DDIT, New Delhi V. M/s L.G. Cable Ltd., New Delhi

ITA 2800/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58501 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 31-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: VIJAY IYER; TARANPREET SINGH
• Keywords: Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGARWAL : VICE PRESIDENT & SHRI A.D. JAIN: JUDICIAL MEMBER ITA NO. 2800/DEL/2011 ASSTT. YR: 2006-07 DCIT CIR. 3(1), VS. M/S L.S. CABLE LTD., INTERNATIONAL TAXATION, FORMERLY KNOWN AS L.G. CA BLE LTD., NEW DELHI. NO. 3, 3 RD FLOOR, LSC, VASANT ARCADE, SECTOR-B, POCKET-7, VASANT KUNJ, NEW DELHI. PAN/GIR NO. AAACL6446Q (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI N.K. CHAND CIT DR RESPONDENT BY : SHRI TARANPREET SINGH CA & SH. VI JAY IYER O R D E R PER A.D. JAIN, J.M : THIS IS REVENUES 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 T AXABLE IN INDIA. 2. FACTS ARE THAT: LG CABLE LTD. (LGCL, FOR SHORT ) IS A COMPANY INCORPORATED IN KOREA, DURING THE ASSESSMENT PROCEE DINGS, IT WAS SEEN THAT DURING THE YEAR THE COMPANY WAS ENGAGED IN THE EXEC UTION OF VARIOUS PROJECTS IN INDIA. DURING THE FINANCIAL YEAR 2005-0 6, RELEVANT TO A.Y. 2006- 07, I.E. THE YEAR UNDER CONSIDERATION, LGCL HAS EXE CUTED FIVE CONTRACTS [OF WHICH FOUR HAVE BEEN AWARDED BY THE POWER GRID CORP ORATION OF INDIA ITA 2800/DEL/11 L.G. CABLE LTD. 2 LIMITED (PGCIL) AND ONE HAS BEEN AWARDED BY NEW D ELHI POWER LIMITED (NDPL)] - OVERHEAD FIBRE OPTIC CABLING SYSTEM PACKAGE PROJECT UNDER THE SYSTEM CO-ORDINATION & CONTROL PROJECT EASTERN REGI ON; - OVERHEAD FIBRE OPTIC CABLE SYSTEM PACKAGE UNDER WR SC & C PROJECT; - OVERHEAD FIBRE OPTIC CABLE PACKAGE FOR PACKAGE-2A UNDER POWER GRIDS DIVERSIFICATION INTO TELECOMMUNICATION PROJE CT (PDT 2A) - FIBRE OPTIC CABLE PACKAGE FOR PACKAGE 1B UNDER P OWER GRIDS DIVERSIFICATION INTO TELECOMMUNICATION PROJECT (PDT 1B); - FIBRE OPTIC CABLING PROJECT OPGW FOR NDPL 2.1. FOR THE PURPOSE OF EXECUTING THE FIVE CONTRACT S MENTIONED ABOVE, LGCL HAD SET UP A PROJECT OFFICE IN INDIA AFTER OBT AINING REQUISITE APPROVALS FROM THE RESERVE BANK OF INDIA. 2.2. IT WAS ALSO CLAIMED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS THAT THE POWER GRID CORPORATION OF INDIA LIMITED ( PGCIL) IMPORTED CERTAIN MATERIALS FROM LGCL, KOREA, PGCIL DEDUCTED TAX AT S OURCE WHILE MAKING PAYMENTS TO LGCL. SINCE THE MATERIAL WAS SUPPLIED O UTSIDE INDIA, NO INCOMES ACCRUE OR ARISE IN INDIA AND NONE IS TAXABL E IN INDIA. HOWEVER, SINCE TAX HAS BEEN DEDUCTED, CREDIT FOR TAX DEDUCTED AT S OURCE AGAINST SUCH SUPPLIES HAS BEEN CLAIMED AGAINST OTHER INCOME OF LGCL. SUCH TDS CERTIFICATES ARE OF RS. 24,38,547. 2.3. AO OBSERVED, INTER ALIA, THAT: 4.7.1. THE ASSESSEE HAS CONTENDED THAT THE OWNERSH IP OF THE MATERIAL IS TRANSFERRED TO PGCIL AT THE PORT IN KOR EA. THE ITA 2800/DEL/11 L.G. CABLE LTD. 3 SUPPLIES WERE ON CIF TERMS. THE NOTIFICATION OF AWA RD AND CONTRACT AGREEMENT MAKES IT CLEAR THAT THE TRANSFER OF TITLE DOES NOT RELIEVE THE ASSESSEE FROM THE RESPONSIBILITY OF ALL RISKS AND LOSSES AND DAMAGE TO THE GOODS AND THE QUALITY AND PERFORMANCE OF THE GOODS FOR THEIR COMPLIANCE WITH THE SPECIFICATIONS, UNTIL FINAL ACCEPTANCE OF THE GOODS . IN THE BID DOCUMENT LG CABLE LTD. AHS DECLARED THAT THE AWARD OF THE TWO CONTRACTS WILL NOT IN ANY WAY DILUTE OUR RESPONSIBI LITY FOR SUCCESSFUL FOR OPERATION OF PLANT/ EQUIPMENT AND FU LFILLMENT OF ALL THE OBLIGATIONS AS PER BIDDING DOCUMENT AND THA T BOTH THE CONTRACTS WILL HAVE A CROSS-FALL BREACH CLAUSE I.E. A BREACH IN ONE CONTRACT WILL AUTOMATICALLY BE CLASSIFIED AS A BREA CH OF OTHER CONTRACT WHICH WILL CONFER ON YOU THE RIGHT TO TERM INATE THE OTHER CONTRACT AT OUR RISK AND COST. - THE INSURANCE REQUIREMENT OF THE OFFSHORE SUPPLY CONTRACT REQUIRES THAT THE CONTRACT SHALL AT ITS EXPENSES TAKE OUT AND MAINTAIN DURING THE PERFORMANCE OF THE CONTRACT VARIOUS INSURANCES LIKE CARGO INSURANCE, INSTALLATION ALL RISKS INSURANCE, THIRD PARTY LIABILITY INSURANCE, AUTOMOBILE LIABILI TY INSURANCE, WORKER COMPENSATION AND OTHER INSURANCES. REGARDING CARGO INSURANCE, COVERING LOSS OR DAMAGE OCCURRING, WHILST IN TRANSIT FROM TH E CONTRACTORS OR MANUFACTURERS WORK OR STORES UNTIL ARRIVAL AT THE SITE, TO THE FACILITIES AND TO THE CONSTRUCTION EQUIPMENT TO BE PROVIDED BY THE CONTRACTOR OR ITS SUBCONTRACTORS. THIS INSURANCE IS AN AMOUNT EQUAL 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 ITA 2800/DEL/11 L.G. CABLE LTD. 4 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 I T 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 BID MEETING). THIS MEETING WAS ATTENDED BY MR. C.H. KIM, MR. N.Y. KIM AND MR. J.S. GILL FROM LG SIDE. THIS MEETING WAS IN RESPECT OF BOTH THE CONTRACTS. THERE WERE NO SEPARATE MEETINGS FOR THE OFFSHORE SUPPLY AND ONSHORE SERVICES PORTION OF THE CONTRACT. - IF ANYONE PERUSES ALL THE CONTRACTS TOGETHER, WHICH ARE FULL OF CLAUSES LEADING TO ONE ULTIMATE CONCLUSION THAT, THE OFFSHORE SUPPLY CANNOT BE SEPARATED FROM THE ONSHORE SERVICES CONTRACT. - THE TWO CONTRACTS ARE NOT INDEPENDENT OF EACH OTHER BUT ARE TOTALLY DEPENDENT ON EACH OTHER AND ONE CANNOT BE COMPLETED WITHOUT THE OTHER. THE CONTRACTS OF OFFSHORE SUPPLY EQUIPMENT AND ONSHORE SERVICES CONTRACT INVOLVING ERECTION AND COMMISSIONING OF THE EQUIPMENT ARE INTERRELATED, INEXTRICABLY LINKED, INTER DEPENDENT AND ONE CANNOT EXISTS WITHOUT THE OTHER. THESE FACTS MAKE IT CLEAR THAT THIS IS NOT A CASE O F A SALE SIMPLICITOR. POWER GRID HAS NOT MERELY CONTRACTED T HAT ASSESSEE FOR SUPPLY OF EQUIPMENTS. THE CONTRACT IS FOR FULL PACKAGE. IT ITA 2800/DEL/11 L.G. CABLE LTD. 5 COULD NOT HAVE MADE ANY DIFFERENCE, HAD THE CONTRAC T BEEN ONE INSTEAD OF TWO DIVISIBLE CONTRACTS. THE LG WOULD HA VE REQUIRED TO DO THE SAME FUNCTIONS AS IT HAS DONE BY ENTERING INTO TWO CONTRACTS. THE EQUIPMENTS ARE SUPPLIED IN ACCORDANC E WITH DETAILED SPECIFICATIONS GIVEN BY THE POWER GRID AND MENTIONED BY LG IN THE BID DOCUMENT. LG HAS ALSO SPECIFIED TH E SOURCE OF PROCURING THE EQUIPMENTS. THE TWO CONTRACTS FOR OFFSHORE SUPPLY AND ONSHORE SERVICES ARE ESSENTIALLY FOR A SINGLE C OMPOSITE WORK, WHICH INCLUDES NOT ONLY DESIGN, FABRICATION, TESTING AND SUPPLY BUT ALSO UPTO THE STAGE OF COMMISSIONING AND DEMONSTRATION FOR ACCEPTANCE. THE CONTRACT MAY STATE THAT THE TRANSFER OF TITLE T O THE EQUIPMENT SHALL TAKE PLACE OUTSIDE INDIA, HOWEVER, THE FACTS MENTIONED ABOVE CLEARLY INDICATE THAT DELIVERY WOUL D NOT BE COMPLETED TILL THE EQUIPMENTS ARE COMMISSIONED ON S ITE. THE FULL PAYMENTS AGAINST THE SUPPLY WOULD ONLY BE MADE AFTER SATISFACTORY FUNCTIONAL DEMONSTRATION OF THE EQUIPM ENT. IN VIEW OF THESE FACTS, THE CONTENTION OF THE ASSESSEE THAT TITLE OF THE EQUIPMENTS WAS PASSED TO PGCIL OUTSIDE INDIA IS OF LITTLE SIGNIFICANCE, AS FAR AS THE ISSUE OF TAXABILITY OF INCOME EARNED IN TRANSACTION IS CONCERNED. 4.7.2 THE ASSESSEE HAS ALSO CONTENDED THAT INCOME F ROM OFFSHORE SUPPLY OF EQUIPMENTS WAS ON A PRINCIPAL-TO -PRINCIPAL BASIS IS NOT TAXABLE IN INDIA, AS ENTIRE CONTRACT R ELATING TO OFFSHORE SUPPLY WAS CARRIED OUT BY LSCL IN KOREA. T HIS CONTENTION IS NOT ACCEPTABLE FOR THE REASONS MENTIO NED 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. WI THOUT THE PRESENCE OF THE PERSONNEL OF LG IN INDIA AND IN ABS ENCE 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 OFFSH ORE AND ONSHORE SERVICES ARE TOTALLY ISOLATED AND INDEPENDE NT TO EACH OTHER, IS NOT ACCEPTABLE, BECAUSE THE AGREEMENTS EN TERED INTO BY THE ASSESSEE AND THE VARIOUS DOCUMENTS FORMING PART OF THE AGREEMENT AND THE ACTUAL CONDUCT OF THE ASSESSEE IN EXECUTION ITA 2800/DEL/11 L.G. CABLE LTD. 6 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 AC TIVITY OF OFFSHORE SUPPLY TILL THE COMMISSIONING, THE ASSESSE E WAS IN CONTROL AND RESPONSIBLE FOR ALL THE INTERMEDIATE AC TIVITIES. THE TRANSACTIONS RELATING TO OFFSHORE SUPPLY AND ERECTI ON OF EQUIPMENT AT THE SITE ARE INTER-RELATED AND ARE CER TAINLY NOT ISOLATED TRANSACTION. THE ACTIVITY OF OFFSHORE SUPP LY IS NOT INCIDENTAL TO THE MAIN ACTIVITY OF COMMISSIONING OF EQUIPMENT BUT IT IS INDIVISIBLE AND WITHOUT THE FIRST ONE THE FINAL ACTIVITY WAS NOT POSSIBLE. 4.7.5 THE REFERENCE TO INSTRUCTION NO. 1829 ISSUED BY THE CBDT IN RESPECT OF TURN KEY POWER PROJECT IS ALSO O F NO HELP TO THE ASSESSEE, BECAUSE THE INSTRUCTION REFERS TO SUP PLY OF EQUIPMENTS AND MATERIALS FOB AT PORTS OUTSIDE INDIA . IN CASE OF THE ASSESSEE, THE SUPPLIES ARE ON CIF TERMS. 4.7.6 THE HAS FURTHER CONTENDED THAT NO PART OF THE ACTIVITY RELATING TO OFFSHORE SUPPLY IS CARRIED OUT BY THE P ROJECT OFFICE, IS ALSO UNACCEPTABLE, FOR THE REASON THAT THE CONTRACT S FOR SUCH SUPPLY WAS SIGNED IN INDIA. THE PRICES FOR SUCH SUP PLIES WERE DECIDED BY THE PERSONS WORKING FOR THE PROJECT OFFI CE. THE INCOME IN RESPECT OF OFFSHORE SUPPLY, DID NOT ARISE ONLY DUE TO THE ACTIVITIES OF SALE, BUT AS DISCUSSED LATER ON IN THIS ORDER, THE INCOME RESULTED ONLY WHEN ALL THE ACTIVITIES RELATI NG TO SALES WERE COMPLETED. 2.4. THE AO, THEREFORE, HELD THAT INCOME EARNED BY THE ASSESSEE ON ACCOUNT OF OFFSHORE SUPPLY OF EQUIPMENT TO PGCIL WO ULD BE TAXABLE IN INDIA; THAT IN VIEW OF THE FUNCTIONS PERFORMED IN I NDIA, IT WOULD BE REASONABLE TO ATTRIBUTE 50% OF THE INCOME RELATABLE TO THE OPERATIONS CARRIED OUT IN INDIA, BOTH AS PER THE PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT AND ARTICLE 7 OF THE TAX TREATY BETWEEN INDIA AND K OREA; AND THAT ON THE ITA 2800/DEL/11 L.G. CABLE LTD. 7 OFFSHORE SUPPLY, INCOME ATTRIBUTABLE FOR TAXATION I N INDIA WAS BEING DETERMINED AT 10% OF THE CIF PRICE OF COMPONENTS. 2.5. AO FURTHER HELD THAT: 5. AS MENTIONED ALREADY THE FACTS OF THE CASE ARE EXACTLY THE SAME, IN RELATION TO THE ISSUE IN QUESTION, AS THEY WERE FOR THE A.Y. 2005-06. THE ASSESSEES SUBMISSIONS WERE ALSO MORE OR LESS ON THE SAME LINES. IN ADDITION, THE ASSESSEE V IDE HIS LETTER DATED DECEMBER 22,2008 RELIED ON ITATS DECISION IN ITS OWN CASE FOR THE AY 2002-03 (ITA NO. 4692/DEL/2005) IN WHICH IT HAS BEEN HELD BY THE TRIBUNAL THAT THE INCOME ON A CCOUNT OF OFF SHORE SUPPLY OF GOODS IS NOT TAXABLE IN INDIA. HOWE VER, IT IS MENTIONED HERE THAT THE DECISION AHS NOT BEEN ACCEP TED BY THE DEPARTMENT, WHICH HAS PREFERRED AN APPEAL IN HONBL E DELHI HIGH COURT AGAINST THE SAID ORDER. THEREFORE, IT IS NOT POSSIBLE TO ACCEDE TO ASSESSEES REQUEST IN THIS REGARD. 2.6. BY VIRTUE OF THE IMPUGNED ORDER, THE LEARNED C IT(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 DECID ED IN FAVOUR OF THE APPELLANT BY THE JURISDICTIONAL ITAT IN AY 2 002-03 (LG CABLE LTD. (2008) 113 ITD 113). THE RELEVANT EXTRAC TS OF THIS ORDER HAVE BEEN REPRODUCED ABOVE. THE DEPART3MENTS APPEAL AGAINST THIS ORDER OF THE ITAT, DELHI HAS BEEN DISM ISSED BY DELHI HIGH COURT (SUPRA). FOR AY 2003-04, 2004-05 A ND 2005- 06, CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF OFF-SHORE SUPPLIES. THE CIT(A) IN HIS ORDER OBSE RVED THAT THE ITAT, DELHI, WHILE DELETING THE ADDITION IN THE APP ELLANTS CASE FOR AY 2002-03 HAD NOT CONSIDERED CERTAIN POINTS LI KE THE TWO CONTRACTS IN FACT BEING ONE COMPOSITE CONTRACT. PRO JECT 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 COMPLETED ONLY AFTER CUSTOMS CLEARANCE. ITAT, DELHI VIDE ORDER PASSED ON 13 AUGUST 2010 IN LS CABLE LTD. VS. DDIT (ITA NOS. 3634, 3635 AND 3636 OF 2009 ),HAVE ITA 2800/DEL/11 L.G. CABLE LTD. 8 AGAIN DELETED THIS ADDITION REVERSING THE ORDER OF THE CIT(A) FOR AY 2003-04 TO 2005-06. A TABULATED SUMMARY OF THE I SSUES RAISED BY THE CIT(A) WHICH HAD NOT BEEN CONSIDERED BY THE ITAT IN THEIR EARLIER ORDER AND THE OBSERVATIONS OF THE ITAT, DELHI ON THESE ISSUES HAS BEEN REPRODUCED ABOVE. 10. THE FACTS OF THE YEAR UNDER CONSIDERATION ARE S IMILAR TO THE FACTS OF THE EARLIER YEARS. THE AO WHILE MAKING THIS ADDITION FOR THE CURRENT YEAR HAS RELIED ON THE ORD ER OF ASSESSMENT ORDER FOR AY 2005-06 (PARA 4.6 & 5 OF TH E ASSESSMENT ORDER). RESPECTFULLY FOLLOWING THE ORDER OF THE JURISDICTIONAL ITAT AND THE ORDER OF THE HONBLE DE LHI HC IN THE APPELLANTS OWN CASE FOR THE EARLIER YEARS AS D ISCUSSED IN THE PRECEDING PARAGRAPHS, IT IS HELD THAT THE INCOME OF THE APPELLANT FROM OFF-SHORE SUPPLIES IS NOT TAXABLE IN INDIA. 3. CHALLENGING THE IMPUGNED ORDER, THE LEARNED DR H AS CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE RE CEIPTS OF THE ASSESSEE FROM OFFSHORE SUPPLY OF EQUIPMENT ARE NOT TAXABLE IN IND IA; THAT WHILE DOING SO THE LEARNED CIT(A) HAS FAILED TO TAKE INTO CONSIDER ATION THE DETAILED DISCUSSION MADE BY THE AO IN THE ASSESSMENT ORDER; THAT AS CORRECTLY HELD BY THE AO, IT IS NOT A CASE OF A SALE SIMPLICITOR; THA T TWO CONTRACTS FOR OFFSHORE SUPPLY AND ONSHORE SERVICES ARE ESSENTIALLY FOR A S INGLE COMPOSITE WORK, WHICH INCLUDES NOT ONLY DESIGN, FABRICATION, TESTIN G AND SUPPLY BUT ALSO UP TO THE STAGE OF COMMISSIONING AND DEMONSTRATION FOR AC CEPTANCE. THAT THE LEARNED CIT(A) HAS ALSO FAILED TO CONSIDER THAT THE AGREEMENTS ENTERED INTO BY THE ASSESSEE AND THE VARIOUS DOCUMENTS FORMING P ART OF THE AGREEMENT AS WELL AS THE ACTUAL CONDUCT OF THE ASSESSEE IN EXECU TION OF THESE CONTRACTS DISPROVES THE ASSESSEES CONTENTION THAT OFFSHORE A ND ONSHORE SERVICES ARE TOTALLY ISOLATED AND INDEPENDENT OF EACH OTHER; THA T THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AO CORRECTLY HELD THAT THE I NCOME EARNED BY THE ITA 2800/DEL/11 L.G. CABLE LTD. 9 ASSESSEE ON ACCOUNT OF OFFSHORE SUPPLY OF EQUIPMENT TO PGCIL IS TAXABLE IN INDIA. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS PLACED RELIANCE ON THE ORDER DATED 24-12-2010 PASSED BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE FOR A.Y. 2002 -03 IN ITA NO. 703/2009 (COPY AT PAGES 57 TO 96 OF THE ASSESSEES PAPER BOOK). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MATTER, IT IS SEEN, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER (SUPRA) OF THE HONBLE DELHI HIGH COURT IN THE ASSE SSEES 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 SUCC ESSFULLY PERFORMED ONLY AFTER THE SATISFACTORY COMMISSIONING AND ERECTION OF THE PLANT AND EQUIPMENTS. SINCE THE PER MANENT ESTABLISHMENT WAS NOT AT ALL INVOLVED IN THE TRANSA CTION 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 U NDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT), WOULD BE IRRE LEVANT IN THE INSTANT CASE. CLAUSE (A) OF EXPLANATION (1) TO SECTION 9(I) WOULD NOT BE ATTRACTED AT ALL WHICH PROVIDES THAT I N THE CASE OF A BUSINESS WHERE ALL OPERATIONS ARE NOT CARRIED OUT I N INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOM E AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED O UT IN INDIA. IN THE INSTANT CASE THERE WERE NO OPERATION QUA THE AG REEMENT FOR SUPPLY OF EQUIPMENT, WHICH WAS CARRIED OUT IN INDIA , AND THEREFORE, NO INCOME COULD BE DEEMED TO HAVE ACCRUE D OR ARISEN IN INDIA WHETHER DIRECTLY OR INDIRECTLY OR THROUGH ANY BUSINESS CONNECTION IN INDIA. ITA 2800/DEL/11 L.G. CABLE LTD. 10 38. IN VIEW OF THE AFORESAID WE ANSWER THE QUESTION NO. 1 IN THE AFFIRMATIVE IN FAVOUR OF THE RESPONDENT- ASSESS EE AND AGAINST THE REVENUE. IN THESE CIRCUMSTANCES, QUESTION NO. 2 DOES NOT ARISE FOR OUR CONSIDERATION IN THE INSTANT CASE. IT MAY, HOWEVER, BE NOTED FOR ACADEMIC INTEREST ALONE THAT THE QUEST ION NO. 2 HAS BEEN ANSWERED BY THIS COURT IN ITA NO. 491/2008 AND OTHER CONNECTED MATTERS TITLED AS DIRECTOR OF INCOME TAX VS. M/S MITSUBISHI CORPORATION DECIDED ON 30 TH AUGUST, 2010. 5.1. IN VIEW OF THE ABOVE, SINCE THE MATTER HAS BEE N EFFECTIVELY DECIDED IN FAVOUR OF THE ASSESSEE FOR A.Y. 2002-03, HOLDING TH AT THE RECEIPTS FROM OFFSHORE SUPPLY EQUIPMENT ARE NOT TAXABLE IN INDIA, WE FIND NO FLAW IN THE IMPUGNED ORDER, WHEREIN THE LEARNED CIT(A) HAS FOLL OWED THE AFORESAID HIGH COURT ORDER IN ASSESSEES OWN CASE FOR A.Y. 20 02-03. IT IS PERTINENT TO STRESS HERE, AS NOTED BY THE LEARNED CIT(A), THAT T HE TRIBUNAL VIDE ITS ORDER DATED 13-8-2010, IN THE ASSESSEES CASE FOR A.Y. 20 03-04 TO 2005-06, AGAIN DELETED THE ADDITION ON SIMILAR LINES. 6. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13-01-2012. SD/- SD/- ( G.D. AGARWAL ) ( A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 13-01-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 2800/DEL/11 L.G. CABLE LTD. 11