TaxTMI 
TaxTMI 
2023 (3) TMI 319
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....er and are being disposed off by way of this consolidated order. With the consent of the parties, the assessee‟s appeal for the assessment year 2018-19 is taken up as a lead case. ITA no.1679/Mum./2022 Assessee's Appeal - A.Y. 2018-19 3. In its appeal, the assessee has raised the following grounds:- "Ground No. 1: Addition of receipt emanating from offshore supplies of escalators and elevators to the total income of the Appellant: 1. On the facts and circumstances of the case and in law, the Ld. AO erred in adding a sum of Rs. 1,01,16,484/- out of receipts emanating from offshore supply of escalators and elevators to the total income of the Appellant. 2. The AO further inter-alia erred in observing or commenting that Appellant and SIPL constitute an AOP. 3. In absence of Permanent Establishment in India, under Article 7 of the India-China Double Taxation Avoidance Agreement ("DTAA") and absence of any business connection as envisaged u/s.9(1)(1) of the Act, the Appellant prays that the addition made by AO on aforesaid offshore supplies be deleted. Without Prejudice to above, Ground No. 2: Non-consideration of Net ....
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....ina Double Taxation Avoidance Agreement ("DTAA"). The assessee claimed that it does not have any permanent establishment in India and therefore, no part of the income earned by the assessee can be taxed in India by virtue of the provisions of Article 7 of the DTAA. The assessee also submitted that it had entered into a contract with DMRCL and MMRCL for offshore supply of escalators and elevators only. The title to the goods passed outside India and payment thereof was also received outside India, therefore the transaction of sale was not taxable in India. 6. The Assessing Officer vide draft assessment order dated 14/06/2021 did not agree with the submissions of the assessee and after considering the agreements entered into with DMRCL and MMRCL held that the income of the assessee from the offshore supply of elevators and escalators is taxable in India in terms of section 9(1)(i) of the Act. The Assessing Officer further held that the assessee entered into an arrangement with its Indian associated enterprise, Schindler India Private Limited („SIPL') for the fulfilment of its obligation under the contract. It was also held that the income of the assessee earned from India in....
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....rned AR") by referring to the provisions of the Memorandum of Understanding ("MOU") between the assessee and the SIPL submitted that the responsibility of the assessee is confined only to design, manufacture, and supply of escalators and elevators. On the other hand, the SIPL was responsible for the clearance of material after reaching at the port, its transportation to the site as per contract conditions, complete installation, testing, commissioning, and maintenance of escalators and elevators. The learned AR also submitted that the payments to the two parties were made separately by DMRCL and MMRCL based on their respective invoices. It was submitted that the assessee was paid in USD, while SIPL was paid in Indian currency and the Indian entity‟s work starts after the escalators and elevators reach India. The learned AR also submitted that only the assessee was taxed, though the Assessing Officer recorded the finding that the consortium of the assessee and SIPL is an AOP. It was also submitted that installation profits have been offered to taxation by SIPL and the same has also been assessed in its hands by the Revenue. 9. On the contrary, the learned Departmental Repre....
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.... of each of the parties in the consortium is separately defined and since the MOU forms part of the contract agreement, it cannot be denied that the same was not known to the DMRCL/MMRCL. Secondly, the work of SIPL can only start after the goods reach the port of destination. In Article 2 of the MOU, the parties specify the percentage of effort and time that is expected to be spent by them on the project. In this Article, it has been clarified that the said percentage does not, in any way, imply the share of profit or losses, and each party will bear its own losses and retain its own profits separately based on the contract price and invoices raised. In the MOU, it is also mentioned that separate invoices would be raised by each party on the DMRCL for the work performed by them under the contract and the consideration shall be paid by the DMRCL as per the terms of the contract and quoted price in respective currency to the concerned consortium member raising such an invoice. From clause 4 of the contract agreement entered with DMRCL, we find that the same mentions contract price of Rs.15,38,93,850.16 and USD 37,60,376. As per the assessee, the consideration in Indian currency was p....
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....India, therefore, the consideration received by the assessee is taxable in India. Though, the Assessing Officer vide draft assessment order treated the consortium as an AOP under the Act, however, proceeded to make the addition only in the hands of the assessee. The learned DRP did not go into the question of AOP and upheld the addition in the hands of the assessee on a substantive basis. On one hand, the Revenue treated the agreement with DMRCL and MMRCL as a composite contract, while on the other hand, it is an admitted fact that no separate assessment has been made in the hands of the consortium as an AOP. In coming to the aforesaid conclusion, the Revenue has placed heavy reliance on the scope of the contract, which is „design, manufacturing, supply, installing, testing, commissioning‟. However, we are of the considered view that the Revenue did not consider the other parts of the contract agreement with DMRCL and MMRCL, which clearly demarcates the description of work, the consideration, and the currency in which the same is to be paid to each of the consortium members. In Arosan Enterprises Ltd. v. UOI: (1999) 9 SCC 449, the Hon‟ble Supreme Court held that t....
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....ht" means that the seller must pay the cost and freight necessary to bring the goods to the named port of destination but the risk of losses of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. It has further been explained that in the case of CIF the seller must 'deliver the goods on board the vessel at the port of shipment on the date or within the period stipulated'. Clause A.5 also states that "Subject to the provisions of clause B.5, bear all risks of loss of or damage to the goods until such time as they have passed the ship's rail at the port of shipment." Clause B.5 in turn states that the buyer must 'bear all risks of loss of or damage to the goods from the time they have passed the ship's rail at the named port of shipment'." 14.As of the above it follows that in the case of CIF, the property in goods passes on to the buyer at the port of shipment. Though the Cost, Insurance and Freight etc. is met by the seller but the property in the go....
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.... infructuous. 17. In the result, the appeal by the assessee is partly allowed. ITA NO.2483/Mum./2022 Assessee's Appeal - A.Y. 2019-20 18. In its appeal, the assessee has raised following grounds:- Ground No. 1: Addition of receipt emanating from offshore supplies of escalators and elevators to the total income of the Appellant: 1. On the facts and circumstances of the case and in law, the Ld. AO erred in adding a sum of Rs 1,69,76,405/- out of receipts emanating from offshore supply of escalators and elevators to the total income of the Appellant. 2. The AO further inter-alia erred in observing or commenting that Appellant and SIPL constitute an AOP. 3. In absence of Permanent Establishment in India, under Article 7 of the India-China Double Taxation Avoidance Agreement ("DTAA") and absence of any business connection as envisaged u/s.9(1)(i) of the Act, the Appellant prays that the addition made by AO on aforesaid offshore supplies be deleted. Without Prejudice to above, Ground No. 2: Non-consideration of Net Loss incurred by the Appellant on offshore supply of escalators and elevators to DMRCL/MMRCL: 1. On ....