Case Law Details
In Re SEPCO III Electric Power Construction (AAR) – The applicant is a company incorporated under the laws of China on 26.3.2009. The applicant, among other things, is a supplier of equipments for Electric Power Projects. On 26.3.2009, the applicant entered into a contract with M/s Jhajjar Power Limited, for supplying of equipments for the Haryana Power Project.
That contract was amended and restated on 1.6.2009. According to the applicant, it is an off-shore supply contract requiring the applicant to carryout design, engineering, procuring and transportation to the port of loading of the equipment for a coal fire power station built for the Indian company. According to the applicant, the payment received by it for the equipment supplied under the contract are not taxable in India under the Income-tax Act since the supply of material was outside the territory of India. It has also claimed that under the India-China Double Taxation Avoidance Convention no tax can be levied on it in India. It is in that context that the applicant came up with this application for an Advance ruling on the taxability or otherwise of the payment received by it under the contract.
On a perusal of the terms of the contract and the conduct disclosed by the Bill of Lading, the Bill of Entry and the taking of transit insurance that this would be an offshore sale in the light of the decision of the Supreme Court in Ishikawajima¬Harima Heavy Industries Ltd. referred to earlier. The argument of the Revenue that the transaction must be taken as one and indivisible and the liability to tax should be determined on that basis, cannot be accepted in the light of the decision of the Supreme Court. The effect of the above decision of the Supreme Court is that the Income-tax Authorities under the Act have no jurisdiction to tax the payment made outside for these supplies taking place outside the country. Relying on the decision of the Supreme Court, we overrule the objection raised on behalf of the Revenue.
We therefore rule on the question posed, that the amounts received/receivable by the applicant from M/s Jhajjar Power Ltd. for off-shore supply of equipments in terms of the contract dated 1.6.2009 is not liable to tax in India under the provisions of the Income-tax Act, 1961, in view of the decision of the Supreme Court in Ishika Wajima Harima Heavy Industries Ltd [2007] 228ITR408. We clarify that the ruling relates only to off-shore supplies.
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