TaxTMI 
TaxTMI 
2024 (11) TMI 569
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....ble to be quashed and/or set aside. 2. That on the facts and circumstances of the case and in law, the assessment order passed under section 143(3)/ 144C(13) of the Act on 28.04.2023, being barred by limitation, is bad in law and void-ab-initio. 3. That on the facts and circumstances of the case and in law, the assessment order dated 28.04.2023 is invalid and shall be deemed to have never been issued, in absence of DIN mentioned in the body of the order/ directions dated 28.03.2023 passed by the DRP under section 144C(5) of the Act. Re: Offshore supply receipts of Rs. 86,76,13,943 from THDC 4. That the DRP/ assessing officer erred on facts and in law in holding that receipts of Rs. 86,76,13,943 from offshore supplies to THDC India Ltd ("THDC") are taxable in India under the provisions of the Act. 5. That the assessing officer erred on facts in recording that the aforesaid receipts arose from offshore supplies to THDC and National Hydroelectric Power Corporation Ltd ("NHPC"), whereas, the said receipts only pertained to THDC, as also recorded by the DRP in order dated 28.03.2023. 6. That the DRP/ assessing officer erred on facts and in law in alleging that the Appellant ....
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....r 234B of the Act." 2. Brief facts of the case: The assessee is a foreign company incorporated in France and is a hydro-power equipment supplier. It is a tax resident of France and is entitled to claim benefits under the India France Double Taxation Avoidance Agreement ('India-France DTAA'). The assessee was earlier part of Alstom Group and after merger of the Alstom with GE Group the assessee is a company of the GE Group and known as GE Hydro France (earlier known as M/S Alstom Hydro France). The AO held the assessee to have a PE in India and treated income from the receipts from offshore supply of equipment to the extent attributable to the PE as taxable in India. The AO invoked Section 44BBB of the Income Tax Act 1961 to attribute 10 percent of the receipts from offshore supply of goods as attributable to the PE. The AO assessed total income of the assessee at Rs. 9,71,69,821 as against the return income of Rs. 73,30,050. 2.1 In framing the final assessment order as well as the draft assessment order, the AO had referred to the assessment in the case of the assessee company for AY 2018-2019 and noted that the facts in the present year are also similar to the facts in the cas....
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....from the assessee's submissions these receipts had arisen from projects in Chamera (NHPC), Subansiri (NHPC) and Tehri (THDC). 2.4Against the draft assessment order passed under Section 144C(1) of the Act vide order dated 30.09.2022, the assessee filed objections before the DRP. The DRP agreeing with the findings of the AO gave directions vide order dated 28.03.2023. After considering the directions of the DRP, the Assessing Officer passed the final assessment order under Section 144C(13) of the Act on 28.04.2023. Aggrieved with the said order, the assessee has filed an appeal before us. 3. At the outset, we find that the assessee had not pressed ground nos. 1 and 2. The ld. AR before us made a statement from the Bar to the aforesaid effect and hence the aforesaid grounds are dismissed as not pressed. 4. Ground nos. 4 to 14 are against the action of the DRP/AO in holding that receipt of Rs. 86,76,13,943 from offshore supplies to THDC India Ltd ("THDC") are taxable in India under the provisions of the Act. 4.1 During the course of hearing, the Ld. AR submitted that the issue is covered squarely in favour of the assessee company by an order dated 13.03.2024 in assessee's own case....
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....rd to its contract with THDC India Lid for erection, procurement, execution and commissioning of Tehri Pump Storage Plant on turnkey basis. As per the contract, the consortium has proposed that the project shall be executed on a coordinated basis through 5 separate contracts for execution of the project. The project comprises of planning, engineering, design, manufacturing, procurement and supply of all machines and equipment's civic construction, hydro machines equipment, installation and erection, testing and commissioning etc. Since, all members of the consortium are jointly and severally responsible for completion of the entire project under agreement with the Indian customer, failure on the part of a single member of the consortium fails the entire project. In the circumstances, a member of the consortium cannot take an isolated position that it is responsible only for a part of the contract separable from the rest of the contract. As has been rightly observed by the AO, entire project forma a part of the composite contract wherein out component of the contract cannot be seen in isolation. Thus, any entity involved in the chain of composite contract which includes supply o....
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.... the in this regard. Accordingly, the approach adopted by the AO for profit attribution to PE is upheld." 5.2 The directions of the Ld. DRP for AY 2018-19 and 2019-20 on this issue were challenged by the assessee before the Tribunal and the Co-ordinate Bench vide its order dated 15.03.2024 in ITA Nos. 2085 & 2086/Del/2022, cited supra, decided the matter in favour of the assessee. The relevant extracts of the said order are reproduced as under: "5. The assessee is a foreign company incorporated in France and tax resident of France. The assessee is a hydro power equipment supplier. During the year under consideration, the assessee earned following income from various Indian customers: S. No. Customer Nature of receipt Amount received in AY 2018-19 (in Rs. ) Whether offered to tax in ITR 1. THDC India Ltd. ("THDC") Offshore supply of goods in relation to ongoing contract 38,46,36,867 Not offered to tax 2. National Hydroele Ctric Power Corpn. Ltd. ("NHPC") Offshore activity by Project Office relating to contract with NHPC 3,10,31,524 Offered to tax 3. CE Power India Ltd. Income from Fees for Technical Service 96,45,476 Offered to tax TOTAL 42,53,13,867....
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....as entered into between THDC and the consortium formed by the assessee, HCC and GE Power India Ltd, which is hereinafter referred to as "THDC Overall Agreement". As per the THDC Overall Agreement, it was agreed that the project shall be executed on a coordinated basis, inter alia, through 5 separate contracts. The assessee was awarded Contract No.3, i.e., contract to supply electro-mechanical plant & machinery and hydro-mechanical plant & machinery (Offshore Component) of 4 x 250 MW Tehri Pumped Storage Plant. Under the said Contract No.3, the assessee received consideration from THDC for offshore supply of plant and equipment. Along with HCC, the assessee was also awarded Contract No.1. However, no amount has been received by the assessee under the said Contract No.1 in the subject assessment years and the same is not subject matter of dispute before us. 9.1. The details of five contracts entered into by THDC with the consortium formed by the assessee, HCC and GE Power India Ltd, as mentioned in Annexure-3 of THDC Overall Agreement are tabulated hereunder:- Contract No. Particulars Contractor 1. Planning, Design and Engineering of 4x250 MW Tehri Pumped Storage Plant Hindus....
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....rded on turnkey basis which were deliberately split into 5 contracts by the parties for tax purposes. Firstly, in terms of the THDC Overall Agreement, the consortium of the assessee and THDC agreed that the Tehri Project shall be executed through separate five contracts, as tabulated supra. X X X 9.5. Based on the Overall Agreement with THDC, it was submitted that Joint and Several responsibility of the Consortium is provided and according the ld. AO alleging that assessee bears all the responsibilities and liabilities for execution of the contracts under THDC Overall Agreement has no basis. Rather assessee is jointly and severally liable along with the other consortium members under all the Agreements. It was submitted that assessee acted as a leader of the consortium for the purposes of ensuring coordination of the inter-related tasks between the members of the consortium undertaking the project but did not assume responsibility and liability (other than to THDC) for work to be performed by the independent contractors being consortium members, responsible for undertaking onshore work under separate and independent contracts with THDC. We find that the Hon'ble Jurisdictional Hi....
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....lf may not be of much significance. The project is a turnkey project. The contract may also 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 appellant to pay tax in India. The taxable events in execution of a contract may arise at several stages in several years. The liability of the parties may also arise at several stages. Obligations under the contract are distinct ones. Supply obligation is distinct and separate from service obligation. Price for each of the component of the contract is separate. Similarly offshore supply and offshore services have separately been dealt with. Prices in each of the segment are also different. 18. The very fact that in the contract, the supply segment and service segment have been specified in different parts of the contract is a pointer to show that the liability of the appellant thereunder would also be different. ...................... 70. We would in the aforementioned context consider the question of division of taxable income of offshore services. Parties were ad idem that there existed a distinction between o....
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....dia, then income from such offshore supplies cannot be made liable to tax in India as assessee does not constitute „Business Connection‟ in India. It is also pertinent to note that under the Contract No.3 which is in dispute before us, Offshore Supply under THDC Contract, supply of plant and equipment was to take place on "FOB" basis. At the cost of reiteration, we hold that title to and property in the goods shipped by the assessee stood transferred at the port of shipment and the event of sale clearly took place outside the territory of India. In these facts, the income arising out of such sale cannot be said to have accrued or arisen in India. The accrual of income derived from offshore supplies cannot be attributed to any operation in India and therefore, no income can be deemed to accrue or arise in India. 9.9. The ld. AO had further alleged that there is a Fixed Place PE of the assessee in India. The assessee had stated that it does not have PE in India apart from the project office which is set up for rendering services in connection with the contract with NHPC project and the income earned by such Project Office is already offered to tax by the assessee in the....
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....nformation based on which such conclusion has been reached by him. As stated earlier, in the instant case before us, in respect of offshore supplies made by the assessee, the title to the goods as per the contract had been transferred outside India, sales concluded outside India and no part of the profit with respect to the same could be attributed to the alleged PE in India. It was specifically submitted by the ld.AR before us that the ld. AO had stated in his order that this is a legacy issue and it is already covered in favour of the revenue by the decision of the Delhi Tribunal in GE Group company cases for Asst Year 2001-02. But it is pertinent to note that assessee herein became part of GE group only in the year 2015 which is also admitted by the ld. AO in his order. Hence all the findings of Delhi Tribunal in GE Group company cases relied upon by the ld. AO cannot be made applicable to the facts of the assessee herein. It is also relevant to understand that Contract No. 03 between THDC and assessee is in dispute before us with regard to offshore supply. Admittedly THDC is a Government of India Undertaking, which had split the contracts. Splitting of contracts is not done at ....
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.... be no attribution profits in view of operational or net loss at global level, need not be gone into as adjudication of the same would become merely academic in nature. X X X 10. To sum up, we hold that assessee was engaged in offshore supply of plant and equipment pursuant to contract with THDC and that the said contract was not artificially split for gaining any tax advantage as alleged by the revenue; there is no business connection of the assessee in India; there does not exist Fixed Place PE or Construction PE of the assessee in India and provisions of section 44BBB of the Act are not applicable in the instant case. Hence we hold that the addition made by the ld. AO by bringing to tax receipts from offshore supply is hereby directed to be deleted." 6. As noted above, the assessee has continued to carry out the project vide agreement dated 23.07.2011 against which the receipts of Rs. 86,76,13,943/- from Offshore supply to THDC India Ltd. has been received as the amount of Rs. 38,46,36,867/- was received by the assessee from Offshore supply to THDC India Ltd. during AY 2018-19. Similarly, the AO relying upon the reasons for Assessment Year 2018- 19 held that the receipts of ....
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.... in earlier years by holding that the assessee has a PE in the form of a fixed place and dependent agent PE (DAPE) through GEPIL. The relevant discussion made by the Ld. DRP is reproduced as under: "4.2.6 In ground number 2(ix) it is submitted that of the total receipts from offshore supplies Rs. 3.07,83,774/- pertains to the receipts from M/s GEPII, in respect of offshore supplies made to it. It is submitted that receipts amounting to Rs. 3,07,83,774/ received by the assessee from GEPIL for offshore supplies made to it, the allegation in the assessment order that GEPIL served as PE of the assessee is unsustainable and is not supported by any facts. It is submitted that in such a scenario, the end customer of the assessee was GEPIL itself, i.e., the Indian entity which is alleged to also be the PE of the assessee. It is submitted that the end customer cannot constitute PE of the non-resident enterprise in respect of the same transaction. Therefore, without prejudice to the aforesaid, the amounts of receipts from GEPIL for offshore supply made to it by the assessee shall be excluded from the scope of assessment. The panel has considered the submissions. As observed by the AO at pa....