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TMI Blog2023 (4) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... raightway attributed 25% of Rs.54.22 crores to the PE. Thus due to factual inconsistencies and non-consideration of facts on record by learned DRP, the impugned assessment order deserves to be set aside. Restore the matter back to the Assessing Officer for deciding the issues relating to taxability of receipts from offshore supplies and onshore services afresh by properly considering the facts brought on record. We further direct the Assessing Officer to decide the issue of attribution of profit to PE by taking note of the profit rate as per the global accounts, keeping in view the ratio laid down in the decisions referred to earlier in the order - Appeal is allowed for statistical purposes. - ITA No.636/Del/2021 - - - Dated:- 26-12-2022 - SHRI G.S. PANNU, HON BLE PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For the Appellant : Sh. Kamal Sawhney, Adv. Sh. Prashant Meharchandani, Adv. Sh. Arun Bhadoria, Adv. For the Respondent : Sh. Gangadhar Panda, CIT(DR) ORDER PER SAKTIJIT DEY, JM: The present appeal has been filed by the assessee assailing the final assessment order dated 30.04.2021 passed under section 143(3) read with section 144C(13) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 144C(8) of the IT Act to find out the global revenue from offshore supplies and the global gross profit from such offshore supplies and apply such gross profit rate to the supplies to India, when the provisions of section 144C(8) prohibit the DRP from giving any directions for further enquiry to the AO. 9. Whether on the facts and in the circumstances of the case, the Assessing Officer/DRP is justified in estimating that 25% of the profit from offshore supplies are attributable to Appellant's PE in India, especially when there is no evidence available of any activity in India with regard to offshore supplies to India. 10. Whether on the facts and in the circumstance of the case, the assessing officer/DRP is justified in holding that 50% of the onshore services receipts are attributable to the PE of Appellant in India, especially when the entire onshore services receipts have been offered as income by SPL, partner of JV who is independent and has no relation or association with the Appellant and also in the absence of any evidence of any onshore activity by the Appellant in India. 11. Whether on the facts and in the circumstances of the case, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore supply. Moreover, the supply under the offshore contracts has also been made only for the amount of INR 31,40,83,937/- in the concerned FY 2016-17 (AY 2017- 18). Even the Ld. AO has recorded that only INR 31,40,83,937/- out of the total contract consideration of INR 54,22,74,752/- can be considered for computation of the taxable income. 19. Without prejudice to the Appellant's arguments against the existence of Permanent Establishment (`PE'), the Ld. AO ought to recompute the attribution in light of the principles laid down by the Hon'ble Delhi High Court in the case of GE Energy Parts Inc. v. CIT-International Taxation, Delhi-I [2019] 411 ITR 243 (Delhi) and the order dated 30.05.2016 of this Hon'ble Tribunal, Delhi Bench in ZTE Corporation v. ADIT, Range-3, International Taxation and arrive at a reasonable attribution of 'profits' to the alleged PE. 20. Without prejudice to the Appellant's arguments against the existence of PE, the matter ought to be remanded back to the Ld. AO for determining the global profits of the Appellant for the purpose of further determining attribution because the entire turnover, as perversely done by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the territory of India, the case of the assessee before the Assessing Officer was, though, the contracts were granted to the joint venture of the assessee and SPL. The scope of work under each contract was performed by the members of JV, i.e., the assessee and SPL in their individual capacity. It was submitted by the assessee that the offshore supply contract was solely undertaken by the assessee. Whereas, the on-shore services contract required performance of all activities such as, port handling, port clearance, other incidental services, survey, planning, transportation, insurance, delivery at site, unloading, handling, storage, installation, splicing, termination, testing, training and demonstration for acceptance, commissioning, documentation, providing training for telecom equipment, project management and other ancillary activities related to the installation and commissioning of telecom equipment and accessories was solely the responsibility of SPL. It is the SPL which executed the onshore services contract. 4. As regards the maintenance contract, SPL solely undertook to provide the services. Thus, according to the assessee, it was involved only with the first c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, such revenue is entirely relatable to the assessee. Learned DRP observed, in such case, the global cost profit ratio has to be taken in view of extraordinary items of expenses in other geographical jurisdictions which may not have any bearing on the transaction made in India. Thus, learned DRP held, in case, global revenue of the assessee from offshore supply and global gross profit figures there from are available on a reasonable basis, 25% of such profit will be attributable to a PE in India. Learned DRP observed, in case, such figures are not available, the Assessing Officer is to take 25% of Rs.54,22,74,752/- as profit attributable to PE in India. 5. As regards onshore services, learned DRP held that total consideration received of Rs.28,67,05,122/- shall be apportioned between the assessee and SPL in 50:50 ratio, and the 50% revenue falling to the share of assessee shall be attributable to the PE. In other words, he directed the Assessing Officer to attribute Rs.14,33,52,561/- as income from onshore services attributable to the PE. In terms with the directions of learned DRP, the Assessing Officer completed the assessee. 6. Before us, learned counsel appearing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the observations of learned DRP. However, he submitted that the matter can be restored to the Assessing Officer to verify assessee s claim of factual inconsistencies in the directions of the DRP. 10. We have considered rival submissions and perused the material on record. We have also examined the decisions cited before us. It is evident, from the initial stage of assessment the assessee claimed that though three separate contracts were awarded to the joint venture, namely, offshore supply of equipment contract, onshore services contract and maintenance contract, however, the role of the two JV partners for execution of contracts were well defined. The assessee had submitted that it had the sole responsibility of offshore supply of equipments, whereas, the Indian partner, i.e., SPL was solely responsible for the onshore services and maintenance contract. It is another matter that the Assessing Officer had rejected assessee s claim and held that contracts are composite in nature and the composite consideration has to be divided in the proportion of 40% and 60% towards FTS and equipment supply. Thus, the Assessing Officer had held that 60% of the receipt from offshore supply c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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