Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (10) TMI 272 - AT - Income TaxAttribution of income - Addition on account of training charges, defect liabilities and design and engineering services - HELD THAT:- AO cannot attribute any amount on account of training services specifically when the same have not been imported in the year under consideration - we find merit in the submission of the ld. Counsel that the consideration of these services has already been included in the amount received for foreign supervisor activity and since the revenue from the aforesaid activities have already been offered to tax, no further attribution can be made by the AO. In this view of the matter, we hold that the addition made by the AO on account of training services is not justified. Accordingly, the same is directed to be deleted. Liquidated damages and defect liability - As damages have to be paid by the assessee in case of delay i.e., a contingent event, therefore, the said liquidated damages under no circumstances can be concluded to be a part of consideration. We, therefore, find merit in the argument of the ld. Counsel that the conclusion of the AO that the same form part of the revenue earned from offshore supply is incorrect and against the settled principle of law. Further, this being the initial year of contract for the project, no such occasion had arisen and, therefore, in absence of any material with the AO, he was not justified in making the addition. We find, the Kolkata Bench of the Tribunal in the case of Outotec GmbH [2015 (6) TMI 609 - ITAT KOLKATA] has held that clauses like liquidated damages, performance guarantee and defect liability are part of normal commercial arrangements generally agreed in common trade parlance and cannot form the basis for attributing revenue earned from offshore supply of equipment to India. We hold that no portion of revenue earned from the sale of equipment can be taxed in India by virtue of commercial clauses like performance guarantee, defect liability and liquidated damages. We, therefore, set aside the order of the AO and direct him to delete the addition. Grounds of appeal No. 4 and 5 are accordingly allowed. Revenue received for design and engineering services - AO held that design and engineering are chargeable to tax u/s. 9(1)(vii) of the Act as well as Article 13 of the India-Korea DTAA - submission of assessee that the consideration for design and engineering is not taxable in India since such designs and drawings are treated as inseparable part of offshore supplies - ITAT set aside the issue to AO - HELD THAT:- Tribunal has given the finding which are specific and unequivocal regarding the taxability of design and engineering services. Since the issue is settled at the level of ITAT and which was not set aside to the file of the AO for any enquiry or verification, we do not find any infirmity in the order of the AO holding that design and engineering services are chargeable to tax u/s. 9(1)(vii) of the Act as well as Article 13 of the India-Korea DTAA. The ld. Counsel for the assessee has also not brought anything before us to take a contrary view than the view taken by the AO on this issue. Accordingly, the ground raised by the assessee on this issue as per ground of appeal No. 6 is dismissed.
|