TMI Blog2020 (6) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... , uphold the same. Before parting, we may further observe that as the repair works are undertaken at the overseas work stations of the assessee, therefore, the question of taxability of such receipts from rendering of the repair work as attributable to PE of the assessee in India does not arise. We thus, in terms of our aforesaid observations conclude that the A.O had erred in holding that the revenue from repair activities rendered by the assessee to ONGC was taxable in India under Sec. 44DA - Decided against revenue. - ITA No. 1400/Mum/2019 - - - Dated:- 27-5-2020 - Hon ble Justice P.P Bhatt, President And Pramod Kumar, VP For the Appellant : Madhur Aggarwal For the Respondent : Avaneesh Tiwari ORDER PER BENCH: [1] By way of this appeal, the Assessing Officer has challenged correctness of the order dated 31st December 2018, in the matter of assessment under section 143(3) r.w.s. 144C of the Income Tax Act, 1961, for the assessment year 2015-16, on the following grounds: - Grounds of Appeal Tax Effect relating to each Ground of appeal 1. Whether on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of assessee is computed in accordance with provisions of section 44BB i.e. at 10% of receipt. The issue is whether the following is to be considered in computation of income. Particulars Revenue Amount Fees for repair work and related warehousing costs; including reimbursement for transportation and logistics support 21,89,72,756/- Product Supply 1,85,94,235/- The reasons for exclusion of same by appellant is that revenue from these two streams out of the contract with ONGC is that service concerned is rendered outside India. The Assessing Officer included the same holding the same to be part of composite contract. 6. The issue is recurring in nature. In AY 2011-12 and 2012-13 the CIT(Appeals) held the issue in favour of appellant. In AY 2013-14 (where only issue of repairs was there), I had allowed the appeal citing earlier decision of AYrs. for AY 2014-15 too I had takes the same decision Vide order dated 13.07.2018, the view of the CIT(Appeals) for AY 2011-12 was upheld by ITAT. 7. Considering all aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into a composite contract having two types of operations viz. (i) one being fabrication in Korea; and (ii) the other consisting of installation in India. The Hon‟ble Apex court in the backdrop of the facts involved in the said case observed that the profits earned by the Korean GE on supplies of fabricated platform could not be made attributable to its Indian PE as the installation PE came into existence only on conclusion of the transaction giving rise to the supply of the fabricated platform. On the basis of the aforesaid deliberations, it was observed by the Hon‟ble Court that the profit on such supplies of fabricated platform cannot be said to be attributable to the Indian PE of the assessee. Rather, it was observed that even if it was to be assumed that the supplies of platform were necessary for the purpose of installation (activity of the PE in India) and even if it was to be assumed that the supplies were an integral part, still no part of the profits on such supplies could be attributed to the independent PE, unless it was established by the department that the supplies were not at arm s length price. We further find that the aforesaid view arrived at b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) had observed that in case of offshore supplies made under the ONGC contract, the property in goods were transferred by the assessee to ONGC outside India and the entire sale was executed outside India. The CIT(A) had further observed that no part of the activities of the offshore supply of equipments were carried out in India. Further, the PE of the assessee in India also had no role to play in effectuating such transactions either pre or post such offshore supply. We find that the CIT(A) relying on the judgment of the Hon ble Supreme Court in Ishikawajima Harima Heavy Industries ltd. Vs. DIT (2007) 288 ITR 408 (SC) and CIT Vs. Hyundai Heavy Industries Company Ltd. (2007) 291 ITR 482 (SC), had observed that as in the case of the assessee no part of the activities of offshore supply of equipments by the assessee were undertaken in India, hence the revenue received by the assessee there from could not be taxed in India. We have deliberated at length on the aforesaid observations of the CIT(A) and find ourselves to be in agreement with the view arrived at by him that the revenue received by the assessee from offshore supply of goods to ONGC could not be taxed in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head salaries . It is clearly discernible from a perusal of Explanation 2 to Sec. 9(1)(vii), that where the consideration is received by the recipient for any mining or like project undertaken by him, the same would be excluded from the sweep of FTS. We are of the considered view that as the consideration received by the assessee for providing the repair work (and related activities) to ONGC are in context of the business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used, in the prospecting for, or extraction or production of mineral oils, thus, the receipts in the hands of the assessee from providing such services would clearly fall within the sweep of the exclusion contemplated in Explanation 2 to Sec. 9(1)(vii) of the Act. We thus, in terms of our aforesaid observations are of the considered view that the revenue received by the assessee from providing repair servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, are persuaded to subscribe to the view taken by the CIT(A) that the rendering of the repair services by the assessee to ONGC cannot be characterised as royalty. Still further, we may herein observe that as the equipment is owned by ONGC itself, therefore, while rendering the repair services, no right to use the equipment can be said to have been provided by the assessee to ONGC. We thus, finding no infirmity in the order of the CIT(A) holding that the revenue received by the assessee from rendering of the repair services to ONGC cannot be brought within the sweep of FTS or Royalty, uphold the same. Before parting, we may further observe that as the repair works are undertaken at the overseas work stations of the assessee, therefore, the question of taxability of such receipts from rendering of the repair work as attributable to PE of the assessee in India does not arise. We thus, in terms of our aforesaid observations conclude that the A.O had erred in holding that the revenue from repair activities rendered by the assessee to ONGC was taxable in India under Sec. 44DA of the Act. The Ground of appeal No. 3 raised by the revenue is dismissed. [4] We see no reasons to take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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