Recently, in M/s Iljin Electric Co. v. DCIT, the Mumbai Tribunal held that the amount received from off–shore supplies of goods / materials is not taxable at the hands of the assessee under the provisions of the Income Tax Act.
The assessee is a South Korean Company, for the year under consideration, the assessee entered into contracts with Mumbai Railway Vikas Corporation (MRVC), Delhi Metro Rail Corp. (DMRC) as well as Transmission Corp. of A.P. Ltd. (TCAPL) for installation of electric cables in relation to certain projects. As per the agreement, the assessee was also required to supply materials / equipments from its manufacturing facilities in South Korea and some other places abroad. While completing assessment, the AO observed that the receipt from off–shore supply of material and equipment are subject to tax in India.
The assessee contended that the sales were made abroad outside the territory of India and therefore, the receipts from off–shore supplies are not taxable under Indian Income Tax Act.
Accepting the contentions of the assessee, the bench found that the issue in dispute has been decided in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment year 2011–12 and 2012–13 in ITA no.1023/Mum./2015 and ITA no.5642/Mum./2015.
Relying upon the provisions of the relevant DTAA and judicial precedents, the bench noted that the contract of sale in relation to the off–shore supplies having completed outside the territory of India and title to the goods having passed to the customer outside India, and therefore, the amount received towards off–shore supply is not taxable in India.
Read the full text of the order below.
