TaxTMI 
TaxTMI 
2018 (5) TMI 49
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....t existing facilities and hook-up, testing, pre- commissioning, start up and commissioning of the entire facilities. Under the contract entered by it with ONGC for the aforesaid activities, the assessee had to perform certain activities within India and outside India. According to the assessee activities relating to design and engineering are performed in Malaysia, fabrication took place in Korea and Malaysia, transportation took place from Malaysia to India, the jackets arrived at the offshore site in India where the installation and commission took place at Mumbai offshore. At the instance of the ONGC, the assessee opened a Project office in Mumbai by intimating the RBI, for the purpose of coordination and communication between the parties to the contract. 3. For AY 2008-09, the appellant had filed its return of income declaring loss of Rs. 89,73,23,135/- which relates to the onshore activities i.e. installation and commissioning. However, learned AO by his order dated October 18, 2011 passed u/s 143(3)/144C of the Income-tax Act, 1961 ("the Act") assessed the total income of the appellant at Rs. 1,76,02,16,110/- as against returned loss of Rs. 89,73,23,135/- holding that there ....
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....d allowed the appeal for the Asstt. Year 2007-08 holding that in order to bring offshore supplies to tax in India, apart from the PE, the evidences or material need to be placed on record to demonstrate that the PE played any role in the offshore supplies so that it fits into the governing law i.e. 'through which' offshore supplies business is wholly or partly carried on. However, the order of the ITAT for Asstt. Year 2007-08 which formed the basis of the decision rendered by this tribunal in Asstt. Year 2008-09, has been reversed by the Hon'ble High Court of Uttarakhand, while observing that that there is not even an iota of evidence to substantiate the claim of the Revenue to support attribution of gross revenues earned by the foreign enterprises, including outside India revenues to the project office, and imputing a profit margin of 25% thereon. Basing on these facts, Ld. AR prayed to allow the appeal as the same is covered by the decision of the Hon'ble High Court. This appeal also , therefore, needs to be treated similarly i.e., there is no evidence that the offshore supplies had been made by the appellant from outside through its PE which had no role to play in respec....
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....see in India and all functions carried out and risks assumed by the assessee are actually represented through its PO only. 13. There were only two employees, working for the Project office and they were neither technically capable nor equipped to carry out the work pertaining to offshore supply of platforms. Their role was limited to acting as a communication channel between the appellant and ONGC, an activity which will qualify as preparatory or auxiliary as per Article 5(4) of the India-Korea DTAA. 14. Placing reliance on the decision of the Hon'ble Uttarakhand High Court in the case of CIT vs. M/s BKI/HAM (203 Taxman 58), he argued that Article 7(1) of the India-Korea DTAA says that the profits earned through the Permanent establishment can only be brought to tax in India, and the income of the assessee cannot be taxed unless it is shown that income generating activities were carried out through the Permanent Establishment, because mere existence of a PE is not enough to fasten tax liability. 15. Since the appellant is a tax resident of Korea and as such the income earned by virtue of offshore supply of platforms is to be taxed only in Korea and not in India. In view of the d....
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....revenue was earned by it for having had carried out within India activities. It asserted and continues to assert that the remaining revenue was generated by carrying out of India activities. There is no finding anywhere that the revenue earned and said to have been on account of out of India activity was earned, in fact, on account of within India activity. 9. Being a resident of Korea, appellant is governed by the Income-tax Laws applicable to the class of assessees as that of the appellant as prevalent in Korea. Therefore, it has a tax identity in Korea. In addition thereto, appellant has submitted to the jurisdiction of Indian Taxing Authorities by furnishing return of income and, thereby, acknowledged that it has also a tax identity in India. The question is, this identity is covered by which provision of the Agreement. In terms of paragraph 1 of Article 7, appellant will acquire its tax identity in India only when it carries on business in India through a permanent establishment situate in India. By submitting the return, appellant has held out that it is carrying on business in India through a permanent establishment situated in India. In the circumstances, the contention o....
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....e is attributable to the tax identity or permanent establishment of the enterprise situate in India and the same, we think, is answered in the negative and in favour of the appellant." 19. It is, therefore, clear that the Hon'ble High Court held that in the absence of any material that the offshore supplies had been made by the appellant through its project office, the revenue had erred in bringing to tax by attributing 25% of gross revenues of supplies as the profit, and the onus was on the revenue to establish that the business of offshore supplies were carried by the appellant through its PE in India. It is, therefore, clear that in view of the decision of the High Court if there existed no evidence of involvement of PE in the business of offshore supply, no liability to tax could be fastened on the appellant. 20. The submission of the ld AR that, vide pages 1-35 of Paper book, the assessee had placed on record its annual accounts, in support of the contention that the office at Mumbai had absolutely no role to play in respect of offshore supplies made and as such no income could be attributed to such supplies being the profit which has been carried through the business from s....