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2014 (8) TMI 312 - ITAT HYDERABADReduction of estimation on the offshore contracts - Adoption of domestic tax rate as against higher rate – estimation of income under Rule 10 of the Income Tax Rules in case of non residents - Held that:- The burden of proof of India operations in the case of a non-resident were generally lie on the Revenue as it was contended that no part of the offshore contract was executed in India - following the decision in Pirelli Cavi E. Sistemi Telecom SPA. (India Project Office) Hyderabad Versus ACIT, Circle 3(2), Hyderabad [2014 (6) TMI 368 - ITAT HYDERABAD] - CIT(A) elaborately discussed the legal principles and arrived at a correct conclusions that India Project Office is liable under the Income Tax and the DTAA between India and Italy only to the extent of profit attributable to the business operations carried out by the permanent establishment in India - This position does not change even if all the three contracts signed by the parent company are treated to be single or composite contract - The cables are manufactured outside India and procurement of cables outside India fall beyond purview and jurisdiction of the provisions of Income Tax Act. The offshore contract is only for procurement of cables that too outside India and the training provided in India is incidental to the contract No.1 i.e., offshore contract and further as there is no profit earned on training, no part of the income can be attributable to the PE - when under an offshore contract, equipment was found transferred outside India, necessarily taxable income also accrued outside India - no portion of such income was taxable in India – thus, the order of the CIT(A) in restriction of the addition to 1% of the total contract is set aside – Decided in favour of Assessee.
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