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TMI Blog2011 (9) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had performed various activities in India during the relevant assessment year and thereby attributed 50% of the income relatable to the operations carried out in India, both as per the provisions of Section 9 of the Income Tax Act (hereinafter referred to as „the Act‟) and Article7 of Double Taxation Avoidance Agreement („DTAA‟ for brevity) between India and Korea. The AO while considering the offshore supply, attributed income for the taxation in India vide letter dated 05.07.2006, the details of payments received on originating the territory of India in respect of the offshore supplies during the period 01.04.2003 to 31.03.2004 are of US$ 25,705,837/-. The TT buying rate as on 31.03.2004 was Rs.1,127,458,025/-. The profit taxable in India on this amount @ 10% is computed at Rs.11,27,45,802/-. The AO, therefore, vide Assessment Order dated 26.12.2006 assessed the income of the assessee at Rs.7,85,16,943/-. 3. Being aggrieved by the assessment order passed by the AO, the assessee filed three separate appeals, i.e. Appeal No.179/06-07, 380/06-07 & 127/07-08 for the Assessment Years 2003-04, 2004-05 & 2005-06 respectively before the CIT (A). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent in India, income on sale of equipment has accrued in India and on that basis, Section 9 of the Act was attracted in this case. 8. In respect of off-shore supplies also, it was held that the assessee had a business connection in India and M/s. Alpasso Industries Pvt. Ltd. was a permanent establishment. It is on this ground that income from off-shore contacts had accrued in India and was held liable for tax. It is a matter of record that the Assessment Year 2002-03, identical issue had cropped up and the Tribunal had taken the view that off-shore/overseas contract was totally incumbent on on-shore service contract and in respect of off-shore contract, no work was entrusted by the assessee to its Indian agent, M/s. Alpasso Industries Pvt. Ltd. On this basis, it was held that Section 9 of the Act had no application and in respect of those off-shore supplies, the Indian agent did not constitute a business connection and the following two conditions which are necessary for invocation of Section 9 of the Act are not satisfied: (i) Business connection in India; or (ii) Attributing income earned by the assessee from the said supplies, were not satisfied. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performed by or through a business connection then, profits would be deemed to have accrued in India. The petitioner had a permanent establishment in India within the meaning of the said term in paragraph 3 in Article 5 of the Double Taxation Avoidance Agreement entered into between the Governments of India and Japan. 26. Reversing the aforesaid finding of the Authority for Advance Rulings, the Supreme Court in respect of the offshore supply and equipments held as under: - "Re: Offshore Supply: (1) That only such part of the income, as is attributable to the operations carried out in India can be taxed in India. (2) Since all parts of the transaction in question, i.e. the transfer of property in goods as well as the payment, were carried on outside the Indian soil, the transaction could not have been taxed in India. (3) The principle of apportionment, wherein the territorial jurisdiction of a particular state determines its capacity to tax an event, has to be followed. (4) The fact that the contract was signed in India is of no material consequence, since all activities in connection with the offshore supply were outside India, and therefore cannot be deemed to accrue or aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Contract) relating to certain performances by the respondent-assessee including port handling, custom clearance, transportation, insurance, handling on site, unloading at transportation site, testing and commissioning to the satisfaction of the buyer are in a separate agreement for a separate consideration which is clearly enunciated in the second agreement as follows: - "Whereas the employer desires to engage the contractor for performance of all activities within India.................. subject to the terms and conditions hereinafter appearing." 12. Mr. Abhishek Maratha, learned counsel appearing for the Revenue, could not dispute that the identical issue was decided by the Tribunal earlier, which view was upheld by this Court in the case of Director of Income Tax, New Delhi Vs. LG Cable Ltd. (in ITA No.703/2009 decided on 24.12.2010). Faced with this, his only submission was that even in respect of off-shore supply in the instant case, the AO had found that the contract between the assessee and PGCI even for off-shore supply provided that the assessee had appointed an Indian agent, viz., M/s. Alpasso Industries Pvt. Ltd. who was working for the assessee in India. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. The ITAT had categorically held that the delivery of goods, documents and receipt of substantial part of sale consideration did take place outside India and hence income relatable to sale outside India had not accrued in India. Such income could only be taxed outside India and not under Indian law. Further, there cannot be a business connection between a seller and purchaser (Hindustan Shipyard Ltd. - 109 ITR 158). The income from onshore services was taxable in India, simply because such income accrued in India from services rendered in India. One need not look for business connection to tax such income. The assessee company had shipped the goods from abroad with the bill of lading in the name of Power Grid Corporation against a irrecoverable letter of credit. The assessee had assumed, under the onshore contract, the responsibility of customs clearance on behalf of Power Grid Corporation as an agent only and it would be wrong to assume that the ownership of the goods did not. The Tribunal has rightly held that the property in the equipment had passed to the buyer as stipulated in para 31.2 of General Conditions of the Contract. Stipulation in the on-shore contact relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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