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2024 (4) TMI 796 - AT - Income TaxTaxability of income in India - Addition of receipt emanating from offshore supplies of escalators and elevators - assessee has claimed that the aforesaid receipt was not taxable in India on the ground that they pertained to off-shore supplies of equipment to DMRCL and MMRCL - AO was of the view that the contract with DMRCL and MMRCL was composite and indivisible and could not be split up into supply and commissioning parts as stated by the assessee and that the said consortium was liable to be assessed as an Associate of Person (AOP) and the income from the transaction was chargeable to tax in India, as no benefit of India-China DTAA could be granted to the association - HELD THAT - As decided in own case 2023 (3) TMI 319 - ITAT MUMBAI assessee did not carry out any operations in India in respect of its scope of work, therefore, we are of the considered opinion that the income earned by the assessee from the offshore supply of escalators and elevators to DMRCL and MMRCL is not taxable in India. Accordingly, we direct the Assessing Officer to delete the addition made in the hands of the assessee. As a result, ground No. 1 raised in assessee s appeal is allowed. Refund - Non receipt of funds granted by the AO - During the course of appellate proceedings before us the ld. Counsel submitted assessee has not issued refund as determined in the intimation issued u/s 143(1) of the Act - HELD THAT - After hearing both the sides we direct the AO to determine the refund after verification of the relevant supporting material as claimed by the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purpose.
Issues Involved:
1. Addition of receipt emanating from offshore supplies of escalators and elevators to the total income. 2. Non-consideration of Net Loss incurred by the Appellant on offshore supply of escalators and elevators. 3. Non-receipt of refund granted by the AO. Summary: Issue 1: Addition of receipt from offshore supplies The assessee, a non-resident company from China, filed an appeal against the addition of Rs. 2,30,21,640/- to its total income by the ACIT International Taxation, Circle 4(2)(1) Mumbai, under an order u/s 143(3) r.w.s 144C(13). The addition was based on the receipts from offshore supplies of escalators and elevators to Delhi Metro Rail Corporation Limited (DMRCL) and Maharashtra Metro Rail Corporation Limited (MMRCL). The assessee contended that these receipts should not be taxable in India under Article 7 of the India-China Double Taxation Avoidance Agreement (DTAA) due to the absence of a Permanent Establishment (PE) in India. However, the AO argued that the income was earned from a composite contract with significant on-shore elements and that the assessee had a business connection in India through its Indian Associate Enterprise, Schindler India Private Limited (SIPL). The AO thus taxed 5% of the total receipt of Rs. 46,04,32,808/- at 40% (plus cess/surcharge). The Dispute Resolution Panel (DRP) upheld the AO's decision. Issue 2: Non-consideration of Net LossThe assessee argued that the AO ignored the net loss incurred on the offshore supply of escalators and elevators to DMRCL and MMRCL and requested the deletion or reduction of the addition of Rs. 2,30,21,640/-. The Tribunal noted that similar issues had been adjudicated in favor of the assessee in previous years (AY 2018-19 and AY 2019-20) and directed the AO to delete the impugned additions, following the precedent set by the coordinate bench of the ITAT. Consequently, ground no. 2 of the appeal was allowed. Issue 3: Non-receipt of refundThe assessee claimed that a refund of Rs. 6,19,67,772/- (including interest of Rs. 43,23,330/-) determined in the intimation issued u/s 143(1) was not issued by the AO. The Tribunal directed the AO to determine the refund after verifying the relevant supporting material. Therefore, this ground of appeal was allowed for statistical purposes. In conclusion, the appeal of the assessee was partly allowed, with the Tribunal directing the deletion of the impugned additions and the verification and issuance of the claimed refund. Order pronounced in the open court on 22.03.2024.
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