Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (4) TMI 758 - AT - Income TaxAmount received under the offshore supply contracts - Income deemed to accrue or arise in India - applicability of provisions of Section 44BBB - liability to tax in India - Held that:- The meanings given to certain expression which were not otherwise defined / clarified in the Treaty could derive their meaning from domestic law. An analysis of the above clauses indicates that the overall contract provided for separate/specific terms & conditions for supply of the equipment and also provided for consequences for default of the terms. The same was not dependent upon the service contracts. Section 44BBB is computational provision and hence, it cannot enlarge the scope of total income which is otherwise provided in Section 4,5, & 9 of the Income Tax Act. Whether the impugned income from OSC are taxable as per the substantive provisions and DTAA - Held that:- There were separate contracts for supply as well as services and supply contracts were not dependent upon service contracts. This being the factual position, we find that explanation 1(a) comes into play in the instant case. Hence, the income which is deemed to accrue / arise in India shall be only with respect to those business operations that are carried out in India. After analyzing the various case laws, statutory provisions, DTAA provisions and contractual terms and respectfully following judgment in Ishikawajima-Harima Heavy Industries Limited Vs. DIT (2007 (1) TMI 91 - SUPREME COURT ), we are inclined to hold that Offshore Supply contracts were ‘carried and concluded’ outside India and hence no income there-from deemed to accrue or arise in India as per Section 9(1) and DTAA provisions and accordingly, not chargeable to tax. The receipts thereof do not form part of receipts for the purpose of computational provisions of Section 44BBB. Explanation 4 could not overcome the limitation imposed by Explanation 1(a) to Section 9(1)(i) and hence, the impugned income do not form part of business receipts for computation of income u/s 44BBB of the Act. We held so. We also observe that impugned payment has been paid by NPCIL to ASE on ‘net’ basis and NPCIL has borne the burden of tax on behalf of the assessee. DRP rightly observed that ‘Grossing up’ of the impugned payment was required to be done as per Section 195A before applying 44BBB of the act. But Section 44 BBB has been applied on ‘net payment basis’ by the assessing officer. Revenue is free to recompute the income of the assessee as per the statutory provisions. With these observations, Ground No.3 of assessee’s appeal is allowed. The payment towards offshore supply contracts being accruing outside India, would not form part of business receipts for the purpose of Section 44BBB. Charging of interest u/s 234B - Held that:- We find that the assessee has received payment on ‘net basis’ and tax thereupon was borne by the Indian Entity and. In view of jurisdictional Hon’ble Bombay High Court in the case of DIT Vs NGC Asia Network LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT], we are inclined to hold that since the impugned payments were subjected to TDS and the assessee was to receive the income on ‘net payment’ basis and hence interest u/s 234B is not attracted on the facts and circumstances of the case. The Ground of assessee’ appeal succeeds.
|