9911796707
TMI Blog2016 (10) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... gures, read as under:- "The appellant objects to the order dated 14 January 2015 passed by the Deputy Commissioner of Income Tax (International Taxation)-(2)(2)(1), Mumbai ('the AO') for the assessment year 201112, pursuant to the directions dated 22 December 2014 issued by the Dispute Resolution Panel ('DRP') under section 144C(5) of the Income-tax Act, 1961 ('the Act') on the following among other grounds. Ground No. 1: Income in relation to offshore supply is not taxable in India. 1.1 The learned AO/DRP erred in law and in facts in seeking to tax in India, a sum of Rs. 300,65,923 as against the income of Rs. 57,41,665 offered to tax for the year under consideration. 2. The learned AO/DRP erred in law and in facts in considering revenue from Offshore Supplies for the purpose of computing the appellant's income taxable in India, without appreciating that the same is not taxable in India both as per the Act as well as the Double Taxation Avoidance Agreement between India and Korea. Ground No. 2: Income, if any, should be taxable only to the extent it can be attributed to operations in India 2.1 Without prejudice, the learned AO/DRP erred in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shore services relating to laying, testing and commissioning. As far as amount received by the assessee towards on-shore supply and services are concerned, in the return of income filed for the impugned assessment year assessee offered it as income after claiming statutory deductions. However, as far as off- shore supplies are concerned, the assessee did not offer it to tax on the ground that title over the goods involved in off-shore supplies was transferred outside India to the contractee/employer upon loading onto the transportation medium outside India. The Assessing Officer in the course of assessment proceedings noticing that the assessee has not offered the amount received on account of off-shore supplies to tax, called upon the assessee to justify its claim. In response to the show cause notice issued by the Assessing Officer it was submitted by the assessee as under:- * Off-shore supplies were manufacturing in Korea by the Head Office. Other functions including finance general management, marketing, business development, etc., were handled from within Korea; * The project office in India had no role to pla in relation to off-shore supplies; * None of the employees of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Head Office; * The project office had no role to play in making off-shore supplies. In fact, the project office had no role to play in securing the contract which lead to the obligation to make the off-shore supplies; * The installing of cables and commissioning thereof was awarded to the company owning to the employer's judgment that it would be preferable that the said activities were carried out by the suppliers. Hence, the distinct activities of installation and commissioning were awarded to the company. In connection with the distinct activities, the company established the project office since the activities could only be undertaken in India which required physical presence in India. Therefore, the project office has no role to play either in securing or in executing the activities of off-shore supplies. It was submitted by the assessee from the very beginning, the contracts for supply and installation activities were envisaged as distinct activities. Only for the purpose of conveyance, the distinct contracts were documented as single contract for both the activities, however, the activities retained their distinct character and consideration in the contract. 7. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit element in off-shore supplies and it has a business connection in India as these off-shore supplies were finally utilised in India. He observed, assessee by applying a dissecting approach has bifurcated the composite contract into on-shore and off-shore supplies. He was of the view that a "Look At Approach" should be taken rather than "Look Through Approach". The Assessing Officer observed, the assessee set- up its project office in India for executing the contract. The Assessing Officer observed, as the project office is executing the contract in India, on turnkey basis the entire amount received in pursuance to the contract comes within the purview of scope of income as envisaged under section 5(2). Therefore, as the assessee is having a direct business connection in India within the meaning of section 9(1) and it has a fixed place of business in India by virtue of its project office exclusively for the purpose of executing the contracts and the goods relates to off-shore supplies are inextricably linked to the P.E., the entire amount received in connection with the contract has to be taxed as business receipt of P.E. in India. As far as the judicial precedents relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible for supply of material purchased overseas, transportation of the material to the site, delivery, storage, security and also insurance till the cables are installed, tested, commissioned and the completed facility is handed over to employer, the transfer of ownership of the cable procured from overseas on loading to the mode of transport for delivery at Indian Ports is only notional and for the limited purpose of making insurance claim due to damage/loss in transit. Even the custom duty on such material is payable by the assessee. Delivery at the ports is to be taken by the assessee and transported to the site and assessee is responsible for the quality, security, storage, testing, performance of such cable till completion of contract and transfer of facility on completion. The DRP observed, the contract awarded to the assessee has not been split into separate parts for supply of off-shore equipments and supply of on-shore equipments and on-shore services. The overall price of the contracts remains fixed. The DRP observed, the assessee has received money from contract on account of supplying, laying, testing and commissioning of extra high voltage cables. Thus, all revenue ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP upheld the draft assessment order. In terms of the directions of the DRP, the Assessing Officer finalized the assessment. Aggrieved, the assessee is in further appeal before the Tribunal. 9. Learned Authorised Representative taking us through various clauses of the contract submitted that both the contracts are turnkey composite contract having three distinct and separate components off- shore supply, on-shore supply and on-shore services. He submitted, the total contract value has been segregated to three different parts i.e., for off-shore supplies, on-shore supplies and on-shore services. Referring to clause 31.1, the learned Authorized Representative submitted that ownership in respect of plant and equipment including spare parts from off-shore supplies shall be transferred to the employer upon loading onto the mode of transport to be utilised to convey the plant and equipments from the country of origin to that country. He submitted, however, clause 31(5) of the contract provided that even after transfer of ownership of the plant and equipment the contractor will be responsible for care and custody. Referring to the invoice raised for off-shore supplies, the learned Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received or accrues or arise or is deemed to accrue or arise in India. He submitted, Explanation-1(a) to section 9(1)(i) specifies that only so much of income is taxable in India as can reasonably be attributable to the operations carried out in India. He submitted, as the only operations in India relate to on-shore supplies and on-shore services, income from these activities having already been offered to tax by the assessee, no further tax liability can arise. Therefore, income from off-shore supplies is not chargeable in India as per the provisions of section 5 r/w section 9. Learned Authorised Representative submitted, as the project office had no role to play in relation to off-shore supply, income from off-shore supply is not attributable to the P.E. in India. Therefore, as per article 7 of the treaty between India and Korea, it is not taxable in India. In support of such contention, the learned Authorised Representative heavily relied upon the decision of the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries (supra) and took us through the relevant portions of the judgment. Further, referring to the decision of the Hon'ble Jurisdictional High Court in DI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the Tribunal, while relying upon the decision of the Hon'ble Madras High Court in Ansaldo Energia Spa (supra), had also observed that the decision in the case of Ishikawajima Harima Heavy Industries (supra). He submitted, as per these decisions, even if title in respect of off-shore supply of goods passed outside India it alone cannot decide the issue of taxability. He submitted, the AAR in case of Roxar Maximum Reservoir Performance WLL, 349 ITR 189, also observed that a contract has to be read as a whole and the purpose for which the contract is entered into by the party is to be ascertained from the terms of the contract. Relying upon the said decision, learned Departmental Representative submitted, when the contract is a composite contract, the off-shore supply of goods being inextricably linked to its utilisation in execution of contract in India is taxable in India. He submitted, when there is no doubt that the contract is for a turnkey project, from survey stage to successful commissioning stage, and it is not a contract for supply of goods, it is to be assumed that the assessee has undertaken complete responsibility of the entire turnkey project of which off-shore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sortium the instruction no.1829 of 1989 will not apply. He submitted, Explanation-4 to section 9(1)(i) retrospectively inserted by Finance Act, 2012, defines the meaning of "through" which is used in section 9(1)(i) of the Act and in Article-27 of the DTAA. 13. He submitted, as per the definition of the word "through" under explanation-4,it is not imperative to establish the fact that the P.E. played active role in the off-shore supply contract as held by the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries (supra). He submitted, as no definition of the word "through" has been provided under India-Korea DTAA by virtue of Article-3(2), the meaning of "through" provided in Explanation-4 to section 9(1)(i) is applicable to DTAA also. He submitted, even the Courts have held that Explanation inserted by Finance Act retrospectively can be read into DTAAs. He submitted, the expression 'directly or indirectly' used in section 9(1)(i) and Article 7 of the India Korea DTAA are wide enough to take into its ambit the off-shore supply contract. The learned Departmental Representative submitted, even otherwise also, by virtue of force of attraction rule, the off-shore supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in L.G. Cables Ltd. (supra), is not applicable as the non-resident company was awarded two separate contracts one for off-shore supply of goods and services and another for on-shore erection, installation, etc. He further submitted that in the case of L.G. Cables Ltd. (supra), the Hon'ble High Court did not discuss the decision of Roxar Maximum Reservoir Performance WLL (supra) and Ansaldo Energia SPA (supra). He submitted, the Hon'ble High Court also did not have the benefit of the Hon'ble Supreme Court's decision in the case of Vodafone International Holdings B.B. (supra). Thus, it was submitted by the learned Departmental Representative the consideration received towards off-shore supply of goods was rightly taxed in India. 14. In the rejoinder, the learned Authorised Representative submitted, even in turnkey contract taxability has to be examined independently for each component stated distinctly in the contract. He submitted, in the decisions relied upon, though, the contracts which were subject matter of consideration were turnkey in nature, however, it has been held that the contract contained distinct obligation and separate consideration for the off-shore and on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorised Representative submitted, though, Explanation-4 of section 9(1)(i) was inserted by Finance Act, 2012, much before the draft assessment order, as well as final assessment order, however, none of the Departmental Authorities including DRP have referred to the said Explanation. He submitted, even otherwise also, Explanation-1(a) to section 9(1)(i), would apply and not Explanation 4. He submitted, in Explanation 1(a), the word "through" does not appear. Therefore, by virtue of Explanation 1(a) to section 9(1)(i) territorial nexus is required for taxing the income in India as held by the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries (supra). He submitted, even assuming Explanation 4 is to be considered for the purpose of section 9(1)(i), however by virtue of said Explanation 4, off-shore supply is not taxable since off-shore supply is by means of, in consequence of order by reason of the contract, entered into with the employer and not by means of or in consequence of or by reason of P.E./business connection. He submitted, in assessee's case, reverse is true, as the project office came into existence as a consequence of the contract entered into by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is very much evident from the contract value. The learned Authorised Representative finally submitted, though, the learned Departmental Representative has tried to distinguish the decision of the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries (supra) as well as other decisions relied upon by the assessee, however, the assessee's case is fully covered by these decisions. 16. Learned Authorised Representative submitted, though, in the case of L.G. Cables Ltd. (supra), two separate contracts were executed even then the Hon'ble High Court held, assuming that both the contract needed to be read together as a composite contract, still then, the issue is covered by the decision of the Hon'ble Supreme Court in Ishikawajima Harima Heavy Industries (supra). The learned Authorised Representative finally summing up submitted, as the consideration received towards off-shore supply of goods has no territorial or economic nexus with India, it cannot be taxed in India. 17. We have patiently and carefully heard the submissions made by the learned Counsels appearing for both the parties, perused the material available on record including the bid document, contract copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipment to be supplied from abroad (Schedule no.1) shall be/quoted on a CIF port-of-entry, CIP border point basis or CIP-named place. In addition the FOB price (or the FCA price, as the case may be) shall also be indicated. (b) Plant and equipment manufactured or fabricated within the Employer's country (Schedule No.2) shall be quoted on an EXW (ex-factory, ex-works, ex-warehouse or off-the-shelf as applicable) basis, and shall be inclusive of all costs as well as duties and taxes paid or payable on components and raw materials incorporated or to be incorporated in the facilities. (c) Local transportation, insurance and other services incidental to delivery of the plant and equipment (Schedule No. 3). (d) Installation Services shall be quoted separately (Schedule No. 4) and shall include rates or prices for all labor, contractor's equipment, temporary works, materials, consumables and all matters and things of whatsoever nature, including operations and maintenance services, the provision of operations and maintenance n1.nua1s, training etc., where identified in the bidding documents as necessary for the proper execution of the installation services, including all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1(C) lays down the structure of taxes; Schedule-1(D) provides for inland transportation, insurance and other incidental charges. The grand summary of price schedule incorporated in the contract is as under:- Item Description Total Cost (Rs.) 1A Supply from abroad $ 1,259,445 = INR 55,554,119 1B Supply from within the employer's country INR 29,984,210 1C Structure of taxes INR 19,845,316 1D Inland transportation, insurance and other incidental charges INR 5,871,941 Agent Commission on CIF INR 1,111,082 Total: INR 112,366,668 (Rupees Eleven Crore Twenty Three Lakh Sixty Six Thousand Six Hundred Sixty Eight only) 22. Thus, on going through clauses of the bid documents as well as the contract, it is very much clear that though only one contract was executed between the parties, however, the scope of work to be undertaken by the contractor have been distinctly and separately earmarked and provided. As could be seen from clause 12.1 of the IFB, it requires the bidder to separately mention the bid currency in respect of plant and equipment to be supplied from abroad. On reading of clause 12.1 (a & b), it is evident, as per the IFB, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies as a distinct and separate component of the contract. It is not disputed that in pursuance to the contract, assessee has supplied the goods not only from Korea but other countries to India. The issue before us is whether the price received towards supply of plant and equipments from abroad is taxable in India by virtue of a business connection through its P.E. It is the case of the Department that as the assessee is executing a turnkey project and the contract is a composite one and since the work of laying, testing and commissioning is executed through the P.E. in India, the assessee has a territorial and economic nexus with India, therefore, profit arising out of off-shore supply of plant and equipment should be deemed to accrue or arise in India in terms of section 9(1)(i) of the Act. The aforesaid argument of the Department has to be examined in the light of relevant statutory provisions, provisions of India-Korea DTAA as well as judicial precedents cited before us. 23. At this stage, we may analyse certain provisions of the Income Tax Act, 1961. Section 5 speaks of scope of total income. As per sub- section (2) of section 5, in case of a non-resident, any income received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arising outside India will not come within the purview of total income in terms of section 5(2) and secondly, as per section 9(1)(i) r/w Explanation-1, income shall be deemed to accrue or arise in India through or from any business connection in India and in a case where all the operations are not carried out in India, only such part of the income as is reasonably attributable to operations carried out in India can be deemed to accrue or arise in India. Keeping in view the aforesaid statutory provisions, if we examine the facts of the assessee's case, it would be seen that though the contract entered with MRVC by the assessee is a single contract, however, the scope of work to be undertaken by the assessee have been well defined and demarcated to specific components, such as, supply of plant and equipment from abroad, supply of plant/equipments within India and the service to be rendered in India with regard to laying, testing, commissioning, etc. It is further evident, the price schedule for each work has also been separately provided in the contract. In fact, the IFB itself has made it clear that the bidder not only should give a break-down of the price while bidding for the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndly, income cannot be deemed to accrue or arise in India through or from any business connection in India in terms of section 9(1)((i) because the income relating to off-shore supplies cannot be attributable to the operations carried out in India. Admittedly, off-shore supplies were made outside the territorial jurisdiction of India and also the transfer of ownership over the goods was also outside the territorial jurisdiction of India. Moreover, the income relating to off-shore supply cannot be considered to be through any business connection in India because none of the conditions of Explanation-2 to section 9(1)(i) are fulfilled. Undisputedly, the project office (P.E) of the assessee came into existence only after the formalization of the contract between the assessee and MRVC. Therefore, the P.E. had no role to play either in obtaining the contract or off-shore supply of goods made by the assessee. Insertion of explanation 4 to section 9(1)(i) by Finance Act, 2012, in our view, will not improve the situation for the department, for the following reasons. Explanation 1(a) of section 9(1)(i) makes it clear, only that part of income which can reasonably be attributable to operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses so incurred 'whether in the State in which the permanent establishment is situated or elsewhere, which are allowed under the provisions of the domestic law of the Contracting State in which the permanent establishment is situated. 4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise; 5. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. 6. Where income or profits include items of income which are dealt with separately in other articles of this Convention, then the provisions of those articles shall not be affected by the provisions of this article." On a plain reading of Article 7(1) of the treaty it is clear, only that part of the profit which is attribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds off- shore supply and off-shore service, dispute arose between the assessee and the Department in relation to its taxability under the Income Tax Act. While the assessee claimed that the amount received towards 0ff-shore supply and off-shore service being outside the territorial jurisdiction of India is not taxable under the Income Tax Act, however, the Department was of the view that as the assessee was having a P.E. in India, it has a business connection and, therefore, the amount received towards off-shore supplies and off-shore services will also be taxable under the Act. While doing so, the Department held that the contract executed between the parties is a composite contract and the off-shore supply and 0ff-shore services are inextricably linked to the other activities since it is a turnkey project and the contract is not divisible. The Hon'ble Supreme Court observed, even if a particular contact is fashioned as a turnkey contract or a turnkey project, they are not of much significance. Merely, for the reason that it is a turnkey contract, it would not mean that for the purpose of taxability, the entire contract must be considered to be an integrated one so as to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any way, the P.E. would be excluded from being a part of the cause of income itself, hence, there would be no business connection. The Court observed, when the off-shore supply and services were rendered outside India and the P.E. has no role to play in respect of earning of income thereto, the income arising therefrom cannot be attributable to the P.E. so as to bring it within the charge of tax. For attracting the taxing statute, there has to be some activities of the P.E. Even under the DTAA, the tax liability in respect of overseas transaction would not arise in India, in view of the specific provisions of section 9, as the said provision has a direct territorial nexus. The Hon'ble Court observed, relief under the DTAA having regard to the provisions contained under section 90(2) of the Act, would arise only in the event the taxable income of the assessee arises in one contracting State on the basis of accrual of income in another contracting State on the basis of residence. However, insofar as accrual of income in India is concerned, taxability must be read in terms of section 4(2) r/w section 9 whereupon the question of seeking assessment of such income in India on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Double Taxation Avoidance Agreement, and the latter is for the application of section 9 of the Income-tax Act. (6) Clause (a) of Explanation 1 to section 9(1)(i) states that only such part of the income as is attributable to the operations carried out in India, are taxable in India. (7) The existence of a permanent establishment would not constitute sufficient 'business connection', and the permanent establishment would be the taxable entity. The fiscal jurisdiction of a country would not extend to the taxing entire income attributable to the permanent establishment. (8) There exists a difference between the existence of a business connection and the income accruing or arising out of such business connection. (9) Paragraph 6 of the Protocol to the DTAA is not applicable, because, for the profits to be 'attributable directly or indirectly', the permanent establishment must be involved in the activity giving rise to the profits. 28. If we apply the principle laid down in the aforesaid decision to the facts of the present case, it is observed that the sales are effected outside India i.e., in Korea and the transfer of title over the goods was effected to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. One of the decision relied upon by the Ld. Departmental Representative is in the case of Orpak System Ltd. vs. ADIT (176 TTJ 655) On a careful reading of the said decision we find that it is factually distinguishable. Factual analysis of the order indicate that separate bills raised by the assessee in dollar terms for supply of equipments and in rupee terms for the work relating to installation was to suit its convenience and was not contemplated by the HPCL (contractee/employer). However, in the present case, it is very much evident from the IFB that it is the employer which wanted the bidders to quote their price for off-shore supply and on-shore supply separately in foreign currency and rupee terms respectively. Further, the Tribunal in Orpak Systems Ltd. (supra) has followed the decision of Ansaldo Energia SPA (supra) while coming to its conclusion. On a reading of the aforesaid decision of the Hon'ble Madras High Court, we find it was decided on the peculiar facts arising in that case. In the case of Ansaldo Energia SPA (supra), it was a single bidder and the employer never intended to segregate the bid price, however, at the instance of the contractor, the bid amount was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a or whether any income could be deemed to accrue or arise in India. The fact that the contractual obligations of Linda were not limited to merely supplying equipment, but were for due performance of the entire Contract, would not necessarily imply that the entire income which was relatable to the Contract could be deemed to accrue or arise in India. 85. The principle of apportionment of income on the basis of territorial nexus is now well accepted. Explanation 1(a) to section 9(1)(i) of the Act also specifies that only part of income which is attributable to operations in India would be deemed to accrue or arise in India. It necessarily follows that in cases where a contract entails only a part of the operations to be carried on in India, the assessee would not be liable for the part of income that arises from operations conducted outside India. In such a case, the income from the venture would have to be appropriately apportioned. The Supreme Court in the case of Ishikawajima Harima Heavy Industries (supra) had considered this aspect and held that merely because a project is a turnkey project would not necessarily imply that for the purposes of taxability, the entire contract b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtue of Section 9(1)(i) of the Act, The expression "look through" had been used by the Supreme Court in this context. The relevant extract of the judgment is as under:- "90. We have to give effect to the language of the section when it is unambiguous and admits of no doubt regarding its interpretation, particularly when a legal fiction is embedded in that section. A legal fiction has a limited scope. A legal fiction cannot be expanded by giving purposive interpretation particularly if the result of such interpretation is to transform the concept of chargeability which is also there in Section 9(1)(i), particularly when one reads Section 9(1)(i) with Section 5(2)(b) of the Act. What is contended on behalf of the Revenue is that under Section 9(1)(i) it can "look through" the transfer of shares in an Indian company holding shares in an Indian company and treat the transfer of shares of the foreign company as equivalent to the transfer of the shares of the Indian company on the premise that Section 9(1)(i) covers direct and indirect transfers of capital assets. 91.For the above reason, Section 9(1)(i) cannot by a process of interpretation be extended to cover indirect transfers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Delhi High Court in the case of DIT vs. Nokia NetworksOY(358 ITR 259). The decision of Sedco Forex International (supra) relied upon by the learned Departmental Representative is also not applicable due to difference in facts. As far as decision in case of Verizon Communications Singapore Pte. Ltd., v/s ITO, (361 ITR 575) (Mad.) is concerned in that case the decision of Ishikawajima Harima Heavy Industries (supra) was referred to in the context of taxability of offshore services and explanation to section 9(2). Moreover it pertains to taxability of royalty in terms of section 9(1)(vi) hence factually different from assessee's case. Further in case of DDIT v/s New Skies Satellite, B.V., 382 ITR 114, the Hon'ble Delhi High Court while considering the law propounded in case of Verizon Communications Singapore Pte. Ltd. (supra) observed it did not cite reason for the extension of the amendments to the double taxation avoidance agreement. The Hon'ble Delhi High Court went on to observe no amendment to the act, whether retrospective are prospective, can be read in a manner so as to extend its operation to the terms of an international treaty. The Hon'ble Court observed a declarato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent on record, the assessee had filed its return of income for the impugned assessment year offering income received towards on-shore supplies and services. However, while completing the assessment, the Assessing Officer has not only included the revenue earned from off-shore supplies as taxable in India, but he taxed the entire income derived by the assessee both from on-shore supply and service as well as off-shore supplies on presumptive basis by applying rate of 10% in terms of section 44BB and 44BBB. Though, the assessee had challenged the estimation of profit at 10% of the total contract receipt, however, the DRP upheld the order of the Assessing Officer. 37. The Learned Authorised Representative has submitted before us that firstly; off-shore supplies cannot be included for estimating the profit and secondly; the estimation of income on presumptive basis @ 10% is not applicable as the provisions of section 44BB and 44BBB are industry specific and cannot be applied to the nature of contract executed by the assessee. The learned Authorised Representative further submitted, the rates prescribed under sections 44B, 44BB, 44BBB, vary from 5% to 10%. Therefore, computing profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and iv) Satellite TV Asia Region Ltd. v/s DDIT, 117 TTJ 249 (Mum.). 43. The learned Departmental Representative on the other hand justified the levy of interest by relying upon the decision of the Hon'ble Delhi High Court in DIT v/s Alcatel Lucent USA Inc., 264 CTR 240 (Del.). 44. We have considered the submissions of the parties and perused the material available on record. The Hon'ble Jurisdictional High Court in NGC Network Asia LLC (supra), have clearly held that in case of a non-resident company, no interest can be levied for non-payment of advance tax because a duty is cast on the payer to deduct tax at source. Following the aforesaid decision, the Hon'ble Jurisdictional High Court in Xelo Pty Ltd. (supra) expressed similar view. The Tribunal, Mumbai Bench, in Satellite TV Asia Region Ltd. (supra) after taking into account the decision of the Hon'ble Delhi High Court in Alcatel Lucent USA Inc. (supra) observed, the primary liability of deducting tax was that of the payer. Hence, no interest is leviable on the assessee under section 234B for failure to pay advance tax. Therefore, in principle, we agree with the assessee that levy of interest under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no.4: Levy of interest under section 234B of the Act: 4.1 The learned A.O. has erred in law and in fact, in levying interest under section 234B of the Act disregarding the fact that the appellant is a non-resident whose income is subject to tax deduction at source (which is supported by lower withholding tax certificates issued by the tax authorities in its case." 49. Ground no.1, relates to taxability of receipt from off-shore supplies. 50. The issue arising out of the above ground is identical to the issue raised by the assessee in its appeal being ITA no.1023/Mum./2015, vide ground no.1, decided in Para no.18 to 35 of this order. Consistent with the view taken therein, we allow ground no.1. 51. Ground no.2 relates to estimation of profit @ 10% on the total contract receipt. 52. The issue arising out of the above ground is also identical to the issue raised by the assessee in its appeal being ITA no.1023/Mum/2015, vide ground no.2, decided in Para no.40 of this order. Consistent with the view taken therein, we set aside the impugned order on this issue and restore the matter back to the file of the Assessing Officer with similar direction. Thus, ground no.2 is allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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