GRID SOLUTIONS OY LIMITED,FINLAND, FOREIGN vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE INT TAX 1(3)(1), NEW DELHI

ITA 1049/DEL/2025Status: DisposedITAT Delhi29 September 2026AY 2022-2319 pages
AI SummaryAllowed

What were the facts?

The assessee, Grid Solutions Oy Limited, a foreign company incorporated in Finland, is engaged in manufacturing products for power transmission. For Assessment Year 2022-23, it received Rs. 22,36,62,891/- from offshore supply of goods to Power Grid Corporation of India Ltd. (PGCIL) and its Associate Enterprise, GE T&D India Ltd. (GETDIL). The assessee filed a return declaring Nil income and claiming a refund. The Assessing Officer (AO) challenged the taxability of offshore supply receipts, relying on various judicial precedents and Incoterms. The AO also held GETDIL as a Dependent Agent Permanent Establishment (DAPE) and a fixed place Permanent Establishment (PE) of the assessee in India. The AO, following the directions of the Dispute Resolution Panel (DRP), taxed 10% of the offshore supply receipts in India under Section 9(1)(i) and Article 7 of the India-Finland Double Taxation Avoidance Agreement (DTAA). The assessee appealed this order.

What did the Tribunal hold?

The Tribunal held that the offshore supply receipts were not taxable in India. Firstly, it found that the assessee had no business connection or dependent agent PE in India. The Indian Associate, GETDIL, was not employed by the assessee to represent it independently. The Tribunal noted that PGCIL treated GETDIL as an independent contractor. The Tribunal also found that GETDIL had its own separate business and was not legally or economically dependent on the assessee, thus not constituting a DAPE. Secondly, the Tribunal held that the assessee did not have a fixed place PE in India. The Tribunal also clarified that the acceptance test mandated by PGCIL did not determine the passing of the ownership title, citing the jurisdictional Delhi High Court's decision in Ericsson AB. Furthermore, the Tribunal found that Section 44BBB of the Act was not applicable as the assessee was only obligated to make offshore supplies, and the property in goods transferred outside India. The revenue derived was from offshore supplies, not from construction, erection, testing, or commissioning activities in India. The Tribunal concluded that the AO and DRP erred in holding offshore supplies as taxable in India, as the revenue earned was not taxable in India. The addition made by the AO was deleted, and the appeal was allowed.

What were the issues?

1. Whether the offshore supply receipts of Rs. 22,36,62,891/- are taxable in India under Section 9(1)(i) of the Income Tax Act, 1961, and Article 7 of the India-Finland DTAA, considering the composite nature of the contract and the role of the Indian Associate Enterprise (GETDIL)? - Assessee's contention: The assessee argued that the contract was split into three parts, with offshore supply being a distinct component where title passed outside India. They contended that GETDIL was an independent contractor and not a DAPE or fixed PE. They relied on the Supreme Court decision in Ishikawajma-Harima Heavy Industries Ltd. and the Delhi High Court decision in Ericsson AB regarding acceptance tests not determining title transfer. - Revenue's contention: The revenue, through the AO and DRP, argued that the contract was composite, and the offshore supply was part of a turnkey project executed in India. They relied on precedents like Voith Paper GmbH and Shanghai Electric Group Co. Ltd. to attribute profits to a PE in India and cited Incoterms to argue that risk and control remained with the assessee until the destination port. They also relied on a survey on GETDIL to establish it as a DAPE and a fixed place PE.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 9(1)(i),Section 44BBB,Section 133A(2A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA

PER NAVEEN CHANDRA, JUDICIAL MEMBER:

The above captioned appeal is preferred by the assessee against the assessment order dated 23.12.2024, passed by the Assistant Commissioner of Income Tax, Circle, Int. Tax 1(3)(1) (hereinafter referred to as ‘ld. AO), under section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in pursuance of directions of

The order continues below.

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