Case Law Details
Contract of sale in relation to the off– shore supplies having completed outside the territory of India and title to the goods having passed to the customer outside India, the amount received towards off–shore supply is not taxable in India.
The issue in dispute in the aforesaid appeal is in relation to the decision of the Departmental Authorities in bringing to tax the receipt from off–shore supply of material and equipment.
Brief facts are, the assessee a South Korean Company entered into contracts with Mumbai Railway Vikas Corporation (MRVC), Delhi Metro Rail Corp. (DMRC) as well as Transmission Corp. of A.P. Ltd. (TCAPL) for installation of electric cables in relation to certain projects. As per the contract, the assessee, apart from laying and installation of cable was also required to supply materials / equipments from its manufacturing facilities in South Korea and some other places abroad. In the return of income filed for the impugned assessment year, the assessee, though, offered the income pertaining to on–shore supply and services, however, as far as off–shore supplies are concerned, assessee claimed that since the sales were made abroad outside the territory of India, the receipts from off–shore supplies are not taxable under Indian Income Tax Act. The Assessing Officer while completing the draft assessment, however, did not agree to the aforesaid claim of the assessee and estimated the profit @ 10% on the receipts from off–shore supplies in terms of rule–10 of Income Tax Rules, 1962 and brought it to tax. The assessee objected to the aforesaid decision of the Assessing Officer before the DRP.
The DRP following its decision in assessee’s own case, for the assessment year 2011–12 upheld the decision of the Assessing Officer in estimating the profit @ 10% on the receipts from off–shore supply of goods and equipments. In terms with the directions of the DRP, the Assessing Officer passed the impugned assessment order.
We have heard the parties and perused the material available on Learned Counsels appearing for both the parties have agreed before us that the issue in dispute has been decided in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment year 2011–12 and 2012–13 in ITA no.1023/Mum./2015 and ITA no.5642/Mum./2015, dated 14th October 2016. On a perusal of the aforesaid order of the Co–ordinate Bench, we have noticed that while considering identical nature of dispute relating to off–shore supply of goods, the Tribunal after examining the terms and conditions of the contract vis–a–vis the statutory provisions as well as relevant DTAA, and following the ratio laid down in certain judicial precedents has ultimately concluded that the contract of sale in relation to the off–shore supplies having completed outside the territory of India and title to the goods having passed to the customer outside India, the amount received towards off–shore supply is not taxable in India. The aforesaid decision of the co–ordinate bench squarely applies to the present appeal as the facts involved are materially same. In fact, the DRP while deciding the issue has simply followed its own decision for the assessment year 2011-12, which now stands reversed by the decision of the Tribunal as referred to above. In view of the aforesaid, we hold that the amount received from off–shore supplies of goods / materials is not taxable at the hands of the assessee. Accordingly, the Assessing Officer is directed to exclude the amount received by the assessee from off–shore supplies and compute the income of the assessee. Ground no.1, is allowed.
