9911796707
TMI Blog2023 (2) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... raised as many as 7 grounds of appeal, but the sum and substance of the grievance of the assessee relates to the taxability of offshore supply of equipment under the Act and taxability of offshore supply of equipment under the India-Singapore Double Taxation Avoidance Agreement [DTAA]. 3. Briefly stated, the facts of the case are that the assessee company is incorporated under the laws of Singapore and is a tax resident of Singapore, within the meaning of Article 4 of the DTAA between India and Singapore. The assessee is a part of UK based business conglomerate - Smiths Group and is engaged in the business of manufacturing and trading of security equipment manufacturing and trading of security equipment. 4. The assessee filed its return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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, the assessee has received interest income of Rs. 71,51,535/- from Canara Bank. However, interest of Rs. 62,94,461/- has been declared by the assessee. The Assessing Officer, accordingly, made addition of Rs. 8,57,074/- and concluded the assessment proceedings. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioning and comprehensive annual maintenance. 16. The ld. DR vehemently stated that the assessee has assigned the aspect related to supply of equipment to itself and the other component of work i.e, installation, testing, commissioning, AMC has been assigned to the subsidiary of the assessee in India i.e. Smith Detection Systems Pvt Ltd. 17. The ld. DR further stated that suo moto bifurcation by the assessee will not change the colour of transaction and the attribution of profit by the Assessing Officer /DRP cannot be faulted with. 18. We have given thoughtful consideration to the orders of the authorities below and have duly considered the judicial decisions relied upon by the ld. counsel for the assessee and relevant documentary evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the sale took place outside India. Similarly, in the present case, there was no allegation made by the Department. that the price at which ONGC was billed/invoiced by the assessee for supply of fabricated platforms included any element for services rendered by the PE. In the present case, we are concerned with assessment years 1987-88 and 1988-89. Therefore, we are not inclined to remit the matter to the adjudicating authority. We reiterate, in the circumstances, not all the profits of the assessee company from its business connection in India (PE) would be taxable in India, but only so much of profits having economic nexus with PE in India would be taxable in India. To this extent, we find no infirmity in the impugned judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 aforemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d commissioning. Therefore, the allegation of ht ld. DR that the assessee suo moto bifurcated the contract does not hold any water as other parties also concurred at the beginning itself and therefore, made separate payments. 24. Considering the facts of the case in totality in light of two above decisions of the Hon'ble Supreme Court [supra] discussed elsewhere, 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. 25. The next grievance relates to the addition of interest on fixed deposits amounting to Rs. 8,57,074/-. 26. The ld. counsel for the assessee vehemently stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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