No Income Tax on Off-Shore Sale of Equipments & Spares by Non-Resident Entities to Indian Purchasers: Calcutta HC [Read Judgment]

Benami Transactions - Balance Sheet - Calcutta High Court - Taxscan

The Calcutta High Court, while upholding a decision of the Settlement Commission, held that off-shore sale of  equipments and spares by a non-resident entity to Indian purchasers are not subject to Income Tax under the provisions of the Income Tax Act, 1961.

A non-resident sold the plant to the Indian purchaser aboard and that, the sale being concluded abroad on Cost, Insurance and Freight (CIF) basis Income Tax cannot be charged on such proceeds.

On behalf of the department, it was contended that the contract does not conclusively establish that, the title to the plant stood transferred abroad. On the contrary, since the plants are to be installed in India, the sale stands concluded on Indian territory and, therefore, the income derived therefrom is amenable to Income Tax under the Income Tax Act, 1961.

However, the Settlement Commission accepted the view of the Company. Aggrieved by the order, the department approached the High Court contending that the sale of the plant did take place in India in view of the various terms and conditions of the contract.

Justice Debangsu Basak upheld the order of the settlement commission that if the intentions of the parties, as garnered from the terms and conditions of the contract in question, justifies an interference that, the sale of the goods took place offshore then the Non-India Entities to the contract are not amenable to taxation in India. So far as the supervisory contracts are concerned, the Settlement Commission is of the view that, the same is taxable and has determined the tax liability.

“The private respondents have accepted the same. Provisions in the contract allowing deferred payment to be made in India, by itself may not allow an inference that, the title to the goods stand transferred only upon such payment being made.”

Read the full text of the Judgment below.

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