TMI Blog2016 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed in India only if it had PE in India. The AO held that assessee had PE in India for installation and commissioning and supply which also included the indigenous supply and presence of its personnel/ entities for providing training to ONGC personnel. These observations are primarily with reference to the contract being treated as a composite contract and does not refer to which PE as per Article 5 of the India-US treaty was there. Admittedly the assessee had no fixed place of business in India and its employees only gave training for proper execution of the project. Further, assessee company did not take the services of any person in India except for supply of indigenous parts and, therefore, there was no dependent agent PE in India also. The AO has not brought on record any evidence to substantiate that the income from offshore supplies was attributable to alleged PE. Further, if we consider the AO’s view that there was installation PE, then too as per Article 5(2)(j)&(k), there should have been presence for more than 120 days then only installation PE could be considered. The AO has not commented on this aspect. Therefore, the entire findings of AO on the issue relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plier s premises in USA and followed by training at ONGC site at Dehradun, Jorhat and Kolkata. 2.4. The assessee company had filed return of income declaring Nil income for AY 2008-09 and had not offered any revenue/ receipts from the contract during the FY 2007-08 relevant to AY 2008-09. However, in the return filed for AY 2009-10, which came under scrutiny, assessee had offered revenues earned on account of installation and inspection amounting to US $ 88613 under the provisions of section 44BB and DPR of 10% and had offered training component given to ONGC engineers in India at US $ 146058 as per provisions of article 12 of DTAA at 15% gross. Thus, in AY 2009-10, the assessee had not offered to tax the supply of goods from the outside India under the claim that income had not accrued/ arisen or deemed to accrue or arisen in India of such sales of goods. The training receipts in respect of training imparted at assessee s premises had also not been offered to tax. Therefore, notice u/s 148 was issued on 29.10.2012 requiring the assessee to file its return of income for AY 2008-09. The assessee vide its reply dated 11.12.2012 stated that return filed originally on 9.9.2009 may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ( ONGC ) for supplies, installation and training as a composite contract and holding that the Appellant has a Permanent Establishment ( PE ) in India, ignoring the fact that - (a) The Appellant has entered into a pure supply contract with installation and other services incidental to such supply. (b) Even if it is assumed that it is not a pure supply contract, it should be considered as a divisible contract with consideration against supply, installation and training separately identified. (c) Even if it is assumed that contract with ONGC is composite in nature, the taxability of various income streams should be determined separately. (d) The Appellant does not have a PE in India; No facts were brought on record by the AO to establish the existence of PE. (e) In the absence of the Appellant having a PE in India, the consideration from contract with ONGC is not taxable in India. (f) Without prejudice to above, even assuming (though not conceded) that the Appellant has a PE in India, the Ld. AO/Ld. DRP has failed to bring any material on record which could substantiate that the income from contract with ONGC is attributable to the alleged PE. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and training outside India. Thus, he pointed out that the AO had duly applied his mind and allowed the payment to be released without deduction of TDS in respect of supply of material outside India and training outside India. 4.1. Ld. counsel pointed out that return for AY 2008-09 was filed on 9.9.2009 at Nil income, which was processed u/s 143(1). However, for AY 2009-10, assessee had offered revenue from training and installation but no income was offered for off shore supply and services. Assessment was completed u/s 143(3). In this assessment it was held that assessee was having a PE in India and supply was liable to tax on the ground that it was a composite contract. 4.2. Thereafter, matter travelled before ld. DRP, which held that the supplies took place in FY 2007-08 and not in FY 2008-09 and, therefore, the additions were to be made in AY 2008-09. Accordingly, notice u/s 148 was issued. He submitted that it is a case of change of opinion. 5. Ld. CIT(DR) submitted that granting of certificate u/s 195 cannot be equated with assessment proceedings, because that is purely administrative act and has no bearing on the final assessment to be made. 6. Before we p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 7 1 unit of complete 3D data acquisition analog system with 4000 channels for Transition Zone along with necessary modules 4,643,827.73 Total 59,822,416.80 8.1. The assessee company also required to provide off shore and on shore training installation and third party inspection. Details of consideration for such services against each of the items mentioned in the above details were as under: S. No. Off-shore Training Installation On-shore Training Inspection Service Tax Total 1 100,000 2,000 42,856 24,000 4,000 172,856 2 50,000 1,000 21,429 12,000 1,000 85,429 3 25,000 500 10,714 6,000 250 42,464 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un - Within 150 days from LOA: 4 units for Geophysical Services (GS), Baroda (WR) and hydrophones of 2 units of Frontier Basin(FB), Dehradun - Within 180 days from LOA: 3 units for GS, Chennai (SR) - Within 210 days from LOA: 2 units for GS-Kolkata (CR) and 3 units of GS, Jorhat (ER) ii. Installation, Commissioning and Acceptance: Within 30 days for all the systems pertaining to each ultimate consignee from the date of receipt of intimation by respective ultimate consignee. The intimation will be sent by Head, Geophysical Services of concerned work center after receipt of all the items of telemetry systems belonging to that site to the supplier (i.e, M/s Input/ Output Inc., USA). b. Trainings : i. At Supplier's premises. USA : Supplier will impart training to 14 Geophysicists of ONGC for a period of four (4) weeks and 14 Engineers for a period of six weeks. Training will be completed before completion of delivery (dispatch) of all the systems. The schedule of training is given at Appendix-IM. ii. At five sites of ONGC in India Supplier will impart one training each for Geophysicists and Engineers for a period of 2 weeks each at ONGC-Jorhat, Chen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -248 003 (India) : a) Invoice as per supply order, in triplicate, drawn in the name of Oil Natural Gas Corporation Ltd. and duly manually signed by the supplier or his authorised representative b) Quality control certificate issued jointly by Head- Quality Assurance and Indentor of concerned region. c) Certificate of TPI for each system as per para 10.1 (b) above. d) Original Certificate(s) of satisfactory installation, commissioning, acceptance issued by Head, Geophysical Services or his auth. Rep. of concerned site. e) Certificate of satisfactory completion of training (in India at supplier's premise); at USA) by concerned Indentor or his auth. representative. 14.3 All foreign Bank Charges towards advising negotiations/cable charges and confirmations of Letter of Credit charges, if required, will be borne by the supplier. All Indian Bank Charges will, however be borne by ONGC. 14.4 The corporate , personnel tax liability (imposed on his employees and the employees of his sub-contractor, vendors, bank-up consultants etc. on account of their association with or for performance of the work in India) against this order will be borne by Supplier. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract as a whole is contemplated. From the terms of contract it is evident that the whole contract was divisible into different components, the consideration for which was separately contemplated in the contract itself. Further, from the assessment order it is evident that AO had aggregated the income from various streams and had not adopted any specific value of the contract. 10.1. Having held that it was a divisible contract with multiple scope of work, we have to find out where the title in goods passed. If title in goods passed off shore, then no income can be attributed from this part of the contract in India. At page 82 of PB wherein the Annexure 1 to the supply order is contained, the contract clearly mentions the consideration in respect of equipment, installation and commissioning, third party charges, service tax charges for training for various services separately. As per the terms of delivery, reproduced earlier, it is evident that terms for imported items through sea was FOB and through air it was FCA. FCA implies that seller fulfills his obligations to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nous parts and, therefore, there was no dependent agent PE in India also. The AO has not brought on record any evidence to substantiate that the income from offshore supplies was attributable to alleged PE. 10.5. Further, if we consider the AO s view that there was installation PE, then too as per Article 5(2)(j) (k), there should have been presence for more than 120 days then only installation PE could be considered. The AO has not commented on this aspect. Therefore, the entire findings of AO on the issue relating to PE are without any basis. Therefore, considered from all perspectives no income can be attributed to the offshore supply. In the result ground nos. 3 4 are allowed. 11. Now coming to ground no. 5, ld. counsel pointed out that as far as onshore supply of equipment was concerned, it was sub-contracted to third party namely HGS (India) Sales and Services Private Limited ( HGS India ). Ld. counsel pointed out that HGS India supplied goods directly to ONGC amounting to USD 589,010. The same amount of invoices was raised by HGS India to the assessee company and by the assessee company to ONGC, hence, no profit was earned on this transaction. In support of his conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently carry out installation and inspection in future without recourse to the assessee company. We find that both these aspects were not examined by AO and, therefore, it will be in the interest of justice that for proper verification of facts on this count, the matter is restored back to the file of AO. We order accordingly. Ground no. 6 is allowed for statistical purposes. 15. Ground no. 7: At the time of hearing ld. counsel submitted that this ground is not pressed as it is. He, however, referred to page 8 of AO s order and pointed out that since onshore revenue has been taxed in AY 2009-10, so the same should not be taxed in AY 2008-09. He submitted that the matter may be referred back to the AO for verification so as to avoid any double taxation. 15.1. Having heard both the parties, we refrain from giving any direction as the ground is not pressed. In the result, this ground is dismissed. 16. Ground no. 8: AO included USD 8500 in regard to service tax as one of the component of receipt under the contract. Ld. counsel pointed out that this aspect is covered under ground no. 8 raised by assessee. He submitted that on this service tax no income was earned by asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
