This article contain summary of a recent ruling of the Authority for Advance Rulings (AAR) [AAR No. 827 of 2009] in the case of Joint Stock Company Foreign Economic Association “Techno prom export” (Applicant) on the issue of tax ability of income from offshore supplies. Based on the terms of the contract, documents submitted by the Applicant and the legal precedents, the AAR held that the transaction for sale was concluded outside India.
Hence, no income from offshore supplies accrues or arises or can be deemed to accrue or arise to the Applicant in India under the Indian Tax Law (ITL). The AAR also ruled that the Applicant does not have a Permanent Establishment (PE) in relation to offshore supplies. Therefore, no part of income from offshore supplies can be said to be taxable in India.
Background and facts of the case
- Applicant is a company formed and registered under the laws of Russia. It is one of the world’s leading companies in the field of power project construction and export of electric power and also engaged in the business of construction and commissioning of power projects. The Applicant successfully bid for the tender floated by National Thermal Power Corporation Limited (NTPC) for Main Plant Package Part- A (Steam Generator & Auxiliaries) for Barh Super Thermal Power Project-3X660 MW located in Bihar, India.
2. The Applicant entered into three separate contracts with NTPC:
