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Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI G. MANJUNATHAN, HONBLE
PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order passed by the Disputes Resolution Panel-1 Mumbai dated 27.06.2017 u/s. 144C(5) of the I.T.Act.
2 ITA.No.5616/MUM/2017 (A.Y: 2014-15) SA.No.404/MUM/2017 (A.Y: 2014-15) M/s.Iljin Electric Co. Ltd 2. Assessee has raised the following grounds in its appeal: - Ground No.1: Income in relation to offshore supply is not taxable in India 1.1. The learned Assessing Officer / DRP erred in law and in facts in seeking to tax in India, a sum of ₹.3,53,16,756/- for the year under consideration, as against the loss of ₹.89,41,225/- declared by the appellant in its return of income. 1.2. The learned Assessing Officer / DRP erred in law and in facts in considering revenues from Offshore Supplies for the purpose of computing the appellant’s income taxable in India, without appreciating the order of the Hon'ble Tribunal in the appellant’s own case of Assessment Years 2011-12, 2012-13 and 2013-14 wherein the Hon'ble Tribunal held that revenue from Offshore Supplies is not taxable in India. 1.3. The learned Assessing Officer / DRP erred in law and in facts in considering revenues from Offshore supplies for the purpose of computing the appellant’s income taxable in India, without appreciating that the income there from is not taxable in India both as per the Act as well as the Double Taxation Avoidance Agreement between India and Korea.
Ground No.2: Income, if any, should be taxable only to the extent it can be attributed to operations in India. 2.1 Without prejudice, the learned Assessing Officer / DRP erred in treating the profit from Offshore Supplies (arrived at on a presumed basis of 10% of revenue from Offshore Supplies) as taxable in India without undertaking an attribution thereof of the Permanent Establishment/alleged business connection in India. 2.2 The learned Assessing Officer / DRP erred in disregarding the submissions made and the grounds of objections raised by the appellant.
3 ITA.No.5616/MUM/2017 (A.Y: 2014-15) SA.No.404/MUM/2017 (A.Y: 2014-15) M/s.Iljin Electric Co. Ltd 3. At the outset, the Learned Counsel for the assessee submitted that the issue in dispute in the appeal is in relation to the decision of the direction of the Dispute Resolution Penal in bringing to tax the receipt from offshore supply of material and equipment and this issue has been decided in favour of the assessee by the Coordinate Bench for the Assessment Years 2011-12 and 2012-13 in ITA.No. 1023/Mum/2015 and ITA.No.5642/Mum/2015 dated 14.10.2016 and this decision was followed for the Assessment Year 2013-14 in ITA.No.1113/Mum/2017 dated 09.03.2017. Copies of the orders are placed before us.
4. It is further submitted by the Learned Counsel for the assessee that the contracts entered into by the assessee with Mumbai Railway Vikas Corporation (MRVC) and Delhi Metro Rail Corporation (DMRC) as well as the Transmission Corporation of A.P. Ltd. (TCAPL) for installation of electric cables in relation to certain projects are same in the immediate preceding Assessment Years as well as in the current Assessment Year. Learned Counsel for the assessee further submitted that on identical facts and circumstances in the immediate preceding Assessment Years the Coordinate Bench held that the income from offshore supplies of goods/materials is not taxable in the hands of the assessee. Therefore,
4 ITA.No.5616/MUM/2017 (A.Y: 2014-15) SA.No.404/MUM/2017 (A.Y: 2014-15) M/s.Iljin Electric Co. Ltd the Learned Counsel for the assessee submits that, following the said orders the issue may be decided for the Assessment Year under appeal.
5. Ld.DR fairly submits that the issue in appeal is decided in favour of the assessee by the Coordinate Bench for the Assessment Years 2011-12, 2012-13 and 2013-14 and there is no change in facts.
We have heard the rival submissions, perused the orders of the authorities below and the decisions of the Coordinate Bench. In the immediately preceding Assessment Year i.e. Assessment Year 2013-14 the Coordinate Bench in ITA.No. 1113/Mum/2017 dated 09.03.2017 following the earlier order of the Coordinate Bench for the Assessment Years 2011-12 and 2012-13 held that the amount received by the assessee from offshore supplies of goods/material is not taxable in the hands of the assessee holding as under: -
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 5 ITA.No.5616/MUM/2017 (A.Y: 2014-15) SA.No.404/MUM/2017 (A.Y: 2014-15) M/s.Iljin Electric Co. Ltd 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 record. 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 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 offshore 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 6 ITA.No.5616/MUM/2017 (A.Y: 2014-15) SA.No.404/MUM/2017 (A.Y: 2014-15) M/s.Iljin Electric Co. Ltd 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.
Since there is no change in facts and circumstances, respectfully following the Coordinate Bench decision, we hold that the amount received from the offshore supplies of goods /material is not taxable at the hands of the assessee for the current Assessment Year also as the contracts for supply of goods/materials were entered into by the assessee in the earlier Assessment Years and very same contracts were continued during the current Assessment Year also.
In view of our above decision on Ground No.1, the other grounds raised by the assessee becomes infructuous and need not be adjudicated.
In the result, assessee’s appeal is allowed.
Order pronounced in the open court on the 25th October, 2017.