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TMI Blog2023 (2) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... s division produced machines and systems that were used in engine and drive construction as well as final assembly. It was operating in India through its subsidiary M/s Durr India Pvt Ltd. The assessee was awarded turnkey projects by automobile manufacturers which include major client Ford India. The contract was spilt into three parts at the instance of Durr Germany and three purchase orders (PO) were issued. Contract-1 dealt with off-shore supply, Contract-2 provide for payment of supervision charges and Contract-3 dealt with installation and commissioning of the project. Income arising out Contract 2 has been offered to tax by Durr Germany in India. The Income from Installation and commissioning was offered to tax by M/s Durr India (P) Ltd. In the earlier years, a view was taken by the revenue that only for the tax purposes, the contract was split up. In this year, the main issue arose from various contracts executed by Durr Systems Germany for various automobile manufacturers. The Ld. AO held that all the activities right from engineering stage to commissioning stage were inextricably and organically linked and therefore, the turnkey contract was a single composite contract bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the passing of Risk on Equipment to customer is to happen only on 17.01.2014 post which the warranty for the equipment supplied starts from 31.03.2014, post installation of all the equipments at site. There are two stages of passing of risk associated with this project viz., passing of risk over equipment and passing of risk over completed project to the customer, which would happen only post commissioning or when the pilot production start and pre-acceptance of the customers. Therefore, the assessee had a PE in India in respect of offshore supplies by virtue of presence of Site Office/Storage Area at the Ford Site in India for a period more than the threshold. It is therefore clear that the income to the assessee accrued in India and the source of income is in India and therefore taxable in India. From the statement recorded from General Manager Sales & Service Durr India Private Limited, the process mentioned in Ford Contract is common for all the contracts executed by Durr Germany in India. Further, the facts recorded by the DRP in the following portion of its order stand undisputed:- " the assessee is intricately connected to the client activities in India from supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facade, existence of close relationship between the foreign person and the Indian operations. 37. ....................................................................................it had secured the due performance of the whole contract by insisting that the assessee should guarantee its performance even if the contract was split up into four contracts, NLC did not stand to lose since the value of the contract was fixed even from the beginning. It must be remembered that it was open only for a single bidder. It was only for the convenience of and at the instance of the assessee that it was divided into four. Therefore, the question as to whether NLC would have agreed to such a course of action is really not relevant. NLC did not suffer in any way by splitting up and NLC was bound to pay the entire payment regardless of whether it was equally distributed among all the four contracts or whether the price was loaded on to Contract or 11. 40. For the reasons given above, we confirm the findings that, (a) the foreign company and the activities rendered by it under contract No. I and the other three contracts are inextricably linked and it was a composite contract, (b) al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter was restored by the bench back to lower authorities for limited purpose of computation of income. Set-aside proceedings 4.1 Pursuant to the aforesaid directions, order giving effect has been passed by Ld. AO on 06.02.2020. During proceedings, details were called from assessee seeking information on the income which is taxed twice and the year in which the same was already brought to tax. However, the assessee submitted that it was not maintaining separate books for the permanent establishment (PE) in India and there was no separate ledger accounts pertaining to the Indian Operations in the books of account of the assessee. The list and copies of all the invoices with respect to contracts undertaken in India was provided. The assessee maintained that since the transfer of goods took place outside India, no income on account of such supply of goods accrue or arise or deemed to accrue or arise in India. Accordingly, no income therefrom is liable to tax in India and therefore, no income from supply of equipment have not been disclosed in the return of income. 4.2 The Ld. AO noted that the assessee earned 4,25,44,796.52 Euros from Ford India contract over the years which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bench that all the activities of the assessee from engineering stage to supply erection, installation, commissioning and completion are inextricably linked and hence, the turnkey contract is a single composite contract between Ford India and Durr Systems GmbH (assessee). However, considering the submissions of the assessee that the profit rate was determined by applying adhoc mark-up rate and the down payment invoices were considered as supplies which lead to double taxation and the plea that the income should have been computed on mercantile basis, the bench directed lower authorities to re-determine the computations. However, upon perusal of impugned order, it could be seen that the assessee has miserably failed to provide the basic information as to invoices raised by it under all the three categories despite the averment before the Tribunal that computations were erroneous. The complete reconciliation of invoices raised by it under all the heads vis-à-vis payments received by it and the quantum of income offered by it over various years has neither been tabulated nor been quantified at any stage of proceedings. Instead, the assessee has, merely raked up the issue on m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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