SMS GROUP GMBH,NEW DELHI vs. ACIT, CIRCLE-3(1)(2), INT. TAXATION, NEW DELHI

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ITA 1591/DEL/2022Status: DisposedITAT Delhi24 December 2025AY 2017-18Bench: SHRI M. BALAGANESH (Accountant Member), SHRI VIMAL KUMAR (Judicial Member)39 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the income from supervisory services should be determined based on the audited books of account, and since the audited books showed a loss, no income was taxable for that activity. The chargeability of interest under sections 234B and 234C was also addressed.

What were the facts?

The assessee, a German company, supplied equipment, designs, and supervisory services to Indian customers. The Assessing Officer (AO) sought to tax certain offshore supplies and onshore services, while the assessee offered some technical services and supervisory services for taxation. The dispute centered on the taxability of offshore supplies and the attribution of profits to a Permanent Establishment (PE) in India.

What were the issues?

The key issues were whether offshore supplies of equipment and designs were taxable in India and how to compute the profits attributable to the Permanent Establishment for supervisory services, particularly when the audited books showed a loss.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C,Section 5(2),Section 9(1)(i),Section 234B,Section 234C

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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI

Before: SHRI M. BALAGANESH & SHRI VIMAL KUMAR

For Appellant: Shri Percy Pardiwala, Sr. Adv, Shri C. S. Mathur, CA, Ms. Richa Agarwal, CA
For Respondent: Shri M. S. Nethrapal, CIT DR
Hearing: 12/11/2025Pronounced: 24/12/2025

Heard together (2 matters)

ITA No. 1592/Del/2022
ITA No. 3297/Del/2023

Read from the judgment's own cause title. This page is filed under one of them.

per audited books of account, no income is to be brought to tax thereon own qua this activity. Accordingly, Ground No. 5 raised by the assessee is allowed.

38.

Ground No. 8 raised by the assessee is challenging the chargeability of interest u/s 234B and 234C of the Act. The chargeability of interest u/s 234B of the Act is consequential in nature. With regard to interest u/s 234C of the Act, the law is very well settled that same shall be charged only on the returned income and not on the assessed income.

39.

In the result, the appeal of the assessee in for AY 2021-22 is Partly allowed. for AY 2022-23 (assessee’s appeal)

40.

Ground Nos. 1, 2 and 8 raised by the assessee are general in nature and does not require any specific adjudication.

41.

Ground No. 3, 4, 5 and 6 raised by the assessee for AY 2022-23, identical to Ground Nos. 3 to 6 and 8 raised by the assessee for assessment 2017-18. Hence, the decision rendered by us thereon for AY 2017-18 supra shall apply mutatis mutandis for AY 2022-23 also in view of identical facts, except with variance in figures.

42.

Ground No. 7 raised by the assessee is challenging the chargeability of interest u/s 234B and 234C of the Act. The chargeability of interest u/s 234B of the Act is consequential in nature. With regard to interest u/s 234C of the Act, the law is very well settled that same shall be charged only on the returned income and not on the assessed income.

-1592/Del/2 MS Group Gmbh

43.

In the result, the appeal of the assessee is partly allowed in for AY 2022-23.

44.

To sum up, all the appeals of the assessee are partly allowed.

Order pronounced in the open court on 24/12/2025.

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