TaxTMI 
TaxTMI 
2020 (6) TMI 52
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....ation to Offshore supply is not taxable in India, wrongly relying on the decision of Supreme Court in the case Ishikawajma Harima, ignoring the facts that in the case of Ishikawajma Harima the contract was divisible separately in Off-shore and on-shore component, whereas, in the fact of present case, it is a indivisible contract and decision of AAR in the MERO Asia Pacific Pte Ltd., (AAR/981/2010) will directly apply in this case." Rs. 87.58,910/- 3. "Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in holding held that since such repair work (and related activity) is undertaken at the overseas workstation the question of taxability of such receipts from repair work as attributable to PE does not arise and directed the AO to delete the addition made for the revenues earned by the assessee from repairs activity under ONGC contract, ignoring the crucial fact that the receipts are emanating from a composite contact." Rs. 7,43,770/- 4. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 5. The Appellant craves leave to amend or alter any ground o....
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.... case of Ishikawajima Harima Heavy Industries Ltd. Vs. DIT (2007) 288 ITR 408 (SC). The Hon'ble Apex court in its aforesaid judgment had observed that where different severable parts of a composite contract are performed in different places, the principle of apportionment can be applied, to determine which fiscal jurisdiction can tax that particular part of the transaction. The Hon'ble Court further observed that the principle of apportionment would help determine, where the territorial jurisdiction of a particular state lies, to determine its capacity to tax an event applying it to composite transactions which have some operations in one territory and some in other, is essential to determine the taxability of various operations. It was thus observed by the Hon'ble Apex Court that though a contract may be a turnkey contract, but the same by itself would not mean that even for the purpose of taxability the entire contract must be considered to be an integrated one so as to make the assessee to pay tax in India. We further find that the CIT(A) in order to fortify his aforesaid view that the taxability of revenue earned by the assessee from each separate, independent and divisible wor....
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....ndustries Company Ltd. (supra), had rightly concluded that the taxability of the revenues received there from by the assessee from such separate, independent and divisible activities were required to be undertaken independently. We thus, finding ourselves to be in agreement with the view taken by the CIT(A), uphold the same. The Ground of appeal No. 1 raised by the revenue is dismissed. 14. We shall now advert to the sustainability of the view of the CIT(A) that taxability of revenue received by the assessee from offshore supply of equipments under the ONGC contract, being a case of outright transfer of title in the products by the assessee to ONGC outside India, thus, cannot be construed to be FTS or Royalty and brought to tax in India. We find that the CIT(A) after concluding that the taxability of the revenue received by the assessee from its various streams of separate, independent and divisible activities under the ONGC contract were required to be undertaken independently, had thus, in the backdrop of his said observations deliberated on the independent taxability of the revenue received by the assessee from offshore supplies made under the ONGC contract. The CIT(A) observe....
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....ndertaken by the assessee at its overseas work stations located outside India. The equipment which is identified by ONGC requiring overhauling/maintenance is transported at the latters responsibility to Australia/Malaysia (depending upon the type of equipment and nature of services to be rendered). After initial inspection, the spares required to be replaced are identified and ONGC makes necessary requests for the same to the assessee. The assessee replaces the spares in the course of repair of the overall equipment. After the repair work is completed, the equipment is again transported to India. We shall now, in the backdrop of the aforesaid repair activities provided by the assessee to ONGC adjudicate as regards the scope of the taxability of the receipts received there from by the assessee. 16. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to subscribe to the view of the A.O that as the repair activities involves technical expertise, therefore, the receipts from rendering of such services would be liable to be brought within the definition of FTS. We find that a perusal of Explanation 2 to Sec. 9(1)(vii) of the Act, reads a....
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....n received for rendering of such services cannot be characterised as royalty for the purpose of Article XII(3)(g) of India-Australia DTAA. 18. We shall now analyse as to whether the repair activities provided by the assessee to ONGC can be brought within the sweep of royalty, as defined in Article XII(3)(g) of the India-Australia tax treaty. We find that as observed by the CIT(A), though the term "make available‟ had not been defined under the India-Australia DTAA, however, the meaning of the same can safely be gathered from other such similar treaties. We are of the considered view that mere rendering of repair work by the assessee outside India would not enable the ONGC personnel to make use of technical knowledge, experience etc. in future. We find that the CIT(A) had deliberated at length on the issue as to whether the providing of repair services by the assessee to ONGC did make available any technical knowledge, experience, skill, knowhow or process or consisted of the development and transfer of a technical plan or design. We find that the CIT(A) after relying on a host of judicial pronouncements and the scope of the term "make available" as used in India- USA DTAA, ....