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Director of Income Tax (International Taxation) , Kolkata Versus Income Tax Settlement Commission, Additional Branch, Kolkata & Others

Taxability in India - Settlement commission order eligibility - Settlement Commission held that the Non- Resident Entities not having permanent establishment in India are not liable to pay taxation in respect of offshore transactions - DTAA - Held that:- The Settlement Commission considers the contracts. It looks into the aspect of the taxability of the portion said to be performed within India. It takes a particular view upon understanding the contract between the parties and gives reasons for .....

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rence that, the title to the goods stand transferred only upon such payment being made. - An order passed by the Settlement Commission is justiciable. Jyotendrasinhji (1993 (4) TMI 1 - SUPREME Court ) is of the view that, an order of the Settlement Commission which is contrary to any of the provisions of the Income Tax Act, 1961 and prejudicial to the interest of the assessee is amenable to interference under Article 226 of the Constitution of India. An order of the Settlement Commission can .....

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Petitioner : Md. Nizamuddin, Advocate For the Respondents : Mr. J.P. Khaitan, Sr. Advocate Ms. Nilanjana Banerjee Pal, Advocate JUDGMENT Debangsu Basak, J. An Order dated December 30, 2011 passed by the Settlement Commission (Income Tax and Wealth Tax) Additional Bench, Kolkata in respect of three applicants is under challenge at the behest of the Director of Income Tax. Learned Advocate appearing for the petitioner submits that, the Settlement Commission was considering three separate applicati .....

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ipments and thirdly as spares and rendering supervisory services. The disputes relate to the contract for sale of equipments and spares. The respondent nos. 2, 3 and 4 claim that, it sold the plant to the Indian purchaser aboard and that, the sale being concluded abroad on CIF basis Income Tax cannot be charged on such proceeds. Learned Advocate for the petitioner contends that, the contract does not conclusively establish that, the title to the plant stood transferred abroad. On the contrary, s .....

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ing to him, the Settlement Commission has failed to consider that, the sale of the plant did take place in India in view of the various terms and conditions of the contract. The Settlement Commission has misapplied the various ratios of the decisions of the Courts cited before it. Such decisions are of the view that, when a sale takes place in India, the income derived there from is amenable to the imposition of the Income Tax under the Act of 1961. In the facts of the present case, according to .....

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ment between the respondent nos. 2, 3 and 4 and the Indian Companies in the true context. He submits that, in view of the nature of the contract between the respondent nos. 2, 3 and 4 and the Indian Companies, the plant and machineries are to be installed in India. The sales stand completed only after release of the balance 15 per cent of the sale amount by the Indian Companies. Consequently, it cannot be said that, the title of the goods stood transferred abroad prior to receipt of full payment .....

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e sale from being treated to be made in India. He submits that, the Settlement Commission has misapplied and misconstrued 2007 Volume 288 Income Tax Reports page 408 (SC) (Ishikawajima-Harima Heavy Industries Ltd. v. Director of Income-Tax, Mumbai) and 2011 Volume 197 Taxman page 100 (Delhi) (Director of Income-tax, New Delhi v. L.G. Cable Ltd.). He submits that, L.G. Cable Ltd. (supra) follows Ishikawajima-Harima Heavy Industries Ltd. (supra). However, the facts situations obtaining in the pres .....

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t, 1961, the Writ Court need not interfere with the impugned order. Learned Senior Advocate appearing for the respondent nos. 2, 3 and 4 submits that, the private respondents are Non-Resident Entities. They had entered into certain contracts. They did not file any Income Tax Return in India on the premise that, the sale of equipment, designs and drawings took place outside India. In respect of contract for supervisory services, since the Indian customers had paid due tax, the private respondents .....

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ndia. The Settlement Commission considered the issues in details. The order of the Settlement Commission is detailed and speaking. There is no perversity in the impugned order calling for an interference by the Writ Court. The Settlement Commission after considering the various provisions of the contract had directed taxes to be paid at the stipulated rate in respect of a portion and has held that, the other portions are exempt for the reasons given. He draws the attention of the Court to the va .....

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asses, while the payment in respect of such goods may be deferred. He relies upon the equipment sale agreement as well as the supervisory services agreement and the various terms and conditions thereunder and submits that, none of those terms and conditions can be construed to mean that, the entirety of the transacted goods are within the taxation laws in India. He contends that, in view of the provisions of the double taxation avoidance agreement, the Settlement Commission has correctly held th .....

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Additional Commissioner of Income-Tax v. Skoda Export, Praha) in support of his contentions. Does the order of the Settlement Commission allowing the settlement application filed by the private respondents require any interference under Article 226 of the Constitution of India, is the issue falling for consideration in the present writ petition. The private respondents as Non-Resident Entities had applied to the Settlement Commission on June 29, 2010 for settlement of tax liability in respect of .....

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parties. It takes into consideration the provisions of the Sale of Goods Act, 1930 as raised by the department as also by the private respondents. It considers the contracts in question. It takes into account to the authorities cited before it by the parties on the proposition of law canvassed by them. It is of the view that, if the intentions of the parties, as garnered from the terms and conditions of the contract in question, justifies an interference that, the sale of the goods took place o .....

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rtion which is performed offshore need not attract the Indian Taxation Laws. The extent of taxation, however, will depend on the fact situation of a given case. This principle is followed in Hyundai Heavy Industries Co. Ltd. (supra) and L.G. Cable Ltd. (supra). The Settlement Commission considers the contracts. It looks into the aspect of the taxability of the portion said to be performed within India. It takes a particular view upon understanding the contract between the parties and gives reaso .....

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