TaxTMI 
TaxTMI 
2018 (1) TMI 852
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....assessment order. The assessee filed its return of income on 28.11.2014 declaring taxable income of Rs. 49,88,35,664/-. It was claimed by the assessee during the assessment proceedings that Indian concerns had imported certain materials from LSCL, Korea and had deducted tax at source while making payments to LSCL. Since the material was supplied from outside India, no income accrues or arises in India and no income is taxable in India. However, since tax has been deducted, credit for tax deducted at source against such supplies was claimed as refund. 4. The AO asked the assessee to submit the copy of agreements entered into with various project owners and also asked the assessee to show-cause as to why additions made in previous year on offshore supply should not be made in this year. The AO noticed that all activities and the nature of receipts in respect of offshore supply are identical to those in preceding years i.e. 2004-05 to 2009-10. He observed that his predecessors has dealt with this issue in great detail and has attributed 50% of the income relatable to operations carried out in India and profit rate of 20% was deemed on estimated basis. The AO observed that the asses....
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....ould be said to receive or deemed to be received in India; accrue or arise; or deemed to accrue or arise to LS Cable in India. Further, it is humbly submitted that the issue of taxability of offshore supplies is no longer res integra and the same stands covered by the following multiple judgments in appellant's own case for various AYs as tabulated below:- Assessment Year DRP/CIT(A) ITAT High Court Reference to Paper Book AY 2002-03 Held offshore supply taxable In favour of appellant (Held that offshore supplies are not taxable in India) In favour of appellant (Held that offshore supplies are not taxable in India) Refer page no.175 to 275 of paperbook AY 2003-04 Held offshore supply taxable In favour of appellant (Held that offshore supplies are not taxable in India) In favour of appellant (Held that offshore supplies are not taxable in India) Refer page no. 276 to 320 of paperbook AY 2004-05 Held offshore supply taxable In favour of appellant (Held that offshore supplies are not taxable in India) In favour of appellant (Held that offshore supplies are not taxable in India) Refer page no. 276 to 320 of paperbook AY ....
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.... the General Conditions of Contract (which states that ownership in goods to be imported to India shall be transferred to the PGCIL upon loading onto the mode of transport to be used to convey the goods from the country of origin to India) and provisions of Sales of Goods Act, 1930 held that property in the goods was transferred outside India. The relevant extract from the order is reproduced as under: "13.2 All the circumstances mentioned above are fully satisfied in the present case also as goods were ascertained and delivered to ship for transportation to India, bill of lading was also handed over to the bank nominated by the assessee and payment was also received outside India. The property in goods got transferred to the buyer and sale was completed. With the completion of the sale, income accrued and that accrual was outside India. Accrual of such income was not attributable to any operation carried out in India. Therefore, contention of the assessee that income from offshore contract for supply etc did not arise in India and provisions of Indian Income-tax Act had no application is well founded and is required to be accepted." * The permanent establishment ....
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.... "18. Furthermore, as noticed above, the scope of work under the onshore contract was under a separate agreement and for a separate consideration. There is no justification to mix the consideration for the offshore and onshore contracts. When the equipment was transferred outside India, necessarily the taxable income also accrued outside India, and hence, no portion of such income was taxable in India." * The PE had no role to play in offshore supplies and the same was involved in onshore contract only. Relevant extract of the He judgment in this regard is reproduced herein below: "36. With regard to the setting up of Permanent Establishment also, the PE of the respondent in the instant case, as in Ishikawajima (supra), had no role to play in the execution of the offshore supply contract and as a matter of fact was set up for the sole purpose of enabling the performance of the onshore services contract." * The question of sale concluding in India does not arise at all as the contract clause clearly stipulates that title in goods would transfer at the port of shipment at the time of loading the goods onto the ship. The sale thus concludes at that very mome....
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....sued irrevocable letter of credit in favour of the appellant and that under para 31.2 agreed that property in goods will pass to the buyer as and when the assessee loads the equipment on the mode of transport for transportation from the country of origin. The question to be asked was having appropriated in the goods by delivery to the ship was there any right with the seller of disposal of goods. Is there any condition under which the seller could keep control of the goods and retake the goods. There is no such condition in the agreement and, therefore, sale of goods as for as buyer was concerned, was complete and unequivocal. The property in the equipment passed to the buyer as stipulated in para 31.2 of the agreement." * Relevant extract of the ITAT's judgment for AYs 2003-04, 2004-05 and 2005-06 in connection with Indian Agent is reproduced below: "As regards the role of India Agent in overseas supply the contention of the assessee is that ld. CIT(A) has not been able to point out exactly what operations relating to off-shore supply were carried out by the Indian agent when it is a matter of record that the goods were manufactured abroad and dispatched from....
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....gement is reproduced as under: "5.1. In view of the above, since the matter has been effectively decided in favour of the assessee for A.Y. 2002-03, holding that the receipts from offshore supply equipment are not taxable in India, we find no flaw in the impugned order, wherein the learned CIT(A) has followed the aforesaid High Court order in assessee's own case for A.Y. 2002-03. It is pertinent to stress here, as noted by the learned CIT(A), that the Tribunal vide its order dated 13-8-2010, in the assessee's case for A. Y. 2003-04 to 2005-06, again deleted the addition. on similar lines." Observations of Hon'ble ITAT in the order for AY 2007-08 * The Hon'ble ITAT following its own decision in appellant's case for AY 2002-03 to 2005-06 and order of Hon'ble High Court of Delhi in appellant's own case for AY 2002-03 held that offshore supply is not taxable in India. Relevant extract from the judgement is reproduced as under: "3. It is the common submission of both the parties that the issue involved in current year is covered by the decision of this Tribunal in assessee's own case for assessment year 2002-03 reported....
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....der dated 26 July 2011 of the Hon'ble AAR in Appellant's own case (AAR No. 858-861 of 2009) wherein the Hon'ble AAR relying on the decision of Hon'ble Supreme Court in case of Ishikawajima Harima Heavy Industries (288 ITR410) adopted consistent view that offshore supply is not taxable in India. Relevant extract from the order of Hon'ble AAR is reproduced as under: "7 Income of similar nature earned by a non-resident was held to be not taxable in India by this authority in the case of Hyosung Corporation, 314 ITR 343, where all these issues were considered at length following the binding decision of the Hon'ble Supreme Court in Ishikawajima Haritna Heavy Industries, 288 ITR 410. At the outset it may be stated that this authority is not free to disregard the law laid down by the Supreme Court and to have a fresh look into the matter. The clauses in the offshore supply contract agreement regarding the transfer of ownership, the payment mechanism in the form of letter of credit which ensures the credit of the amount in foreign currency to the applicant's foreign bank account on receipt of shipment advice and insurance clause, would go to establish t....
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....ffshore supply is not taxable. Relevant extract from the order is reproduced as under: "8.2 The facts obtaining in the year under consideration are similar to the facts of the earlier years. The AO while making this addition for the current year has relied on the order of assessment order for earlier years (para 4. 6 & 5 of the assessment order). Respectfully following the order of the ITAT and the order of the Hon'ble Delhi HC in the appellant's own case for the earlier years as discussed in the preceding paragraphs, it is held that the income of the appellant from off-shore supplies is not taxable in India. Ground No.1 is therefore, allowed and the AO is directed accordingly." In support of the non-taxability of offshore supply, the appellant also places reliance on, and invites the attention of your goodself to the following judicial precedents: Ishikawajma-Harima Heavy Industries Ltd. vs DIT [288 ITR 408 (SC)] The Apex Court in the said case categorically held that the title transfer and payment outside India shall be determining factor for the purpose of taxability of income from offshore supply. The Apex Court vide Para 99 held as u....
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.... the case and the points made by the AO in the assessment order. This issue has already been decided in favour of the appellant by the Jurisdictional High Court in AY 2002-03 (LG Cable Ltd (2010) ITA 703 of 2009), AY 2003-04, 2004-05 and 2005-06 (LG Cable Ltd (2011)ITA No. 704,706,707 of 2011), and by the order of ITAT in AY 2007-08 and 2008-09. Even the tax effect is minimal, being disallowance of loss of Rs. 33,919/- only. 8.2 The facts obtaining in the year under consideration are similar to the facts of the earlier years. The AO while making this addition for the current year has relied on the order of assessment order for earlier years (para 4.6 & 5 of the assessment order). Respectfully following the order of the ITAT and the order of the Hon'ble Delhi HC in the appellant's own case for the earlier years as discussed in the preceding paragraphs, it is held that the income of the appellant from off-shore supplies is not taxable in India. Ground No. 1 is therefore, allowed and the AO is directed accordingly. 8.3. The other grounds of appeal become infructuous and do not require any adjudication. 9. In the result, the appeal is allowed." ....