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TMI Blog2023 (3) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried out in India can be taxed in India. It was further held that since all parts of the transactions in question, i.e. the transfer of property in goods as well as the payment, were carried out outside the Indian soil, the transaction cannot be taxed in India. Since, in the present case, the 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. - ITA no.1679/Mum./2022 And ITA no.2483/Mum./2022 - - - Dated:- 2-3-2023 - Shri G.S. Pannu, President And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Yogesh Thar a/w Ms. Sakshi Dande For the Revenue : Shri Amit Kumar Soni ORDER PER BENCH The aforesaid appeals have been filed by the assessee challenging the final assessment order dated 29/04/2022, for the assessment year 2018 19 and final assessment order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds of appeal. 4. The issue arising in ground No. 1, raised in assessee‟s appeal, is pertaining to taxability of receipts from the offshore supply of escalators and elevators. 5. The brief facts of the case as emanating from the record are: The assessee is a non-resident company incorporated in China and is engaged in the business of supply of elevators and escalators, which includes design and manufacturing. The assessee is a part of Schindler group of companies. For the year under consideration, the assessee filed its return of income on 31/10/2018 with returned income of Rs.Nil and claimed a refund of Rs. 43,76,387. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) of the Act were issued and duly served on the assessee. During the year under consideration, the assessee considered receipts of Rs.17,42,55,454 from Delhi Metro Rail Corporation Ltd (DMRCL) and Rs. 2,80,74,219 from Maharashtra Metro Rail Corporation Ltd (MMRCL) in its return as appearing in Form 26AS statement. The assessee considered both receipts as not taxable in India and claimed a refund of taxes deducted at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made in India. Therefore, the profits from supplies made by the assessee on CIF basis are liable to be taxed in India on the ground that the sale is completed in India. Accordingly, the Assessing Officer proceeded to tax 5% of the total receipts of Rs.20,23,29,673 as income from composite contract liable for taxation in India. 7. The assessee filed detailed objections before the learned DRP, inter-alia, against the addition made by the AO. Vide directions dated 30/03/2022, issued under section 144C(5) of the Act, the learned DRP rejected the objections filed by the assessee. As regards the AOP, the learned DRP held that the Assessing Officer has only raised a prima facie finding and no assessment in hands of AOP has been made in this case. It was further held that these are matters of fact, which have to be inquired into by the Assessing Officer having jurisdiction over the AOP and it would be premature for the panel to issue any directions at this stage. Accordingly, the learned DRP proceeded to decide the issue on the basis that addition in hands of the assessee is on a substantive basis. The learned DRP upheld the findings of the Assessing Officer that the contracts are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioning of heavy-duty machine room less elevators and escalators for NMRCL Project. The bids were accepted by the DMRCL and MMRCL and letters of acceptance were issued. Subsequently, separate contract agreements were signed between the consortium and DMRCL, and the consortium and MMRCL. It is pertinent to note that the MOU entered into between the assessee and SIPL was made part of both the aforesaid contract agreements. From the perusal of the contract agreements, forming part of the paper book, we find that the consortium agreed to perform efficiently and faithfully all of the work under the agreement. It was also agreed that the consortium shall be jointly and severally liable for undertaking the contracts. Responsibility of each member of the consortium in respect of the contract is provided in the MOU entered between the assessee and SIPL. From the perusal of the MOU in respect of DMRCL, we find that the parties jointly bid for the project as a consortium with each party responsible for its own scope of work. It was further agreed that both parties shall be jointly and severally responsible for completing the project. As per Article 3 of the MOU, the assessee agreed to underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers, the roles and responsibilities are also clearly demarcated, at the outset, at the time of bidding for the contract. Since multiple parties form part of the consortium, the members may choose a lead member amongst them for the purpose of representing the parties in such a contract and the same is only for administrative convenience and coordination. Therefore, for the purpose of taxation, it is relevant to take into consideration the roles/functions performed by each member of the consortium. 12. As per the assessee, the consideration received by SIPL in respect of its scope of work, i.e., clearance of material after reaching at port and transportation to the site as per contract conditions, installation, testing, commissioning, and maintenance of escalators, has already been offered for taxation in India. The Revenue has not brought any material to controvert the aforesaid submission of the assessee. In the present case, the consideration received from DMRCL and MMRCL was claimed as not taxable by the assessee on the basis that the same is in respect of the offshore supply of elevators and escalators. The distinct scope of work and separate responsibility of each member o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee on an Indian port of disembarkation basis, therefore the delivery of the goods is to be taken as having been made in India. Thus, it has been held that the profit made by the assessee on a CIF basis is liable to be taxed in India on the basis that the sale is completed in India. We find that in a case, wherein the assessee made an offshore supply of equipment on a CIF basis at an Indian port, the coordinate bench of the Tribunal in JCIT vs Siemens Aktiengesellschaft, [2009] 34 SOT 16 (Mumbai) observed as under: 12. From the above clause of the contract it is patent that BPL acquired the absolute right in the property when it was delivered to the carrier at the port of shipment i.e., in Germany. The reference of the learned D.R. to the invoice for depicting that it was on CIF basis at Bombay and hence the right of the buyer in the property should be construed as getting vested in Bombay, is not acceptable. The INCO Terms, 1990 explains various relevant terms. Page 755 of it mentions that : 'Cost, Insurance and Freight' means that the seller has the same obligation as under CFR but with the addition that he has to procure marine insurance against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Therefore, in the case of CIF, the property in goods passes on to the buyer at the port of shipment. Though the Cost, Insurance, and Freight, etc., are met by the seller but the property in the goods gets transferred to the buyer at the port of shipment. The buyer incurs all risks of loss of or damage to the goods from the port of shipment. Therefore, the title in property in the goods shipped by the assessee in the foreign port was transferred at the port of shipment itself. In Ishikawajma-Harima Heavy Industries Ltd. vs DIT, [2007] 288 ITR 408 (SC), the Hon‟ble Supreme Court held that only such part of the income, as is attributable to the operations carried out in India can be taxed in India. It was further held that since all parts of the transactions in question, i.e. the transfer of property in goods as well as the payment, were carried out outside the Indian soil, the transaction cannot be taxed in India. Since, in the present case, the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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