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TMI Blog2011 (9) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... SIDDHARTH MRIDUL, JJ. For Appellant: Mr. Abhishek Maratha, Sr. Standing Counsel. ForRespondrnt: Mr. R. Satish Kumar, Advocate. A.K. SIKRI, J. 1. The assessee is a company incorporated in Korea and as per the notes attached to the statement of the total income, during the year under consideration, the company was engaged in the execution of the following four projects: (i) Fibre Optic Cabling Project Eastern India for Power Grid Corporation of India Limited (hereinafter referred to as the PGCIL). (ii) Fibre Optic Cabling Project PDA 2A for PGCIL. (iii) Fibre Optic Cabling Project Western India for PGCIL. (iv) Fibre Optic Cabling Project PDT 1B for PGCIL. 2. The Assessing Officer (AO) after going through all the four contracts and even interacting in details with the assessee company and PGCIL and perusing the documents on record found out that the assessee had performed various activities in India during the relevant assessment year and thereby attributed 50% of the income relatable to the operations carried out in India, both as per the provisions of Section 9 of the Income Tax Act (hereinafter referred to as the Act‟) and Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply is concerned, the admitted facts are that the cables are manufactured in Korea and shipped from a port in the said country. 6. We may mention at this stage that for each project two contracts were entered into, viz., a contract for off-shore supply of equipments and separate supply for on-shore supply, viz., custom clearance of imported equipments at Indian port, inland transportation insurance, erection and testing, commissioning and related activities. We may also point out here itself that for on-shore activities, the assessee had appointed Indian agent, viz., M/s. Alpasso Industries Pvt. Ltd. This Indian agent was concerned only with execution of contract in India. 7. The AO as well as CIT (A), however, took the view that the issue relating to off-shore contract and on-shore contract between the assessee and PGCI had been carried out by the agent in India, income on sale of equipment has accrued in India and on that basis, Section 9 of the Act was attracted in this case. 8. In respect of off-shore supplies also, it was held that the assessee had a business connection in India and M/s. Alpasso Industries Pvt. Ltd. was a permanent establishment. It is on this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the title in the equipments supplied was to stand transferred upon delivery thereof outside India on high-seas basis as provided for in Article 22(1), the Authority for Advance Rulings proceeded on the basis that supplies had taken place offshore. It, however, rendered its opinion on the premise that offshore supplies or offshore services were intimately connected with the turnkey project and proceeding on that basis the Authority, as already stated, opined that the assessee company was liable to pay tax in India though the property in the goods which were subject matter of the offshore supply passed outside India, in view of the fact that it had a business connection in India. It further opined that if a contract envisaged a composite compensation for the various obligations to be performed and if certain operations are to be performed by or through a business connection then, profits would be deemed to have accrued in India. The petitioner had a permanent establishment in India within the meaning of the said term in paragraph 3 in Article 5 of the Double Taxation Avoidance Agreement entered into between the Governments of India and Japan. 26. Reversing the aforesaid finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax in India. The instant case, in fact, in our view stands on a better footing as two separate contracts have been entered into between the parties, albeit on the same day, one for the offshore supply and the other for the onshore services, but even assuming that both these contracts need to be read together as a composite contract, the issue in controversy is nevertheless squarely covered by the decision of the Supreme Court in Ishikawajma (supra). It is beyond dispute that PGCIL had issued irrevocable letter of credit in favour of the respondent-assessee and in paragraph 31.2 agreed that the property in the goods will pass to the buyer (PGCIL) as and when the respondent-assessee loads the equipment onto the mode of transport for transportation from the country of origin. The stipulation in the second agreement (Erection Contract) relating to certain performances by the respondent-assessee including port handling, custom clearance, transportation, insurance, handling on site, unloading at transportation site, testing and commissioning to the satisfaction of the buyer are in a separate agreement for a separate consideration which is clearly enunciated in the second agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion cables. The above work was attended to by the project office, which constituted permanent establishment of the assessee company in India. In view of the above, the only work which could be entrusted by the assessee to its Indian agent, M/s. Alpasso was general administrative coordination and liaison with PGCI and nothing else. 13. Therefore, we are of the view that all the aspects are duly considered by the Tribunal in the light of provision of Section 9 (1) of the Act. The Tribunal had pointed out that clause (i) of sub-section (1) of Section 9 is very wide whereas Explanation 1(a) is restrictive and provides that in case of a business where all operations are not carried out in India shall be only such part of income as is reasonably attributable to operations carried out in India would accrue in India. The ITAT had categorically held that the delivery of goods, documents and receipt of substantial part of sale consideration did take place outside India and hence income relatable to sale outside India had not accrued in India. Such income could only be taxed outside India and not under Indian law. Further, there cannot be a business connection between a seller and purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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