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2014 (8) TMI 837 - AT - Income TaxTransfer pricing adjustment - Offshore activities – whether there are separate out of India activity or not – Held that:- There are so many disputed facts which need further verification by the AO to arrive at the just and proper conclusion to make a just assessment - The claim of the assessee is that contract is in two parts which has been disputed by the CIT(DR) - As per him, there is only one contract in case of the assessee and there is no such division “inside India” and outside India” activities - CIT(DR) has also disputed the contentions of the assessee that there are activities outside of India that can be considered as separate, identifiable and distinct activity - the activities of procurement of material from third party are for executing the contract in India - no separate project have been developed out of India - the issue is not that how the outside India activities and it revenue was attributable to the PE of the assessee in the form of offices and construction of PE but the issue is that there are no separate out of India activity - Against the claim of the assessee that there is absolutely no material to even remotely suggest that Indian offices had any role to play in the offshore activities of designing, fabricating, procurement of equipment and supply - The project has been managed and executed from Indian offices of the assessee - The procurement, fabrication, designing, services, if any, rendered from outside India have been compensated by Indian PEs - The body and sale of the ONGC project lies in India and it had role in all the activities, if any, carried outside India. Burden to prove – Fabrication and designing services were rendered from outside India or not - Held that:- The primary burden of proof is on the assessee to justify that fabrication and designing services were rendered from outside India - It should have submitted the details of all the expenses and location and incurring the expenses against the so called receipts on account of “imported components” - This receipt has gone in the hands of the assessee without justifying the expenses against the same and profits earned - in absence of providing the basic information of activities, the assessee could not claimed that revenue should prove what role the Indian offices had in regard to those unproved activities outside India. The fabrication and supplies are made by the third parties outside India to the assessee and the revenue is not taxing the profits of these third parties. Profits out of price “imported components “ is receipts minus expenses on purchases for which information is not filed to the authorities in India and AO has made a reasonable estimation on income chargeable to tax in India – thus, the matter is remitted back to the AO for examination of the related facts based on the material made available on record to arrive at a definite conclusion as to whether the assessee has carried out any distinct and identifiable business operation in respect of the project outside India, after affording adequate opportunity of being heard to the assessee and make the afresh assessment accordingly – Decided in favour of Assessee.
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