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2014 (6) TMI 368 - AT - Income TaxReduction of estimation on the offshore contracts - Adoption of domestic tax rate as against higher rate 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 - CIT(A) elaborately discussed the legal principles and arrived at a correct conclusions vide para 11 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 Relying upon ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. Versus DIRECTOR OF INCOME-TAX [2007 (1) TMI 91 - SUPREME COURT] - 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. Onshore contracts - Rejection of books of account u/s 145(3) of the Act Held that:- CIT(A) came to correct conclusion that provisions of section 44BBB are not applicable to the assessee as work of India Project Office does not relate to any turnkey power project - he confirmed the action of the AO in invoking the provisions of section 145(3) on the reason of incorrect method of accounting and partly debiting the expenses of offshore contracts - Even though there seems to be merit in contentions, it is very difficult to examine them at this point of time in view of afflux of time thus, estimation of income at 10% on the contracts relating to onshore supply and services is reasonable - ITAT is generally estimating incomes from 10 % to 12.5% in main contractors cases - assessee undertook on contract basis the estimation at 10% is reasonable Decided against Assessee. Levy of interest u/s 234B, 234D of the Act Held that:- Levy of interest u/s 234B and 234D are to be re-examined by the AO - once the amounts are covered by the TDS, question of levy of interest u/s 234B on non-payment of advance tax should not arise Relying upon DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) Versus NGC NETWORK ASIA LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] AO is directed to verify whether the income that has been taxed is covered by the provisions of TDS and if so, not to charge interest u/s 234B of the Act - Decided in favour of Assessee.
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