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2024 (3) TMI 609 - ITAT DELHITaxability in India - amount received by the assessee from offshore supplies of plants and equipments - PE in India or not? - assessee, a non-resident corporate entity, is incorporated in Federal Republic of Germany - DRP held that the assessee had a PE in India and assessee is involved in building production unit in relation to air gas separation and renewable and low-carbon hydrogen process solutions. Therefore, it would be covered u/s 44BB - HELD THAT:- The terms of payment as per Article 5 of the agreement says that 10% of the price has to be paid as advance and 80% of the price has to be paid upon delivery FOB/FCA Japanese Seaport/Airport/Warehouse out of an unconditional irrevocable and documentary Letter of Crodit which shall be opened within 30 days of the issuance of company’s purchase order. Whereas, balance 10% will be paid upon successful completion of test run. The bill of lading indicates that freight and charges are payable at the destination only. The invoice for supply of plant and machinery shows that place of delivery is Moji Port, Japan and the value of invoice is on FOB basis. Thus, the aforesaid facts clearly establish that the situs of sale of plant and equipment was in Japan and not within the territory of India. Therefore, in our view, the ratio laid down in case of Ishikawajma-Harima Heavy Industries Ltd [2007 (1) TMI 91 - SUPREME COURT] clearly applies to the facts of assessee’s case and no part of the receipts in dispute is taxable in India as the sale event and transfer of title over the goods have taken place outside the territory of India. In the facts of the present appeal, admittedly, the assessee is not engaged in the business of providing services or facilities in connection with prospecting for, or extraction or production of mineral oils in India. Neither the assessee has supplied plant and machinery on hire for use or to be used in prospecting for, or extraction or production of mineral oils. The assessee has sold the plant and equipment to BPCL for setting up a plant in its facilities at Kochi. Therefore, in our opinion, the conditions of section 44BB of the Act do not apply. In case, the Department was convinced that the assessee had a PE in India all the receipts should have been brought to tax under domestic law, either under section 44BB or section 44DA or section 9(1)(vii) of Act, as the case may be. Further, though, the departmental authorities have concluded that the assessee had a PE in India, however, they have not established how the conditions of Article 5(1) of the tax treaty are satisfied and what is the nature of PE in India. On careful scrutiny of the assessment order and directions of learned DRP, we find that except general observations, no valid reasoning has been provided by the departmental authorities to establish existence of PE. Thus we hold that the receipts from sale/supply of plant and equipment are not taxable in India. Accordingly, ground no. 1 is allowed.
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