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TMI Blog2024 (4) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The AO further inter alia erred in observing or commenting that the Appellant and SIPL constitute an AOP 3. In the absence of Permanent Establishment in India, under Article 7 of the India-China Double Taxation Avoidance Agreement ("DTAA") and in the absence of any business connection as envisaged u/s 9(1)(1) of the Act, the Appellant prays that the addition made by AO on aforesaid offshore supplies be deleted. Without Prejudice to above Ground No. 2: Non-consideration of Net Loss incurred by the Appellant on offshore supply of escalators and elevators to DMRCL and MMRCL: 1. On the facts and circumstances of the case and in law, the Ld. AO erred in making an addition of Rs. 2,30,21,640/- to the total income of the Appellant in India ignoring the act that the Appellant had incurred net loss on the offshore supply of escalators and elevators to DMRCL and MMRCL 2. The Appellant prays that the Ld. AO be directed to delete the addition of Rs. 2,30,21,640/- or appropriately reduce the same, after considering the facts and loss, if any, incurred by the Appellant in respect of the above transaction. Ground No. 3: Non-receipt of refund granted by the AO: 1. On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in India, therefore, no part of the income earned by the assessee can be taxed in India by virtue of the provisions of Article 7 of DTAA. However, the assessing officer has not agreed with the submission of the assessee. He was of the view that income of the assessee was earned from India in respect of a composite contract having significant on-shore elements and the assessee had entered into an arrangement with its Indian Associate enterprise Schindler India Private Limited (SIPL) as its associate enterprise for fulfilment of its obligation under the contract. AO further stated that assessee was having regular income from India from the contracts as well as the assessee has a clear cut business connection in India. Accordingly, a sum of Rs. 2,30,21,640/- being 5% of total receipt of Rs. 46,04,32,808/- was taxable as income from composite contract liable for taxation in India @ 40% (plus cess/surcharge). 3. The assessee filed objection before the Dispute Resolution Panel on 21.10.2022. The DRP vide order u/s 144C(5) of the Income Tax 1961 dated 28.06.2023 has rejected the objection of the assessee. In pursuance to the directions issued by the DRP, the AO has passed final assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commissioning and maintenance of escalators/elevators. During the course of appellate proceedings before us the ld. Counsel submitted that similar issue on identical facts has been adjudicated by the coordinate bench of the ITAT for the earlier years as referred above. With the assistance of ld. Representative we have perused the decision of ITAT in the case of Schindler China Elevator Company Ltd. Vs. ACIT, IT, Circle 4(2)(1) vide ITA No. 1679/Mum/2022. The relevant operating part of the decision is reproduced as under: "10. We have considered the rival submissions and perused the material available on record. The assessee is a tax resident of China. The assessee along with SIPL formed a consortium for purpose of bidding to the tender floated by DMRCL for the design, manufacturing, supply, installation, testing, and commissioning of escalators for Noida-Greater Noida MRTS project. Similarly, the aforesaid consortium bid for the tender floated by MMRCL for the design, manufacturing, supply, installation, testing, and commissioning 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 wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raising such an invoice. From clause 4 of the contract agreement entered with DMRCL, we find that the same mentions contract price of Rs. 15,38,93,850.16 and USD 37,60,376. As per the assessee, the consideration in Indian currency was payable to SIPL and the consideration in USD was payable to the assessee. 11. In big projects, it is a common practice that two or more companies with different expertise come together to form a consortium to bid for the project and jointly agree to undertake the project. In such a case, it cannot be said that the roles and responsibilities of one of the members can be performed by the other member. The purpose of the consortium is only to jointly bid for the project and win the mandate to perform the contract. Thereafter, each party is responsible for its own scope of work as agreed amongst them by way of MOU. The joint agreement can at best be for the purpose of completion of the contract for which the joint bid was made by the consortium. Due to the different expertise of the consortium members, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demarcates the description of work, the consideration, and the currency in which the same is to be paid to each of the consortium members. In Arosan Enterprises Ltd. v. UOI: (1999) 9 SCC 449, the Hon'ble Supreme Court held that the Agreement must be read as a whole with corresponding obligations of the parties so as to ascertain the true intent of the parties. 13. As per the assessee, the title in the goods i.e. escalators and elevators was transferred to DRMCL and MMRPL outside India and payment thereof was also received outside India, therefore the transaction cannot be taxed in India. It is the plea of the assessee that the goods were transferred on a CIF basis. In this regard, reference was made to the copy of sample invoices forming part of the paper book from pages no.239-243. From the perusal of the aforesaid invoices, it is evident that the same are in the name of DMRCL and MMRCL and the transaction is on a CIF basis. In the draft assessment order, it has been held that since the offshore supplies have been made by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve it follows that 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. is 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, it can be precisely seen that when the assessee made offshore supply of equipment to BPL on CIF Bombay basis against the stated consideration, the property in the equipment passed on to BPL on the port of Germany itself. It is trite law that income accrues at the place where the title to goods passes to the buyers on the payment of price. Our view is fortified by the judgment of the Hon'ble Supreme Court in Seth Pushalal Mansighka (P.) Ltd. v. CIT [1967] 66 ITR 159. As it is the case of offshore supply of equipment, it is axiomatic that this transaction got completed outside India. Thus no income accrued to the assessee in India towards this transaction. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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