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2023 (7) TMI 1137 - AT - Income TaxRevision u/s 263 - non-consideration of taxability of receipts from offshore supply of material/equipment in India having regard to the fact whether they are linked to the PE of the assessee, if any, in India - HELD THAT:- AO made detailed inquiry by calling for the copies of contract invoices, the nature of work executed under the contract, details of AEs and subsidiaries in India, details of work executed by AEs/subsidiaries. In response to the queries raised by AO, the assessee furnished a detailed reply with supporting evidences. In so far as receipts from offshore supply contract, the assessee specifically submitted that the transfer of goods having taken place outside the territory of India, receipts are not taxable. Thus, the allegation of learned CIT that the Assessing Officer has not examined the issue is not borne out from the facts and material on record. Also whether the receipts from offshore supply contract are taxable in India or contracts are in the nature of composite contract or whether such receipts are linked to the PE are highly debatable issues which cannot be considered for exercising jurisdiction u/s 263. Except making vague allegation that the assessee has a project office in India which is in the nature of PE, learned CIT has not demonstrated how it fits into the definition of PE as per the treaty. Even assuming that there is a PE, unless, the offshore supplies made are with active involvement of the PE, profit in relation to such contract cannot be attributed to the PE. Therefore, merely on conjecture, surmises and suspicion, PE cannot be established. Issue of taxability of surety commission - As facts on record clearly establish that the assessee had offered the surety commission to tax in the return of income. Therefore, the allegation of learned CIT in this regard is completely unfounded. Allegation made regarding non-examination of transaction with Indian subsidiary from the point of view of transfer pricing, it is observed that in the year under consideration, the assessee has reported the transaction with Indian AEs in Form 3CEB. In the said report, the assessee has claimed the transaction to be at arm’s length. Learned CIT has not demonstrated even remotely how the transactions are not at arm’s length. Therefore, the observations of learned CIT are in the nature of roving and fishing inquiry without examining the facts and material on record. Allegation of CIT that there is difference in the quantum of FTS offered to tax by the assessee and actually received and further that the Indian subsidiary was paying salary to the personnel of the assessee based in India - As observed, these allegations were neither made in the first show cause notice issued u/s 263 nor they are part of subsequent notices issued by the learned CIT. Though, CIT is empowered to consider fresh issues in course of proceedings u/s 263 even, if they are not part of the show cause notice issued under Section 263 of the Act, however, it is trite law, learned CIT has to issue fresh show cause notice to the assessee confronting the fresh issues on which the revisionary authority seeks to revise the assessment order. This is not the case in the present appeal. Simultaneous proceedings - HELD THAT:- Also at the time of exercise of jurisdiction under Section 263, admittedly, proceedings before AAR was pending on the issue of taxability of receipts from offshore supply contract. That being the case, learned CIT being conscious of the fact that proceeding is pending before AAR should not have initiated proceedings under Section 263 of the Act as two parallel proceedings on the same issue, cannot be initiated at a given point of time. Therefore, exercise of powers under Section 263 of the Act in the facts of the present appeal is invalid. Decided in favour of assessee.
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