TaxTMI 
TaxTMI 
2026 (10) TMI 540
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....d and is engaged in the business of manufacturing of products for efficient power transmission, reactive power compensation related project engineering. The assessee, during the year, has received receipts of Rs. 22,36,62,891/- arising from the offshore supply of goods to the Power Grid Corporation of India Ltd. (PGCIL) and its AE, GE T&D India Ltd. (GETDIL). The assessee has filed its return of income for A.Y 2022-23 declaring an income of Rs. Nil and claiming a refund of Rs. 97,68,610/-. The case of the assessee was selected for complete scrutiny u/s 143(3) of the Act for the purpose of 'Refund Claim' and notice u/s 143(2) of the Act was served. 3. The assessee, M/s. Grid Solutions Oy, Finland has entered into contract Agreement dated 22.02.2019 with Power Grid Corporation of India Ltd., New Delhi and M/s. GE T&D India Limited, Noida (Associate of M/s, Grid Solutions Oy, Finland) for 'TCR System (-) 500MVAR (3x33.3% Configuration) complete in all respect, comprising of 1 phase Coupling Transformers (3 main+1 hot standby configuration) including associated equipments/system & all associated civil works etc.at 400kV Kurukshetra under implementation of 500MVAr Thyrist....
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....epresented a single composite contract done with involvement of Indian PE, significant part of profit on offshore supply of equipment under supply agreement was to be attributed to PE in India. In this case 35% profits were attributed to the PE. 3.6 The assessee has also given a Performance bank guarantee for the functioning of the equipment. The AO has held that consequently, the assessee remains responsible for till final commissioning of the project. In this regard, reliance is placed on Shangha Electric Group Co. Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1)(2) International Taxation, New Delhi [2017] 84 taxmann.com 44 (Delhi Trib) wherein it was held that where assessee, a China based company, was engaged business of supply of Boiler, Turbine and Generator (BTG) equipments to variou companies for setting up of power plants in India, since it had supervisory PE in Inda from which it was supervising erection, installation and commissioning activities of equipments, a part of profits earned from offshore supply of said equipment relatable to operations carried out in India, was liable to tax in India. In this case, AD had attributed 25% of global profit accruing from ....
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....owing the reasoning in A.Y 2020-21 having similar and identical issues, and drawing guidance from the provisions of section 44BBB of the Act, have held that the 10% of Off-shore supply receipts of Rs 22,36,62,891/- in the year under consideration, is taxable in India under section 9(1)(i) and Article 7 of India-Finland DTAA as business income in India. 5. Aggrieved the assessee is in appeal before us and has raised the following grounds of appeal: 1. "That on the facts and circumstances of the case and in law, the assessment order dated 23.12.2024 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ("the Act") for assessment year 2022-23 assessing the total income of the Appellant at Rs. 2,23,66,290 is bad in law, void-ab-initio and therefore, liable 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 for assessment year 2022-23 on 23.12.2024, being barred by limitation, is bad in law and void-ab-initio. Re: Offshore supply receipts of Rs. 22,36,62,890 from PGCIL 3. That the impugned assessment order is....
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....onal error 12. That the assessing officer erred on facts and in law in computing the 'total interest and fee payable in the computation sheet annexed to impugned assessment order at Rs. 11,39,848 instead of Rs. 1,000. The Appellant craves leave to add to, amend, alter or vary the above grounds of appeal at or before the time of hearing." 6. Ground No.1 is general in nature and Ground no.2 is not pressed hence dismissed as not pressed. 7. Ground No.3 to 11 is with regard to off-shore supply receipts of Rs. 22,36,62,890/- from Power Grid Corporation of India Ltd. ("PGCIL") Before us, ld. Counsel for the assessee stated that in A.Y 2020-21 the AO had treated the GE T&D India Ltd. as constituting DAPE and fixed place PE of the assessee as per Article 5(1) of the India-Finland DTAA. As the amount involved in A.Y. 2020-21 was small, hence, no appeal was filed. Ld. Counsel stated that since no appeal was filed does not tantamount to the assessee's acceptance of GE & TD India Ltd. as fixed place PE and DAPE of assessee in India. 7.1 With regard to AO's argument regarding the title transfer of the offshore supplies bases on the various terms of the contract li....
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....hat the AO did not provide any evidence and relied on CIT V R D Agarwal and Company 56 ITR 20(SC). 7.4 The ld. Counsel further stated that the AO conclusion that the findings in the course of survey establish that the foreign companies of the T&D Segments of the GE Group (erstwhile Alstom group companies) including Grid Solution Oy have Dependent Agent PE and Fixed Price PE in India, is wrong as survey under 133A(2A) was conducted on 06-07, June, 2019 on GET & D India Limited and none of the statement/contract pertain to the assessee and none of the employee relate to the business to the assessee. The ld AR further referred to financial statement at page 153 PB of the Indian entity to show that the GE & TD India Ltd. are Indian entity having its own separate business. The ld. AR referred to page 164 of the paper book which is the statement of Profit and Loss to show that the Indian entity has its own Revenue of Rs. 3065.95 crore and supply to the assessee is only Rs.22 crore out of 3000 crore. The assessee submitted that this is to point out that the Indian entity is not legally, economically or otherwise depend on assessee. The ld AR stated that mere presence of employees of GE....
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....s the sole responsibility for the entire contract. The ld DR emphasized on the acceptance test, performance guarantee which the assessee has as its responsibility. 10. The ld. DR pointed out that the finding of the survey in the Indian entity was that the three contracts is a whole contract and has been artificially split into three parts. The ld. DR pointed out that the CIF cost, insurance, freight method adopted for delivery of goods shows that the title of goods does not pass outside India and that the offshore supply is to be taxed in India as the assessee has PE in India. 11. In rejoinder, the assessee has relied on the decision of Supreme Court in the case of Ishikawajma - Harima Heavy Industries Ltd. vs. DIT reported in [2007] 288 ITR 408 (SC), decision of Delhi High Court in the case of DIT vs. Ericsson AB reported in 343 ITR 470 (Del) and DIT vs. LG Cable Ltd. [2011] 237 CTR 438 (Del). 12. We have heard the rival submission and perused the material available on record. We find that the ITAT in the sister concern i.e. UK Grid Solutions Ltd. for A.Ys. 2018-19 in 149 taxmann.com 209(Del Tri); UK Grid Solutions Ltd. for A.Ys. 2015-16 to 2017-18, and for A.Y. 2020-21 i....
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....w governing the taxability in case of income which is deemed to accrue or arises in India for the purpose of Section 9 of the Act and how there has to be attribution to profit to the PE, without discussing the evidence in the case in hand, to give conclusive findings as to how the Indian associate of the assessee happens to be an agent or construction PE. His primary and ultimate reliance was on the fact that there was single composite contract which was divided into three contracts and that in two contracts, which were to be performed by the Indian entity, the ultimate liability for non-performance or compensation being on assessee, therefore, the Indian entity was a PE and the provisions of profit attribution were applicable. ............. 22. Hon'ble Delhi High Court in the Linde AG Case (supra) has also referred to case of Hyundai Rotem Co., in re [2010] 323 ITR 277/190 taxman 314 (AAR) which was also referred by the assessee before Ld. Tax Authorities below and where the facts were that Hyosung Corporation submitted a bid for execution of the works relating to 800 KV/400KV Tehri Pooling Station which was floated by Power Grid Corporation of India Limited (Pow....
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....by specific reference to the evidence. No evidence is brought on record to show that the Indian Associate was employed by any 'act' of the assessee to represent the assessee independently while dealing with PGCIL. On the contrary what is established is that it was the assessee at whose proposal, ALSTOM-I was accepted to be an Associate of the assessee and the employer PGCIL treated ALSTOM-I as its 'independent contractor' on the terms and conditions, as laid down in the bidding document. If there was any involvement of the employees of Indian Associate, at any stage in the meetings between assessee and the PGCIL that was bound to be there and outcome of the fact that assessee and its Indian associate were required to work in tandem and that does not give rise to existence of a dependent agent P E of the assessee. ...... 27. As for the applicability of Section 44BBB of the Act, is concerned, it can be observed that the foundation of it was existence of a PE. The assessee under the 'First contract' was merely under obligation to make off shore supplies and wherein property in the goods transferred outside Indian, therefore as Section 44BBB does not speak of engageme....