2022 (1) TMI 237 - AT - Income Tax

Deemed income u/s 44BBB - Income from offshore supplies -- Income attribution - composite contracts - Offshore supply qua PE - amounts received on account of Business whether in or outside India - why the Project Office be not taxed under section 44BBB of the Act and the assessment not be completed by following the assessment orders for earlier assessments years as the facts of the case were identical to that of earlier years? - HELD THAT - Income from offshore supplies was not liable to tax in India both u/s 44BBB as well as under the provisions of Article 7 r.w. para 6 of DTAA between India Japan. The aforesaid order was followed by the Co-ordinate Bench of Tribunal while deciding the appeal for A.Y. 2007-08 2008-09 2020 (2) TMI 1053 - ITAT DELHI . Before us Revenue has not placed any material to demonstrate that the order of Tribunal in assessee s own case for earlier years have been set aside/stayed/overruled by higher judicial forum. Since the facts in the year under consideration are identical to that of earlier years we for similar reasons hold no reason to interfere with the order of CIT(A) and thus dismiss the ground of Revenue. Dependent Agent Permanent Establishment (DAPE) in India - computation of profits attributable to PE - AO noticed that assessee had received amounts for supply to Teesta Purulia Project but the entire receipts were not offered to tax - non inclusion of the amounts to tax to which it made the submissions - HELD THAT - The issue in the present ground is with respect to the. AO attributed the profit to PE @ 50% whereas CIT(A) attributed it to 20%. We find that identical issue arose in assessee s own case in A.Y. 2006-07 to 2008-09 2010-11 2012-13 2013-14. The relevant findings of the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 2020 (11) TMI 1032 - ITAT DELHI . Revenue has also not placed any material to demonstrate that the order of the Co-ordinate Bench of Tribunal in assessee s own case for earlier years has been set aside/stayed/overruled by higher judicial forum. In such circumstances we following the order of the Co-ordinate Bench for earlier years and for similar reasons find no reason to interfere with the order of CIT(A) and thus the grounds of Revenue is dismissed. Attribution of 20% profits to the assessee - HELD THAT - The issue in the present ground is with respect to attribution of profits to the assessee. AO had attributed 50% of gross profits to assessee which was reduced to 20% by CIT(A). We find identical issue arose in assessee s own case in A.Y. 2006-07. The Co-ordinate Bench for the detailed reasons stated in the order upheld the order of CIT(A) in holding that no income was liable to be attributable in India even if Mitsui Co. Ltd. constituted DAPE of the assessee in India. The aforesaid order was followed by ITAT while deciding the appeal for A.Y. 2007-08 2008-09 2020 (2) TMI 1053 - ITAT DELHI . Before us no distinguishing feature in the facts for the year under consideration and that of earlier years has been pointed out by Revenue.

Issues Involved:
1. Taxation of Offshore Supplies under Section 44BBB.
2. Attribution of Profits to Permanent Establishment (PE).
3. Taxation Basis (Cash vs. Mercantile) for Teesta and Purulia Projects.
4. Treatment of Mitsui India Pvt. Ltd. (MIPL) as Dependent Agency Permanent Establishment (DAPE).

Detailed Analysis:

1. Taxation of Offshore Supplies under Section 44BBB:
The AO determined that the payments received from offshore supplies related to Teesta and Purulia projects should be taxed at 10% under Section 44BBB of the IT Act. The CIT(A), following the orders for A.Y. 2006-07 and 2007-08, deleted this addition. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by earlier Tribunal decisions, which held that income from offshore supplies was not liable to tax in India under Section 44BBB or Article 7 of the DTAA between India and Japan.

2. Attribution of Profits to Permanent Establishment (PE):
The AO attributed 50% of the gross profits to the PE, while the CIT(A) reduced this to 20%, following the precedent set in A.Y. 2008-09. The Tribunal upheld the CIT(A)'s decision, referencing earlier Tribunal rulings that consistently held MIPL was not a DAPE of the assessee company. Consequently, no income was attributable to the PE under Article 7 of the DTAA.

3. Taxation Basis (Cash vs. Mercantile) for Teesta and Purulia Projects:
The AO taxed the income from Teesta and Purulia projects on an accrual basis, while the CIT(A) ruled in favor of the assessee, allowing taxation on a cash basis. The Tribunal upheld the CIT(A)'s decision, noting that under Section 44BBB, a presumptive taxation scheme, income is computed based on receipts, not accruals. This was consistent with earlier Tribunal decisions for A.Y. 2007-08 and 2008-09.

4. Treatment of Mitsui India Pvt. Ltd. (MIPL) as Dependent Agency Permanent Establishment (DAPE):
The AO treated MIPL as a DAPE of the assessee. The CIT(A) upheld this but reduced the profit attribution to 20%. The Tribunal, however, following earlier decisions, concluded that MIPL was not a DAPE of the assessee. Consequently, no income was attributable to the assessee's operations in India.

Separate Judgments Delivered:
No separate judgments were delivered by the judges; the order was consolidated and delivered jointly.

Conclusion:
The Tribunal dismissed the appeals of the Revenue and allowed the Cross Objections of the assessee, following consistent precedents set in earlier years. The key findings were that offshore supplies were not taxable under Section 44BBB, profits attributable to the PE should be limited to 20%, income from Teesta and Purulia projects should be taxed on a cash basis, and MIPL was not a DAPE of the assessee.

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