9911796707
TMI Blog2023 (5) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, the assessee is engaged in the business of offshore supply of equipment, providing services in connection therewith and supplying plant and machinery on hire basis to be used in prospecting for, extraction, production of mineral oil. The assessee entered into two separate contracts with the Oil and Natural Gas Commission (ONGC). One of the contracts is for supply of sub-see production system comprising of various plants and equipments from offshore on Freight on Board (FoB) basis. The second contract is for services of equipments and installation and commissioning of supplied items. In the year under consideration, the assessee had earned receipts from India in respect of following activities: (i) Offshore supply of equipment; (ii) Rent/Leasing of equipment; and (iii) Provision of services and repairs 4. In the return of income filed for the impugned assessment year, the assessee offered total income of Rs.5,55,35,152/-. The income declared comprised of the receipts from onshore activities offered to tax under section 44BB of the Act. Insofar as the receipts from offshore supply of plants and equipments, the assessee did not offer them to tax, pleading that no part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and is following consistent revenue, recognition policy of offering income from onshore activity under section 44BB of the Act. Whereas, in respect of offshore supply of equipment, the assessee has claimed that the amount is not taxable in India, as, it is not connected to the activities of the PE. He submitted, in assessment proceedings beginning from assessment year 2010-11 till 2016-17, the Assessing Officer has followed consistent practice of apportioning 1% of the gross receipts from offshore supply of plant and equipment as profit attributable to the service/installation PE. He submitted, the aforesaid decision of the Assessing Officer in assessment years 2010-11 to 2016-17, though, was not totally in favour of the assessee, however, the assessee has accepted to avoid protracted litigation, hence, assessment orders have become final. He submitted, though the same approach was adopted by the Assessing Officer in assessment year 2017-18, however, by exercising jurisdiction under section 263 of the Act, the revisionary authority set aside the assessment order with a direction to tax the receipts from offshore supply of equipment under section 44BB of the Act. He submitted, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to the service and installation activity carried out through the PE. He submitted, once it is established that the assessee has a PE in India and the offshore supply of equipment is connected to the installation activity, hence, linked to the PE, the only provision under which it can be taxed is section 44BB of the Act. He submitted, merely because in past assessment years erroneous position has been taken by the Assessing Officer regarding the attribution of profit at 1% of receipts to the PE, in respect of offshore supply of equipment, that error cannot be allowed to be perpetuated in all assessment years to come as the principle of res-judicata do not apply to income tax proceeding. Thus, he submitted, there is no reason to interfere with the decision of the Assessing Officer and learned DRP. 9. We have considered rival submissions and perused the materials on record. The limited issue arising for consideration in terms of submission made by the parties before us is with regard to attribution of profit to PE qua the offshore supply of plants and equipments. Both the Assessing Officer and learned DRP have held that offshore supply of equipment, being integrally connected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. In any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis. 3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopting the same method year on year basis unless there is good and sufficient reason to the contrary. In the facts of the present appeal, undisputedly, in the past assessment years the Assessing Officer has taken a consistent approach of attributing 1% of the receipts from offshore supplies as profits of the PE in India. Thus, in terms of Article 7(6), profits attributable to the PE have been consistently computed by adopting a particular method. In the impugned assessment year, the Assessing Officer has made a departure by discarding the earlier method and adopting a new method of computing profit under section 44BB of the Act. While doing so, the Assessing Officer, as it appears, has not taken note of the method of determination of profit attributable to the PE adopted in the past assessment years. In fact, in course of proceedings before learned DRP, the assessee has made a specific submission in this regard and has urged learned DRP to take note of the methodology applied in past assessment years with regard to attribution of profit on offshore supplies to the PE. Unfortunately, learned DRP has completely ignored the submissions of the assessee and has proceeded to accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
