TMI Blog2023 (2) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... e, made separate payments. Considering all we do not find any justification in attribution of profit on off shore sale of equipment and direct the Assessing Officer to delete the impugned addition. This grievance alongwith with all its sub grounds is allowed. Addition of interest on fixed deposits - Assessee vehemently stated that the assessee misplaced the fixed deposits and being capital assets, have written off the same, therefore there is no question of earning any interest income - HELD THAT:- We are of the considered view that this contention of assessee is not only illogical, but also unacceptable. The Canara Bank in Form No. 26AS has acknowledged the Fixed Deposits with it and has credited interest by deducting tax at source. Even if the Fixed Deposits are misplaced, the assessee can approach the Canara Bank and ask for duplicate Fixed Deposits. We do not find any error or infirmity in the addition made by the Assessing Officer and the same is upheld. Appeal of the assessee is partly allowed. - ITA No. 2258/DEL/2022 - - - Dated:- 22-2-2023 - Shri N.K. Billaiya, Accountant Member, And Shri Anubhav Sharma, Judicial Member For the Assessee : ShriHimanshu Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts (FDs) 62,94,461/- 6. During the course of scrutiny assessment proceedings, the assessee itself submitted that it has a Permanent Establishment [PE] in existence in India with respect to contract with CIAL and accordingly, the Assessing Officer was of the opinion that once a PE has been established for foreign entity, there is no need to establish the PE again. 7. The Assessing Officer was further of the view that the taxation of business income of the non-resident is ascertained as per source rules under the domestic provisions r.w. relevant Article of the DTAA. 8. Referring to various financial statements furnished by the assessee for the relevant period, the Assessing Officer noticed that the assessee company also carries out similar business in other countries. Therefore, the operating margin shown by the assessee company itself from similar businesses across the world could be taken as the profit similar to the Arms length profit margin. 9. Applying the said ratio, the Assessing Officer computed the total profit to be attributed at Rs. 10,73,79,094/-. 10. Proceeding further, the Assessing Officer noticed that as per Form 26AS, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow and have duly considered the judicial decisions relied upon by the ld. counsel for the assessee and relevant documentary evidences brought on record in light of Rule 18(6) of the ITAT Rules. 19. The core issue which needs to be addressed at the outset is to what extent the Force of Attraction Rule apply in the case of off shore supply/sales of goods/merchandise. 20. The Hon'ble Supreme Court in the case of Hyundai Heavy Industries Co. [supra] had the occasion to address such issue. The relevant observations of the Hon'ble Supreme Court read as under: The attraction rule implies that when an enterprise (GE) sets up a PE in another country, it brings itself within the fiscal jurisdiction of that another country to such a degree that such another country can tax all profits that the GE derives from the sources country-whether though PE or not. It is the act of setting out a PE which triggers the taxability of transactions in the source State. Therefore, unless the PE is set up, the question of taxability does not arise-Whether the transactions are direct or they are through the PE. In the case of a Turnkey Project, the PE is set up at the installation stage wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential to determine the taxability of various operations. XXXXX XXXXX 79. We, therefore, hold as under : Re : Offshore Supply : (1) That only such part of the income, as is attributable to the operations carried out in India can be taxed in India. (2) Since all parts of the transaction in question, i.e. the transfer of property in goods as well as the payment, were carried on outside the Indian soil, the transaction could not have been taxed in India. (3) The principle of apportionment, wherein the territorial jurisdiction of a particular state determines its capacity to tax an event, has to be followed. (4) The fact that the contract was signed in India is of no material consequence, since all activities in connection with the offshore supply were outside India, and therefore cannot be deemed to accrue or arise in the country. (5) There exists a distinction between a business connection and a permanent establishment. As the permanent establishment cannot be said to be involved in the transaction, the aforementioned provision will have no application. The permanent establishment cannot be equated to a business conne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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