SONDEX WIRELINE LTD,UNITED KINGDOM vs. ACIT,INTL TAXATION, CIRCLE-3(1)(2), DELHI

आयकर अपीलीय अधिकरण
धिल्ली पीठ “डी”, धिल्ली
श्री विकास अिस्थी, न्याविक सदस्य एिं
श्री एम. बालगणेश, लेखाकार सदस्य के समक्ष

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “D”, DELHI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER &
SHRI M. BALAGANESH, ACCOUNTANT MEMBER
आअसं.1959/धिल्ली/2025(नि.व. 2022-23)
Sondex Wireline Ltd.,
Cody Technology Park, Builing X107,
Range Road, Farnborough, Foreign,
United Kingdom GU14OFG

...... अपीलार्थी/Appellant
PAN AAQCS-9766E

बिाम Vs.

Assistant Commissioner of Income Tax,
Circle International Tax 3(1)(2), Civic Centre,
Minto Road, New Delhi 110002

..... प्रनिवादी/Respondent

अपीलार्थी द्वारा/ Appellant by : Shri Sachit Jolly, Sr. Advocate with S/Shri Sohum Dua, Abhudaya Shankar
Bajpai (Through VC) & Ms. Mansha Anand,
Advocates
प्रधिवािीद्वारा/Respondent by : Ms. Ekta Jain, CIT(DR)

सुिवाई की निथर्थ/ Date of hearing

:
03/12/2025

घोषणा की निथर्थ/ Date of pronouncement
:
03/12/2025

आदेश/ORDER

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the Assessment Order dated
09.01.2025 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act,1961
(hereinafter referred to as ‘the Act’), for Assessment Year 2022-23. 2
2. Shri Sachit Jolly, Sr. Advocate appearing on behalf of the assessee at the outset submitted that he is not pressing ground of appeal no. 2 & 3 assailing validity of the assessment order on the ground of limitation. In light of the statement made by ld. Counsel for the assessee at Bar, ground no. 2 & 3 of appeal are dismissed as not pressed.
3. The ld. Counsel submitted that the solitary issue in the present appeal for consideration of the Bench is taxability of receipts received in respect of off shore supply of goods and standard software on erroneous presumption by the AO that the assessee has a Permanent Establishment (PE) in India under the India-UK
Double Taxation Avoidance Agreement (DTAA).
4. Narrating facts of the case, the ld. Counsel submits that the assessee company was incorporated under the laws of United Kingdom (UK) and is a tax resident of UK. The assessee is a part of Baker Hughes Group and is engaged in the business off shore supply of equipment and standard software, provision of services in connection with and supplying plant and machinery on hire basis to be used in prospecting for, extraction, production of mineral oil, etc. During the period relevant to assessment year under appeal, the assessee entered into various contracts with Indian entities engaged in prospecting, extracting, production of mineral oil, etc. The assessee received Rs.2,50,99,018/- on account off shore supplies of goods and standard software from Indian entities. Since, off shore supply of equipment to the Indian entities were on FOB basis, and the payments were received outside India, the receipts relating to off shore supplies and standard software are not chargeable to tax in India. The assessee in its reply dated 15.02.2024 during Draft assessment proceedings categorically stated that the assessee does not have any PE in India as per the tax treaty. Still, the 3
Assessing Officer (AO) in para 9 of the Draft Assessment Order records that the assessee has deemed PE in India as per Article 5 of the India-UK DTAA without giving any reason and further held that some portion of profit from off shore supply of equipment including standard software is taxable in India. The AO in an arbitrary and unjustified manner attributed 38.28% of the operating profit margin to the Indian PE.
5. The ld. Counsel submitted that in AY 2013-14, the assessee was part of General Electric Group and subsequently it was acquired by Baker Hughes Group.
In assessment order for AY 2013-14 similar finding with regard to assessee having deemed PE in India was returned by the AO and 1% of profit from off shore supply of equipment was attributed to the Indian PE. The assessee did not contest in AY
2013-14 purely with a view to avoid protracted litigation and to buy peace with the Income Tax Department. However, in the impugned assessment year factual matrix has changed since AY 2013-14 as there has been change in the ownership.
The assessee filed objections before the Dispute Resolution Panel (DRP) inter alia objecting to finding of the AO holding that the assessee has deemed PE in India.
The DRP without appreciating the facts and submissions of the assessee confirmed findings of the AO. Thus, the Final Assessment Order was passed in accordance with the directions of the DRP.
5.1. The ld. Counsel submitted that except for making bald observation that the assessee has deemed PE in India, no reason has been given by the AO to come to such conclusion. The ld. Counsel thus prayed for quashing the impugned assessment order.

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6. Per contra, Ms. Ekta Jain representing the department strongly supported the impugned assessment order and prayed for dismissing the assessee’s appeal.
The ld. DR submitted that the assessee in AY 2013-14 had accepted that the assessee has deemed PE in India and also the profit attribution to the India PE.
7. We have heard the submissions made by rival sides and have examined the impugned assessment order and directions of the DRP. The fact that the assessee is engaged in off shore supply of equipment and standard software is not disputed by the Revenue. Further, that the assessee is a tax resident of UK is also not under dispute. The primary issue for consideration is: Whether the assessee has PE in India as per Article 5 of India-UK DTAA?
The onus to prove that the assessee has PE/deemed PE in India is on the Assessing Officer. From perusal of the assessment order, we find that the AO has merely assumed that the assessee has deemed PE in India as per Article 5 of India-UK DTAA. No reasoning whatsoever has been given by the AO to come to a conclusion that the assessee has PE India. Article 5 of India-UK DTAA sets out certain conditions to hold that the foreign entity has PE in India. No effort has been made by the AO to examine whether the conditions set out in Article 5 of India-UK DTAA are satisfied before coming to the conclusion that the assessee has deemed PE in India. Moreover, the AO has not identified or named the entity which according to him is PE/deemed PE of assessee. Thus, in light of our above observation, we hold that the AO has failed to discharge its onus in proving PE of assessee in India.
7. In so far as provision of off shore supply of equipment and standard software, the contention of the assessee is that no activities in respect off shore

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supply of equipment and standard software were carried out in India. The payments for supply of off shore goods were also received outside India. It is no more res integra that where the entire transaction of off shore supply of goods i.e. the transfer of ownership of goods as well as the payments thereof are carried outside India, such transactions carried outside India are not taxable in India. (RE:
Ishikawajima Harima Heavy Industries Ltd. v. Director of Income Tax, 288 ITR 408
(SC)]. Thus, in the facts of the case and documents on record, we find merit in ground of appeal no. 4 to 11, hence, the same are allowed.
8. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on Wedne ay the 03rd day of December, 2025. (M. BALAGANESH)
(VIKAS AWASTHY)
लेखाकार सदस्य/ACCOUNTANT MEMBER
न्यानयक सदस्य/JUDICIAL MEMBER
धिल्ली/Delhi, ददिांक/Dated 30/12/2025

NV/-

प्रतिलिपि अग्रेपिि/Copy of the Order forwarded to :

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ORDER,
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(Asstt.