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2014 (1) TMI 799 - AT - Income TaxIncome deemed to accrue or arise in India - Activities of the Liaison Office (LO) - Non Resident - Section 9(1)(i) - assisting the Indian manufacturer to manufacture the goods according to its specification is to see that the said goods manufactured has an international market, therefore, it could be exported - Held that:- Following Nike Inc v. ACIT [2013 (8) TMI 194 - KARNATAKA HIGH COURT] – The assessee is enabling the manufacturer to purchase goods of a particular specification which is required by a foreign buyer to whom the manufacturer sells - As the orders are placed by the assessee with the manufacturer and the goods are manufactured according to its specification which is the requirement of the buyer and even if it is held, though the goods are supplied to the buyer, it is deemed to be supplied to the assessee, the whole object of this transaction is to purchase goods for the purpose of export - Once the entire operations are confined to the purchase of goods in India for the purpose of export, the income derived there from shall not be deemed to accrue or arise in India and it shall not be deemed to be an income under section 9 - If one keeps the object with which the proviso to clause (b) of Explanation 1 to section 9(1)(i) was deleted, the object is to encourage exports thereby the country can earn foreign exchange - The activities of the assessee is assisting the Indian manufacturer to manufacture the goods according to its specification is to see that the said goods manufactured has an international market, therefore, it could be exported - In the process, the assessee is not earning any income in India - If at all it is earning income outside India under a contract which is entered outside India, no part of its income could be taxed in India either under section 5 or section 9. Explanation 1(b) to s. 9(1)(i) of the Act is clearly applicable to the assessee's case - No income was derived by the assessee in India through its operations as LO in India. It is ordered accordingly – Decided in favour of assessee.
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