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2016 (11) TMI 1496 - HC - Income Tax


Issues: Interpretation of Section 44BB of the Income Tax Act for offshore supply of equipment

Analysis:
The High Court addressed the appeal filed by the department under Section 260A of the Income Tax Act, 1961 against the Tribunal's order for the assessment year 2002-03. The primary question of law revolved around whether the provisions of Section 44BB of the Income Tax Act applied to the sale of offshore supply of equipment. The Tribunal had ruled that Section 44BB did not apply to offshore supply of equipment and that 20% of profits should be treated as accrued in India based on the Global Profit Ratio. This decision was supported by the Hon'ble Apex Court in a similar case, emphasizing the concept of divisible contracts and the absence of a sale element in India for the manufacturing part of the equipment. The Court noted that the equipment was entirely manufactured outside India, with only the installation and commissioning taking place in India. Consequently, the assessee was held liable for taxation only on the commissioning aspect, not on the purchase of equipment done outside India. The Court, therefore, ruled in favor of the assessee and against the department, disposing of the appeal with no costs incurred.

 

 

 

 

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