2012 (2) TMI 75 - AAR - Income Tax

Off-shore supplies & services - applicant being Hong Kong company project awarded by Petronet - consortium formed with an Indian company(CINDA), to execute the project - CTCI responsible for off-shore supplies & services & CINDA for onshore supplies - Revenue contending that the consortium formed by CTCI and CINDA is an AOP and payments made by Petronet should be taxed in India Held that - All that is income in the transaction for supplies has not arisen in India as the right, title, payments, etc, in the supplies have passed on to Petronet which is importing these supplies outside India. The ownership vests with Petronet who imported these supplies. Further, all such issues, including whether the contract is composite and indivisible, have been addressed in the case of Ishikawajima Harima Heavy Industry (2007 - TMI - 3467 - Supreme Court ). Therefore, amount received/receivable by applicant for offshore supplies is not liable to tax in India under the provisions of the Act, in view of the decision of Supreme Court in IHHI - Decided in favor of assessee.

Summary

Issues:
Taxability of income received for offshore supplies from Petronet LNG Ltd.
Extent of income attributable to operations in India for offshore supplies.

Analysis:
1. The applicant, a Hong Kong company, entered into a consortium with an Indian company to execute a project for Petronet LNG Ltd. The Authority framed questions regarding the taxability of income received for offshore supplies under the Income-tax Act.
2. The applicant argued that since the supplies were outside India, there was no territorial nexus for taxation. CTCI contended that the consortium was not an Association of Persons (AOP) for tax purposes.
3. The Revenue contended that the applicant had a business connection in India due to the consortium and offshore supplies. They argued that the income was taxable under section 9(1)(i) of the Act.
4. The Authority examined the invoices and payment details for offshore supplies. It was noted that the payment was made to a third party supplier, not directly to the applicant.
5. The Revenue claimed that the applicant's case was not covered under a Tax Treaty with Hong Kong, and the consortium constituted an AOP for tax purposes.
6. Referring to the case of Ishikawajima Harima Heavy Industry, the Authority concluded that the income received for offshore supplies was not taxable in India under the Act.
7. The ruling stated that since the supplies were completed outside India, and the ownership vested with Petronet, the income was not attributable to operations in India and was not taxable under the Act.

In conclusion, the Authority ruled that the income received by the applicant for offshore supplies from Petronet LNG Ltd. was not liable to tax in India under the provisions of the Income-tax Act, based on the decision in Ishikawajima Harima Heavy Industry case.