TMI Blog2018 (1) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... nt view than the view taken by the Ld.CIT(A) who has followed the decision of the Tribunal in assessee’s own case in the preceding assessment year as well as the decision of the Hon’ble jurisdictional High Court in assessee’s own case - Decided against revenue - ITA No. 5900/Del/2016 - - - Dated:- 12-1-2018 - SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Sh. Sparsh Bhargava, Ms. Ishita Farsaiya, Adv. For The Respondent : Sh. G.K.Dhall, CIT DR ORDER PER R.K.PANDA, ACCOUNTANT MEMBER This appeal filed by the Revenue is directed against the order dated 22.09.2016 of the Ld. CIT(A)-43, New Delhi relating to assessment year 2014-15. 2. The only effective ground raised by the Revenue reads as under:- 1. On the facts and in the circumstances of the case, whether the Ld.CIT(A) erred holding that the income of M/s L S Cable and Systems Ltd. from offshore supply of cables is not taxable in India. 3. Facts of the case, in brief, are that the assessee is a company incorporated in Korea and is engaged in the execution of various projects in India. During the FY 2013-14, the company has executed 29 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of surcharge and cess) of the receipts as per direction of Ld.CIT(A). He accordingly determined the total income of the assessee at ₹ 52,91,43,096/-. 4.1 In appeal, Ld.CIT(A) held that the income of M/s L.S.Cable and System Ltd. from offshore supply of cables is not taxable in India. The relevant observation of the Ld.CIT(A) from para 4 onwards read as under:- 4. Findings/Determination I have examined the facts at hand. I have heard the Counsel. The appellant has pointed out that the issue stands covered by the Hon'ble High Court in appellant's own case. The submissions and year-wise status has been provided by the appellant vide write up dated 22.09.2016 is as follows:- Our submission It is respectfully submitted that revenues earned by LS Cable from offshore supply of goods under subject offshore supply contract are not subject to tax in India because title and risk in the goods was passed outside India. It is submitted LS Cable has, in accordance with the offshore supply contract, supplied goods from outside India. In consideration for such supplies, LS Cable has been paid consideration outside India. Therefore, such considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able In favour of appellant (Held that offshore supplies are not taxable in India) Refer page no. 355 to 362 of paperbook AY 2009-10 In favour of appellant (Held that offshore supplies are not taxable in India) Refer page no. 363 to 374 of paperbook AY 2010-11 No additions made in the Assessment Order (Held that offshore supplies are not taxable in India on the basis of AAR order) Refer page no. 384 to 409 of paperbook AY 2011-12 No additions were made in the Assessment Order (Held that offshore supplies are not taxable in India on the basis of AAR order) Refer page no. 410 to 427 of paperbook We have briefly discussed below observations of appellate authorities in appellant's case: Observations of Hon'ble ITAT and High Court in the orders for AY 2002-03 Observations of Hon'ble ITAT: The facts of the case are covered by the decision of Hon'ble Supreme Court in the case of Ishikawajima Harim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, the mere signing of agreement of supply did not give rise to any income .. The performance of duties under installation/erection contract cannot postpone the transfer of property. The ITAT also observed that non-payment of entire consideration on shipment cannot prevent transfer of title in goods. The relevant extract from the order is reproduced as under: 13.5 .... Therefore, performance of duties mentioned in the Erection Contract cannot postpone the transfer of property u/s 24 read with para 31.2 of the agreement. None of the activities stated in the Erection contract can be taken as vesting the seller with a right of disposal of equipment or right to take back the equipment, which he is deemed to have unconditionally appropriate at the time of delivery to the ship. In the present agreement the seller was to be paid price of the goods as stipulated in the agreements. Although entire consideration is not paid on shipment of equipment, but non payment of price cannot prevent transfer of equipment. The warranties given in the contract relating to satisfactory performance of equipment are normal warrantees to secure performance by the buyer and cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to convey the plant and machinery, i.e. the shipping vessel, even prior to the goods reaching the high seas. Observations of Hon'ble ITAT and High Court in the orders for AY 2003- 04. 2004-05 and 2005-06 Observations of Hon'ble ITAT: In passing the judgment for AY 2002-03, the ITAT had gone through the relevant clauses of both the offshore and onshore contracts. Relevant extract of the ITAT's order for AYs 2002-03, 2003-04 and 2004-05 is reproduced herein below: We find that the issue is squarely covered by the decision of the ITAT in assessee's own case reported as LG Cables Vs. Dy. Director of Income-tax, Circle 1 (1), International Taxation, New Delhi (113 ITD 113). The contention of the Revenue is that the two agreements i.e. onshore services agreement and offshore supply agreement were part and parcel of one contract and this fact was not brought to the notice of the ITAT. We find that the ITAT while deciding the issue has thread-bare gone through the various terms and conditions of both the agreements. In passing the judgment for A Y 2002-03 the ITA T has analysed the facts of the case in light of the applicable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide India where the sale took place and income had accrued, such income could only be taxed outside India and not under Indian laws. Hence, income from offshore contracts is not taxable in India. ) Observations of Hon'ble High Court The Hon'ble Delhi High Court relying on its previous decision for AY 2002-03 and held that offshore supply is not taxable in India. Relevant extract from the judgement is reproduced as under: Thus, the aforesaid arguments of the learned counsel for the Revenue is not acceptable and there is no reason to change the decision arrived at in the case of LG Cable Ltd. (supra) in ITA no. 703 of 2009. Observations of Hon'ble CIT(A) and ITAT in the orders for AY 2006-07 Observations of Hon 'ble CIT(A) The Hon'ble CIT(A) observed that there is no change in facts for this year. Therefore, following the decisions of ITAT and High Court in appellant's own case for earlier years, the Hon'ble CIT(A) held that offshore supply is not taxable. Relevant extract from the order is reproduced as under: 10. The facts of the case of the year under consideration are similar to the facts of the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee i.e. ground No. (i) is allowed. Observations of Hon'ble ITAT in the order for AY 2008-09 The Hon'ble ITAT following the aforementioned decisions of ITAT as well as jurisdictions High Court held that offshore supply is not taxable in India. Though, the learned Department Representative argued that the department has challenged the order of High Court before the Supreme Court. However, the Hon'ble ITAT observed that decision of jurisdictional High Court is binding upon the authorities and Tribunals working under its territorial jurisdiction and accordingly, decided the issue in favour of the appellant. Relevant extract from the judgement is reproduced as under: 4. We have heard both the sides, considered the material on record as well as precedents relied upon by Ld. Counsel for the assessee. We find that the issues involved in this appeal are squarely covered in favour of the assessee as is clear from various decisions of ITAT as well as of jurisdictional High Court in assessee's own case which fact has not been refuted by the Ld.DR too. The agreement involved in earlier decisions as well as in the case in hand is the same which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Ishikawajima. In the case of Ansaldo Energia SPA relied on by the revenue) the contract for offshore supply awarded to the assessee was held to be a composite contract together with onshore supply contract etc. awarded to another. The turnkey project as a whole was awarded to the applicant who was not a single bidder. Thereafter the contract was split up. In that case the Tribunal found that there was a facade created for the purpose of avoiding tax and that there was price imbalance in the contracts and that it was skewed in favour of the offshore supply contract in order to minimize the tax liability. There is no such case before us. Therefore, the facts are different from the facts of the present case. Nothing in law prevents the parties to enter into a contract which provides for sale of material for a specified consideration, although they were meant to be utilized in the fabrication and installation of a complete plant. Regarding the revenue's plea that as the applicant has a PE in India, the income arising should be taxed in India, it stated that the existence of PE would be for the purpose of carrying out the contract for onshore supplies and services etc. but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been followed. Further, the appellant has placed reliance on the following judgements: Hyosung Corporation (AAR No. 773 of 2008) confirmed by High Court (W.P.(C) No. 2765/2010) Joint Stock Company Foreign Economic Association Technopromexport (AAR no. 827 of 2009) DIT vs. Ericsson A.B. (Delhi High Court) (343 ITR 370) DIT vs. Nokia Networks OY [ITA No. 512/ 2007; 1138/ 2006; 503/ 2007; 505/ 2007 - Delhi High Court National Petroleum Construction Company Limited vs. DIT [TS-29-HC-20 16(DEL)] Delhi High Court SEPCOIII Electric Power Construction Corporation [Application No. 1 of 2011 in AAR No.1 008 of 2010] Thus in view of the position laid by Courts/ Tribunal! CIT(A) in earlier years, the offshore supply is neither taxable under the Income Tax Act as title and risk has passed outside India nor the offshore supply is taxable under the provisions of DTAA between India and Korea as the offshore supply is not related to the permanent establishment for executing onshore activities. The Ld. AO has merely relied on his earlier year orders which have already been decided in the favour of assessee by Courts/ Tribunal/CIT(A). Conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has followed the orders of his predecessors as well as the order of the Ld.CIT passed u/s 264 for the FY 2015-16 i.e. A/y 2016-17. We find the Ld.CIT(A) deleted the addition made by the AO by following order of the Tribunal in assessee s own case in the preceding years as well as the decision of the Jurisdictional High Court in assessee s own case, the details of which have already been reproduced in the preceding paragraphs. Nothing contrary was brought to our notice by the Ld.CIT DR against the finding of the Ld.CIT(A) except stating that the Ld.CIT(A) has not considered the order passed by the Ld.CIT u/s 264 of the I.T.Act, 1961. The same, in our opinion, cannot be a ground to take a different view than the view taken by the Ld.CIT(A) who has followed the decision of the Tribunal in assessee s own case in the preceding assessment year as well as the decision of the Hon ble jurisdictional High Court in assessee s own case. In view of the detailed reasoning given by the Ld.CIT(A), we find no infirmity in his order. Accordingly the same is upheld and the ground raised by the Revenue is dismissed. 7. In the result, the appeal filed by the Revenue is dismissed. Pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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