TMI Blog2023 (5) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and has proceeded to accept the view of the Assessing Officer without saying how the factual position is different from the past assessment years. Thus, it is manifest, both the AO and learned DRP have failed to provide any good and sufficient reason while departing from the methodology adopted by the department in respect of attribution of profit to the PE on receipts from offshore supply of equipment in past assessment years. Therefore, the decision of the departmental authorities militate against the specific provision contained under Article 7(6) of the tax treaty. The decision taken by the departmental authorities in computing profit of the assessee under section 44BB of the Act is unsustainable, as, it is not consistent with the position taken on the issue in past assessment years. Therefore, while deleting the addition made by the AO, we direct him to attribute 1% of the receipts from offshore supply of equipment as profit of the PE and accordingly compute the income of the assessee. - SHRI G.S. PANNU, HON BLE PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For the Appellant : Sh. Sachit Jolly, Advocate Sh. Sohum Dua, Advocate For the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly connected to the installation and commissioning activity, hence, part of composite contract, however, they have been artificially split into two contracts. He observed, though, there is an installation PE in Indian, however, the assessee has not offered to tax receipts from offshore supply of plants and equipments. Therefore, he issued a show-cause notice to the assessee requiring it to explain, why the receipts from offshore supply should not be brought to tax under the provisions of section 44BB of the Act. Though, the assessee vehemently opposed to the proposed action of Assessing Officer by filing detailed submissions, however, the Assessing Officer was not convinced. Ultimately, he proceeded to tax the receipts from offshore supply of equipments by applying the provisions of section 44BB of the Act at 10% on gross basis. Accordingly, he determined the income from offshore supply at Rs.18,08,04,057/- which was brought to tax by applying the rate of 40%. 5. Against the draft assessment order so proposed the assessee raised objections before learned DRP. Though, before learned DRP, the assessee made detailed submissions to the effect that there is no PE in India and, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the earlier assessment years and taxed the receipts from offshore supply of equipment under section 44BB of the Act. He submitted, though, this fact was specifically brought to the notice of learned DRP, however, learned DRP has completely overlooked the submissions of the assessee in this regard. 7. Drawing our attention to Article 7 of India Singapore DTAA, learned counsel submitted that as per paragraph 1 of Article 7, only so much of profit of the enterprise situated in the other Contracting States can be brought to tax in India as is directly or indirectly attributable to the Permanent Establishment situated in the Contracting States. He submitted, as per paragraph 6 of Article 7, the profits to be attributed to the PE shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. He submitted, assessee s income from offshore supply of equipment is being assessed to tax applying a particular method since past many assessment years. Whereas, he submitted, without providing any good and sufficient reason to depart from the methodology applied in the past assessment years, the department has adopted a new method of attri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the past years has taken stand that the receipts from onshore activity are taxable under section 44BB of the Act. Insofar as receipts from offshore supplies are concerned, assessee claimed it as exempt from taxation in India as the sales were effected outside the territory of India and activities are not connected to the PE. However, the Assessing Officer, while completing the assessment in assessment years 2010-11 to 2017-18 had not accepted the position taken by the assessee and devised a mechanism to attribute 1% of the receipts from the offshore supplies of equipment to the PE in India. The aforesaid position regarding taxability of offshore supply of equipment has been accepted both by the assessee and the Revenue over the years till assessment year 2016-17. For the first time, the department attempted to make a departure when the assessment order for assessment year 2017-18 was revised under section 263 of the Act. However, while deciding assessee s appeal against order under section 263 of the Act, the Tribunal set aside the order passed under section 263 of the Act and restored the assessment order attributing the profit to the PE at the rate of 1% of the receipts from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article. 5. 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. 6. 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. 7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 8. For the purpose of paragraph 1, the term directly or indirectly attributable to the permanent establishment includes profits arising from transactions in which the permanent establishment has been involved and such profits shall be regarded as attributable to the permanent establishment to the extent appropriate to the part played by the permanent establishment in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
