ATOMSTROYEXPORT, RUSSIA, MUMBAI V. DCIT (IT) RG 1(1)(2), MUMBAI

ITA 619/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9919 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-08-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Deemed to accrue or arise in india
• Section: 143(3)

Judgement Text

1 INCOME-TAX APPELLATE TRIBUNAL LBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./ITA./619/MUM/2017, /ASSESSMENT YEAR: 2013-14 M/S. ATOMSTROYEXPORT-RUSSIA C/O. NUCLEAR POWER CORPORATION OF INDIA LIMITED, 8 TH FLOOR, SOUTH WING, VIKRAM SARABHAI BHAVAN, CENTRAL AVENUE, ANUSHAKTI NAGAR,MUMBAI-400 094. PAN:AAFCA 3658 N . VS. DY. DIT(IT), RANGE-1(1)(2) 1 ST FLOOR, SCINDIA HOUSE, BALLARD ESTATE, NM ROAD, MUMBAI-400 038 ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAMUEL DARSE-CIT-DR ASSESSEE BY: SHRI NITESH JOSHI -AR / DATE OF HEARING: 06.09.2017 / DATE OF PRONOUNCEMENT: 06.09.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 15/11/2016 OF THE AO,PA SSED IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL(DRP),MUMBAI,THE ASSESSEE H AS FILED THE PRESENT APPEAL.THE ASSESSEE IS A JOINT STOCK COMPANY UNDER THE MINISTRY OF ATOM IC ENERGY, RUSSIAN FEDERATION, INCORPORATED UNDER THE PROVISIONS OF RUSSIAN LEGISLATION HAVING ITS REGISTERED OFFICE AT MOSCOW,RUSSIA.IT IS ENGAGED IN THE BUSINESS OF COMMISSIONING OF TURNKEY POWER PROJECT. RETURN OF INCOME WAS FILED ON 31/3/2006 DECLARING A TOTAL INCOME OF RS.12.30 C RORES.THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON U/S. 143(3) R.W.S.144C(13)OF THE ACT,DETERMINING IT S INCOME AT RS.1,23,06, 44,210/-. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT TAXING THE AMOU NT OF RS. 183.78 CRORES IN INDIA THAT WAS RECEIVED BY THE ASSESSEE FOR EXECUTING THE OFFSHORE SUPPLY CONTRACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD ENTE RED INTO AN AGREEMENT WITH NUCLEAR POWER CORPORATION OF INDIA LTD.(NPCIL)TO SET UP TWO 1000 MW POWER PLANT UNITS IN TAMILNADU,THAT FOR THAT PURPOSE IT ENTERED IN TO FIVE DIFFERENT AG REEMENTS WITH NPCIL,THAT NPCIL HAD MADE PAYMENTS OF RS.70.11 CRORES TO THE ASSESSEE FOR EXE CUTING THE ABOVE REFERRED AGREEMENTS BESIDES PAYING RS.183.78 CRORES FOR SUPPLYING OFFSHORE EQUI PMENTS (OSE) AND MATERIALS,THAT IT HAD ALSO 619/M/17 M/S.ATOMSTROYEXPORT 2 ENTERED IN TO AN AGREEMENT FOR CARRYING OUT FIRST P RIORITY DESIGN WORK FOR THE CONSTRUCTION OF UNITS 3 & 4,THAT FOR EXECUTION OF THE SAID AGREEMENT A FU RTHER PAYMENT OF RS.21.72 CRORES WAS MADE BY NPCIL.HE OBSERVED THAT THE ASSESSEE HAD CLAIMED APP LICABILITY OF THE PROVISIONS OF SECTION 44BBB OF THE ACT TO THE FEES RECEIVED FROM NPICL IN RESPECT OF OFFSHORE SERVICE CONTRACTS,THAT IT CLAIMED THAT THE RECEIPTS UNDER OFFSHORE SUPPLY CONTRACTS WERE NOT TAXABLE IN INDIA,THAT INCOME RECEIVED FROM THE CONTRACT OF PRIORITY DESIG N WORK WERE TO BE TAXED @ 10% UNDER THE HEAD PAYMENTS RECEIVED TOWARDS ROYALTY.HE ASKED THE EXPLAIN AS TO WHY THE RECEIPT OF RS.183.78 CRORES RECEIVED BY IT ON ACCOUNT OF OFFSHORE SUPPLY CONTRACT SHOULD NOT BE TAXED IN INDIA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE DIRECTIONS OF THE DRP,THE AO HELD THAT INCOME OF THE ASSESSEE FROM THE OFFSHORE SERVICE CO NTRACT AND OFFSHORE SUPPLY CONTRACTS WAS TAXABLE IN INDIA AS PER THE PROVISIONS OF SECTION 4 4BBB OF THE ACT. 3 .BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE STANDS COVERED IN FAVOUR THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL FOR THE AY.S .2007-08,2008-09,2011-12(ITA.S 8074/ MUM/ 2010,ITA/6573/MUM/2011,ITA/1033/MUM/2015.DTD.10.01. 2017)ANDAY.2009-10(ITA/6581/ MUM/2012/,DTD.22.03.2017).WE ARE REPRODUCING THE RE LEVANT PORTION OF THE ORDER OF THE TRIBUNAL FOR THE AY.2009-10(SUPRA)AND IT READS AS UNDER: 5.LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFO RE US THAT THE 2007-081 2008-09 AND 2011- 12 IN ITA NO.8074/MUM./20101 ITA NO.6573/MUM./2011 AND NO.1033/MUM./2015, RESPECTIVELY, VIDE ORDER DATED 10TH JANUARY 2017,BY GIVING A CATE GORICAL FINDING THAT THE AMOUNT RECEIVED UNDER THE OFF-SHORE CONTRACT ARE NOT TAXABLE IN IND IA UNDER SECTION 44BBB.THEREFORE, HE SUBMITTED, THE AMOUNTS,RECEIVED UNDER THE OFF-SHORE SUPPLY CONTRACTS CANNOT BE TAXED. 6.LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY AGREED THAT THE ISSUE SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL UNDER REFERENCE. 7.WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE ORDER OF THE CO-ORDINATE BENC H REFERRED TO ABOVE.THE ISSUE IN DISPUTE IN THESE GROUNDS IS IN RELATION TO TAXABILITY OF THE AMOUNT RECEIVED TOWARDS SUPPLY OF MATERIALS AND EQUIPMENT UNDER THE OFF-SHORE SUPPLY CONTRACTS.UNDISPUTEDLY,T HE OFF-SHORE SUPPLY CONTRACTS UNDER WHICH THE ASSES SE HAS SUPPLIED MATERIALS AND EQUIPMENTS IN THE IMPUGN ED ASSESSMENT YEAR IS/ARE CONTINUING FROM THE ASSESSMENT YEAR 2006-07 ONWARDS IT IS RELEVANT TO N OTE, THE TAXABILITY OF THE AMOUNT RECEIVED UNDER . THE OFF-SHORE CONTRACT IS A CONTENTIOUS ISSUE BETWEEN T HE ASSESSEE AND THE DEPARTMENT RIGHT FROM THE ASSESSMENT YEAR 2006-07. IN FACT IN THE IMPUGNED AS SESSMENT YEAR, THE ASSESSING OFFICER FOLLOWING THE ORDER OF THE DRP FOR ASSESSMENT YEAR 2006-07 AND 20 07-08, HAS BROUGHT TO TAX THE AMOUNT RECEIVED UNDE R OFF-SHORE SUPPLY CONTRACTS BY APPLYING IDENTICAL NA TURE OF DISPUTE RAISED BY THE ASSESSEE FOR ASSESSME NT YEAR 2007-08, 2008-09 AND 2011-12, THE TRIBUNAL IN ITS ORDER, AS REFERRED TO ABOVE, AFTER ANALYZING TH E NATURE OF CONTRACT, PROVISIONS OF THE ACT, AND RELE VANT DTAA AS WELL AS THE PRINCIPLES OFLAW LAID DOWN IN JUDICIAL PRECEDENTS, IN A DETAILED ORDER ULTIMATEL Y CONCLUDED, SINCE, SUPPLY OF MATERIALS AND EQUIPME NTS UNDER THE OFF-SHORE SUPPLY CONTRACTS WERE CARRIED O UT AND CONCLUDED OUTSIDE INDI, THE RECEIPTS FROM OF F- SHORE SUPPLY CONTRACTS CANNOT BE DEEMED TO ACCRUE O R ARISE IN INDIA. THE OPERATIVE PORTION FROM THE OR DER OF THE TRIBUNAL IS EXTRACTED HEREIN BELOW 619/M/17 M/S.ATOMSTROYEXPORT 3 '15 THEREFORE AFTER ANALYZING THE VARIOUS CASE LAWS , STATUTORY PROVISFONC, DTA/ PROVISIONS AND CONTRACTUAL TERMS AND RESPECTFULLY FOLLOWING JUDGME NT OF HON'BLE SUPREME COURT IN ISHIKAWAJIMA- HARIRNA HEAVY INDUSTRIES LIMITED V/S DICT (288 ITR 408),WE ARE INCLINED TO HOLD THAT OFFSHORE SUPPLY CONTRACTS WERE 'CARRIED AND CONCLUDED-'OUTSI DE INDIA AND HENCE NO INCOME THEREFROM DEEMED TO ACCRUE OR ARISE IN INDIA AS PER SECTION 9(1) AND DT AA PROVISIONS AND ACCORDINGLY, NOT CHARGEABLE TO TA X. THE RECEIPTS THEREOF DO NOT FORM PART OF RECEIPTS F OR THE PURPOSE OF COMPUTATIONAL PROVISIONS OF SECTI ON 44BBB. EXPLANATION-4 COULD NOT OVERCOME THE LIMITAT ION IMPOSED BY EXPLANATION-L(A) TO SECTION 9(I)(I) AND HENCE,THE IMPUGNED INCOME DO NOT FORM PART OF B USINESS RECEIPTS FOR COMPUTATION OF INCOME U/S 448A8 OF THE ACT. WE HELD SO.' 8.THERE BEING NO MATERIAL DIFFERENCE IN FACTS IN TH E IMPUGNED ASSESSMENT RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH AS REFERRED T O ABOVE,WE HOLD-THAT THE AMOUNT RECEIVED TOWARDS SLI:FVF: MATERIAL AND EQUIPMENT UNDER THE OFF-SHORE SUPPLY CONTRACT EXCLUDE THE AMOUNT OF 423,73F 10,473, FROM THE GROSS RECEIPTS FOR COMPUTING TAX U NDER SECTION 441BBB.GROUNDS NO.1 TO 5, ARE ALLOWED. RESPECTFULLY,FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL F ILED BY THE ASSESSEE STANDS ALLOWED. . PRONOUNCED IN OPEN COURT ON 6 TH ,SEPTEMBER, 2017 . 6 , 2017 SD/- SD/- /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :06.09.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR L BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.