The Mumbai Bench Income Tax Appellate Tribunal ( ITAT ) has while deleting the addition made by the assessing officer and held that offshore supply of escalators and elevators are not taxable in India.
Assessee Schindler China Elevator Company Ltd. is a non-resident company incorporated in China and is engaged in the business of supply of elevators and escalators, which includes design and manufacturing. The assesser’s return of income was selected for scrutiny.
Thereafter assessee said that receipts received from Delhi Metro Rail Corporation Ltd (DMRCL) and Maharashtra Metro Rail Corporation Ltd (MMRCL) is not taxable in India and he also claimed a refund of taxes deducted at source.
Assessing Officer did not agree with the submissions of the assessee and after considering the agreements between DMRCL and MMRCL income of the assessee from the offshore supply of elevators and escalators is taxable in India in terms of section 9(1)(i) of the Income Tax Act 1961 . Thereafter the assessing officer passes the assessment order with an additional amount.
Against the assessment order assesee filed an objection before the DRP. DRP rejected the objections filed by the assessee. Aggrieved, the assessee appeal before ITAT.
Yogesh Thar and Sakshi Dande counsel for the assessee submits that payments to the two parties were made separately by DMRC and BMRCL based on their respective invoices also assessee was paid in USD, while Schindler India Private Limited (SIPL) was paid in Indian currency and the Indian entity’s work starts after the escalators and elevators reach India.
Amit Kumar Soni counsel for the revenue submits that, Memorandum of Understanding (MOU) between the assessee and
Indian associated enterprise, SIPL is a single composite contract, therefore, the income earned by the assessee from the supply of elevators and escalators are taxable in India.
After considering the contentions of the both parties the division bench of the ITAT comprising G.S. Pannu, (President) and Sandeep Singh Karhail, (Judicial Member) allowed the appeal filed by the assessee and observed that,
“All parts of the transactions in question, that is the transfer of property in goods as well as the payment, were carried out outside the Indian soil, the transaction cannot be taxed in India.”
Further ,in the present case, the assessee did not carry out any operations in India in respect of its scope of work, hence the income earned by the assessee from the offshore supply of escalators and elevators to DMRC and BMRCL is not taxable in India.
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