TMI Blog2017 (11) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... of equipments having been effected from outside the territory of India and the sale having been completed outside territory of India, the ratio laid down by the Hon'ble Supreme Court in Ishikawajma-Harima Heavy Industries Ltd. (2007 (1) TMI 91 - SUPREME COURT ) squarely applies to the facts of the present case. Thus the income received from off–shore supply of equipments in case of a divisible contract is not taxable in India - Decided against revenue - ITA no.1599/Mum./2015, C.O. no.28/Mum./2016 And ITA no.1599/Mum./2015 - - - Dated:- 8-11-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Assessee : Shri Madhur Agarwal a/w Shri Milin Thakre For The Revenue : Shri Samuel Darse ORDER PER SAKTIJIT DEY, J.M. Aforesaid appeal by the Revenue and Cross objection by the assessee are against the order dated 19th December 2014, passed by the Dispute Resolution Panel IV (for short the DRP ), Mumbai, for the assessment year 2011 12. 2. The grounds raised by the Revenue pertain to the common issue relating to the direction of the DRP to exclude the income received from off shore supplies of equipments amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of the contract. He observed, the contract is for supply, erection, installation, integration, testing and commission, etc., including the training of the employees. He observed, in case of sub contract with L T, the assessee is also responsible up to 21 days after even installation and training of manpower. He observed, the assessee is also to bear all the risks till it is handed over to the L T. Thus, it was held by the Assessing Officer, not only the contract is a composite one under the sole responsibility of the assessee, but, the assessee is also responsible for training, provision of skilled manpower as well. The Assessing Officer observed, merely because consideration for off shore supply operation is mentioned separately, would not make the contract divisible one since the assessee is required to take care of everything. Thus, ultimately, the Assessing Officer held that the amount received by the assessee towards off shore supplies would be taxable in India and, accordingly, added back the amount to the income of the assessee while confirming the draft assessment order. Against the addition proposed in the draft assessment order, the assessee filed objections befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the payment for unloading at Port of import and loading on truck at Port of import are the responsibility of the buyer. In the case of CIP, they could be the responsibility of the buyer or seller. The DRP observed, as per the definition of CIP, delivery on CIP basis would mean passage of title of goods in the port of loading. Since, the off shore supply for the DIAL contract was on CIF basis and that for the MAIL contract was on CIP basis, the DRP ultimately held that the title of goods supplied under both the contracts have passed hands at the Swedish Port of loading. Therefore, the sale was completed outside the territory of India, hence, the amount received from such off shore supply of goods / equipments are not taxable in India. In this context, the DRP relied upon the decision of the Hon'ble Supreme Court in DIT v/s Ishikawajma-Harima Heavy Industries Ltd. [2007] 158 Taxman 259 (SC). After exhaustively referring to the observations made by the Hon'ble Supreme Court in the aforesaid decision, the DRP ultimately concluded, since supply and service obligation as also off shore and on shore obligation having been distinctly and separately provided in the contract, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required for approval of design till manufacturing stage. He submitted, though, the sale is on CIF basis P.E. is required to decide the route to be taken for equipment supply on Indian highways before goods reach site. To emphasise the fact that the P.E. was also involved in the off shore supply of goods / equipments, the learned Departmental Representative relied upon OECD guidelines and comments by Klaus Vogel. In this context, he also relied upon the decision of the Hon ble Madras High Court in Ansaldo Energia Spa v/s ITAT Ors, [2009] 310 ITR 237 (Mad.). The learned Departmental Representative submitted, the terms of the contract would reveal that the assessee was responsible for receipt of goods in India billed on CIF basis. He submitted, the delivery of goods as per the contract was to be made at site and the contractor was responsible for deciding routes to ensure no damage to highway, staff equipments. He submitted, the assessee was not only entrusted with the supply of material but was also required to carry out training of manpower and delivery programme for materials associated with such supply. Learned Departmental Representative submitted, the price schedule in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from outside the territory of India and the title having passed outside India, the amount received by the assessee on account of off shore supplies of goods / materials is not taxable in India. In this context, learned Authorised Representative took us through various clauses of the contract entered with L T towards development of air field ground lighting works of MIAL. He submitted, as per the scope of work specified under the contract the sub contract, work includes both supply of materials and erection, testing and commissioning work. He submitted, work entrusted to the assessee under the sub contract agreement has been segregated to three parties as provided under Appendix 1 of the sub contract agreement. He submitted, Part A relates only to supply of materials. He submitted, Part B of the scope of work relates to design, installation, testing, commissioning and integration of the supplied items whether to be installed by the assessee or others. Part C provides for developing design, supply, installation and commissioning of control and monitoring system and upgrade as required. He submitted, except materials which were supplied from outside the country all other incomes ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorised Representative relied upon the following decisions: i) DIT(IT) v/s Siemens Aktiengesellschaft, ITA no.1033 of 2011 (Bom.), dated 20.11.2012; ii) DIT(IT) v/s Toyo Engineering Corporation, ITA no.663 of 2011, dated 23.01.2013; iii) DIT v/s Nokia Networks OY, 358 ITR 259 (Del.); iv) Linde AG, Linde Engineering Division v/s DDIT, 365 ITR 1 (Del.); v) DIT(IT) v/s Xelo Pty Ltd., 203 taxman 475 (Bom.); and vi) ILJIN Electric Co. Ltd. v/s DCIT, ITA no.1023 and 5642/ Mum./2015, dated 14.10.2016. 7. We have patiently and carefully heard the rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. As far as the factual aspect of the issue is concerned, there is no dispute that the assessee had undertaken two separate contracts, one with DIAL and another with MIAL. While the assessee has entered into contract with DIAL as a main contractor, the work of MIAL was taken up by the assessee as a sub contractor of L T Ltd. However, it is stated before us that the scope of work as per the contracts are more or less similar. It is evident, the scope of work under both the contracts comprised of supply of equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regated into separate components. Undisputedly, as far as supply of equipment is concerned, such equipments have been manufactured / produced in Sweden are to be supplied on CIF basis. Thus, as held by the DRP, supply of goods / equipment on CIF basis pre supposes that title of goods passes once the goods are loaded to the carrier, hence, the sale becomes complete. Same is the case with sale made on CIP basis which has happened in the case of contract with DIAL. There is no dispute that the off shore supplies in case of both the contracts are either on CIF or on CIP basis and payments have been made in Euros, that too, outside India. Moreover, the invoice raised for supply of equipment, sample copies of which have been placed in paper book, clearly indicate that the supply of equipment has been made in the name of either DIAL or L T Ltd. The invoices also indicate that the payments were to be made outside India. Thus, as could be seen, the title of goods insofar as it relates to off shore supply of equipment was transferred in the name of contractee at the port of loading i.e., outside India. It is also relevant to note, the observations of the Assessing Officer that the P.E. is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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