included USD 8500 in regard to service tax as one of the component of receipt under the contract. Ld. counsel pointed out that this aspect is covered under ground no. 8 raised by assessee. He submitted that on this service tax no income was earned by assessee as this was a reverse charge and is to be excluded. 17. Having heard both the parties, we find that this issue has not been independently examined by lower revenue authorities as the entire issue was considered in the back drop of finding that it was a composite contract. Therefore, we restore this issue to the file of AO to examine the issue de novo. 18. Ground nos. 9 & 10: Vide ground nos. 9 & 10 the assessee has assailed the findings of ld. AO/ DRP for estimating the income attributable to alleged PE in India @ 15%. 19. As we have already held that the matter regarding installation PE is to be ve....