ATOMSTROYEXPORT, RUSSIA,MUMBAI vs. DCIT (IT) RG 1(1)(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य राजे�� राजे�� केकेकेके अनुसार अनुसार /PER RAJENDRA, AM- लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dated 15/11/2016 of the AO,passed in pursuance of the Directions of the Dispute Resolution Panel(DRP),Mumbai,the Assessee has filed the present appeal.The assessee is a joint stock company under the Ministry of Atomic Energy, Russian Federation, incorporated under the provisions of Russian Legislation having its registered office at Moscow,Russia.It is engaged in the business of commissioning of turnkey power project. Return of income was filed on 31/3/2006 declaring a total income of Rs.12.30 crores.The Assessing Officer (AO) completed the assessment on u/s. 143(3) r.w.s.144C(13)of the Act,determining its income at Rs.1,23,06, 44,210/-. 2.Effective ground of appeal is about taxing the amount of Rs. 183.78 crores in India that was received by the assessee for executing the Offshore Supply Contract.During the assessment proceedings,the AO found that the assessee had entered into an agreement with Nuclear Power Corporation of India Ltd.(NPCIL)to set up two 1000 MW power plant units in Tamilnadu,that for that purpose it entered in to five different agreements with NPCIL,that NPCIL had made payments of Rs.70.11 crores to the assessee for executing the above referred agreements besides paying Rs.183.78 crores for supplying offshore equipments (OSE) and materials,that it had also

619/M/17 M/s.Atomstroyexport entered in to an agreement for carrying out first priority design work for the construction of Units 3 & 4,that for execution of the said agreement a further payment of Rs.21.72 crores was made by NPCIL.He observed that the assessee had claimed applicability of the provisions of section 44BBB of the Act to the fees received from NPICL in respect of Offshore Service Contracts,that it claimed that the receipts under Offshore Supply Contracts were not taxable in India,that income received from the contract of priority design work were to be taxed @ 10% under the head payments received towards royalty.He asked the explain as to why the receipt of Rs.183.78 crores received by it on account of offshore supply contract should not be taxed in India.After considering the submissions of the assessee and the Directions of the DRP,the AO held that income of the assessee from the offshore service contract and offshore supply contracts was taxable in India as per the provisions of section 44BBB of the Act. 3.Before us,representatives of both the sides agreed that the issue stands covered in favour the assessee by the orders of the Tribunal for the AY.s.2007-08,2008-09,2011-12(ITA.s 8074/ Mum/ 2010,ITA/6573/Mum/2011,ITA/1033/Mum/2015.dtd.10.01.2017)andAY.2009-10(ITA/6581/ Mum/2012/,dtd.22.03.2017).We are reproducing the relevant portion of the order of the Tribunal for the AY.2009-10(supra)and it reads as under: “5.Learned Authorised Representative submitted before us that the 2007-081 2008-09 and 2011- 12 in ITA no.8074/Mum./20101 ITA no.6573/Mum./2011 and no.1033/Mum./2015, respectively, vide order dated 10th January 2017,by giving a categorical finding that the amount received under the off-shore contract are not taxable in India under section 44BBB.Therefore, he submitted, the amounts,received under the off-shore supply contracts cannot be taxed. 6.Learned Departmental Representative fairly agreed that the issue squarely covered by the decision of the Tribunal under reference. 7.We have considered the submissions of the parties and perused the material available on record as well as the order of the co-ordinate bench referred to above.The issue in dispute in these grounds is in relation to taxability of the amount received towards supply of materials and equipment under the off-shore supply contracts.Undisputedly,the off-shore supply contracts under which the assessée has supplied materials and equipments in the impugned assessment year is/are continuing from the assessment year 2006-07 onwards It is relevant to note, the taxability of the amount received under .the off-shore contract is a contentious issue between the assessee and the Department right from the assessment year 2006-07. In fact in the impugned assessment year, the Assessing Officer following the order of the DRP for assessment year 2006-07 and 2007-08, has brought to tax the amount received under off-shore supply contracts by applying identical nature of dispute raised by the assessee for assessment year 2007-08, 2008-09 and 2011-12, the Tribunal in its order, as referred to above, after analyzing the nature of contract, provisions of the Act, and relevant DTAA as well as the principles oflaw laid down in judicial precedents, in a detailed order ultimately concluded, since, supply of materials and equipments under the off-shore supply contracts were carried out and concluded outside Indi, the receipts from off- shore supply contracts cannot be deemed to accrue or arise in India. The operative portion from the order of the Tribunal is extracted herein below – 2

619/M/17 M/s.Atomstroyexport