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TMI Blog2012 (11) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... JAIN, J.M : This is revenue s appeal against order dated 11-2-2011 passed by the learned CIT(Appeals)-XXIX, New Delhi for A.Y. 2006-07, holding that t he receipt from offshore supply of equipment are not taxable in India. 2. Facts are that: LG Cable Ltd. ( LGCL , for short) is a company incorporated in Korea, During the assessment proceedings, it was seen that during the year the company was engaged in the execution of various projects in India. During the financial year 2005-06, relevant to A.Y. 2006- 07, i.e. the year under consideration, LGCL has executed five contracts [of which four have been awarded by the Power Grid Corporation of India Limited ( PGCIL ) and one has been awarded by New Delhi Power Limited ( NDPL )] - Overhead Fibre Optic Cabling System Package Project under the System Co-ordination Control Project Eastern Region; - Overhead Fibre Optic Cable System Package under WR SC C Project; - Overhead Fibre Optic Cable Package for Package-2A under Power grid s Diversification into Telecommunication Project (PDT 2A) - Fibre Optic Cable Package for Package 1B under Power grid s Diversification into Telecommunication project (PDT 1B); - Fibre Optic Cab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to 165% of the CIF value, from warehouse to warehouse (reference agreement no. C-31003-S958-a/CA-I/492). - The time schedule refers to the project completion schedule and specifies the activities namely, operational acceptance by the employer upon successful completion of system availability test of the complete Overhead Fibre Optic Cable Packager. It also provided for the work schedule for implementing the project. For operational acceptance a duration of 18 months is provided (reference agreement No. C-31 003-8958-1 ICA- 1/492). Therefore, in the offshore supply contract instead of the time schedule for offshore supplies, the duration of overall completion of contract is provided. Accordingly, PGCIL is not interested, when the equipments will be supplied but concern with the overall completion of the project. Due to this fact, the offshore supply of equipments cannot be taken as a separate and distinct activity, but it is a part of the whole project. - In respect of contract No. C-31 003-8958-1 INOA-1/942 dated 21.06.2002, the LG had offered unconditional discount of 5% on the CIF prices and 18.2% on local currency portion (reference Page 10 of the record notes of Post B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o offshore supply was carried out by LSCL in Korea. This contention is not acceptable for the reasons mentioned in para 4.3.1 and as discussed in this order, the supply of equipment was part of the composite contract and most of the activities of the composite contract were undertaken in India. Without the presence of the personnel of LG in India and in absence of onshore services contract, there was no possibility of having only a contract of offshore supply of equipments. 4.7.3 The contention of the assessee that the offshore and onshore services are totally isolated and independent to each other, is not acceptable, because the agreements entered into by the assessee and the various documents forming part of the agreement and the actual conduct of the assessee in execution of these contract proves otherwise. 4.7.4 The reliance of the assessee on the decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs R.D. Aggarwal and Co., is of no help to it, because as per the ratio of the decision, from the start of the activity of offshore supply till the commissioning, the assessee was in control and responsible for all the intermediate activities. The transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible to accede to assessee s request in this regard. 2.6. By virtue of the impugned order, the learned CIT(A) decided the issue in favour of the assessee, holding as follows: 9. I have carefully considered the submissions of the appellant, facts of the case and the points made by the AO in the assessment order. This issue has already been decided in favour of the appellant by the jurisdictional ITAT in AY 2002-03 (LG Cable Ltd. (2008) 113 ITD 113). The relevant extracts of this order have been reproduced above. The depart3ment s appeal against this order of the ITAT, Delhi has been dismissed by Delhi High Court (supra). For AY 2003-04, 2004-05 and 2005- 06, CIT(A) confirmed the addition made by the AO on account of off-shore supplies. The CIT(A) in his order observed that the ITAT, Delhi, while deleting the addition in the appellant s case for AY 2002-03 had not considered certain points like the two contracts in fact being one composite contract. Project office of the appellant being involved in off-shore supplies, an Indian agent assisted in off-shore supplies and therefore attribution of income was required to be made and finally that the ale of the off-shore supplies was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 703/2009 (copy at pages 57 to 96 of the assessee s paper book). 5. We have heard both the parties and perused the material on record. The matter, it is seen, has been decided in favour of the assessee by the order (supra) of the Hon ble Delhi High Court in the assessee s own case for A.Y. 2002-03. Therein it has been held, inter alia, that: 37. The contract, however, in the instant case as in the case of Ishikawajma (supra) would be said to have been successfully performed only after the satisfactory commissioning and erection of the plant and equipments. Since the permanent establishment was not at all involved in the transaction of the offshore supply of equipment, the existence of the permanent establishment (which as held in Ishikawajma (supra) is for the purpose of assessment of income of a non-resident under the Double Taxation Avoidance Agreement), would be irrelevant in the instant case. Clause (a) of Explanation (1) to Section 9(i) would not be attracted at all which provides that in the case of a business where all operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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