Indian Kanoon - Search engine for Indian Law

Income Tax Appellate Tribunal - Mumbai

Atomstroyexport, Russia, Mumbai vs Dcit (It) Rg 1(1)(2), Mumbai on 17 September, 2018

            IN THE INCOME TAX APPELLATE TRIBUNAL,
                  MUMBAI BENCH "L", MUMBAI

     BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND
         SHRI RAJESH KUMAR, ACCOUNTANT MEMBER

                      ITA No.6945/M/2017
                    Assessment Year: 2014-15

                      ITA No.6946/M/2017
                    Assessment Year: 2012-13

       M/s. Atomstroy Export,         Dy. Commissioner of
       Russia                         Income                Tax
       C/o.    Nuclear     Power      (International taxation),
       Corporation     of   India     Range-1(1)(2),
       Limited, 8th Floor,            1st Floor, Scindia House,
                                  Vs.
       South Wing,                    Ballard Estate,
       Vikram Sarabhai Bhavan,        Mumbai - 400038
       Central Avenue,
       Anushakti Nagar,
       Mumbai - 400 094
       PAN: AAFCA3658N
             (Appellant)                    (Respondent)

     Present for:
     Assessee by                 : Shri Nitesh Joshi, A.R.
     Revenue by                  : Shri Samuel Darse, D.R.

     Date of Hearing             : 04.09.2018
     Date of Pronouncement       : 17.09.2018

                             ORDER


Per Rajesh Kumar, Accountant Member:

The above titled two appeals have been preferred by the assessee against the common order dated 22.09.2017 of the Dispute Resolution Panel [hereinafter referred to as the DRP] relevant to assessment years 2012-13 & 2014-15.

2. The various grounds of appeal raised by the assessee are as under:

M/s. Atomstroy Export, Russia "1. The learned DCIT/DRP erred in holding that the amount of Rs.211,03,97,303 received by the appellant company from the Offshore Supply Contracts was taxable in India.

2. The learned DCIT/DRP erred in holding that the amounts received by the appellant company from the Offshore Supply Contracts are covered by the provisions of section 44BBB and consequently liable to tax in India.

3. The learned DCIT/DRP failed to appreciate that the receipts from the Offshore Supply Contracts are not taxable in India.

4. The learned DCIT/ DRP erred in merely relying on DRP's order of the earlier year in applying the ratio of the Hon'ble Madras High Court in the case of Ansaldo Energia Spa vs. Income Tax Officer (310 ITR 237) and Authority for Advance Rulings in the case of Alstom Transport SA (349 ITR 292) and ONGC (376 ITR 306) in appellant company's case without appreciating that the appellant company's case is distinguishable on facts.

Relief Claimed Your appellant prays that:

1. The amount received under the offshore supply contracts is not taxable in India.

The appellant craves leave to amend or alter any of the above grounds or add a new ground, if and when necessary."

3. We would like to first deal with the ground raised on merit by the assessee which is against the order of DRP holding that the amount of Rs.66,14,38,884/- received by the assessee from offshore contract was taxable in India.

4. The facts in brief are that the assessee is a joint stock company under the Ministry of Atomic Energy, Russian Federation, incorporated under the provisions of Russian legislation having its registered office at Moscow, Russia. The Nuclear Power Corporation of India Ltd (NPCIL) is setting up two nuclear power plants in accordance with agreement for cooperation for construction of nuclear power station between Republic of India and Russian Federation. The assessee Atomstroyexport(ASE) is authorized Govt. body of Russian 3 ITA No.6945/M/2017 & ITA No.6946/M/2017 M/s. Atomstroy Export, Russia Federation responsible for implementation of nuclear power plants with Nuclear Power Corporation of India Ltd the Indian Counterpart. During the year the assessee filed a return of income on 28.09.2012 declaring an income of Rs.29,58,59,408/-. The assessment was framed vide order dated 10.10.2017 passed under section 143(3) read with section 147 r.w.s 144C(13) of the Act. Pertinent to state that the case of the assessee was reopened on the ground that income of the assessee has escaped assessment. The only issue challenged on merit is against the taxing of Rs.66,14,38,884/- received by the assessee from offshore supply contracts for supplying offshore equipments and accordingly the AO held that Rs.66,14,38,884/- from offshore supply has to be considered for computing income under section 44BBB of the Act which is upheld by the DRP.

5. At the outset, the Ld. Counsel of the assessee submitted before the Bench that issue is squarely covered in favour of the assessee by the order of the co-ordinate bench of the Tribunal in assessee's own case for earlier years from A.Y. 2007-08 to A.Y. 2013-14 and therefore following the same the appeal of the assessee should be allowed.

6. The Ld. D.R., on the other hand, submitted that the issue is not covered as the DRP has passed the order after considering the decisions of the ITAT in all earlier years and relied on the order of DRP by vehemently opposing the arguments of the Ld. A.R.

7. After hearing both the parties and perusing the material on record including the decisions of the co-ordinate benches of the 4 ITA No.6945/M/2017 & ITA No.6946/M/2017 M/s. Atomstroy Export, Russia Tribunal in assessee's own case in the earlier years from A.Y. 2007-08 to A.Y. 2013-14, we observe that identical issue was decided by the co-ordinate benches of the Tribunal in favour of the assessee by holding that amount received for supply of material and equipment under offshore supply contract is to be excluded from gross receipt for computing income under section 44BBB of the Act. The operative part of the decision in ITA No.619/M/2017 A.Y. 2013-14 order dated 06.09.2017 is reproduced as under:

"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) and AY.2009-10 (ITA/6581/ Mum/2012/,dtd.22.03.2017). We are reproducing the relevant portion of the order of the Tribunal for the AY.2009- 10(supra)and it reads as under:

"5.Learned Authorised Representative submitted before 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 categorical finding that the amount received under the off-shore contract are not taxable in India 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 bench 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, the off-shore supply contracts under which the assessee has supplied materials and equipments in the impugned assessment year is/are continuing from the assessment year 2006-07 onwards It is relevant to note, the taxability of the amount received under .the off- shore contract is a contentious issue between the assessee and the Department right from the assessment year 2006-07. In fact in the impugned assessment year, the Assessing Officer following the order of the DRP for assessment year 2006-07 and 2007-08, has brought to tax the amount received under off-shore supply contracts by applying identical nature of dispute raised by the assessee for assessment year 2007-08, 2008-09 and 2011-12, the Tribunal in its order, as referred to above, after analyzing the nature of contract, provisions of the Act, and relevant DTAA as well as the principles of law laid down in judicial precedents, in a detailed order ultimately concluded, since, supply of materials and equipments under the 5 ITA No.6945/M/2017 & ITA No.6946/M/2017 M/s. Atomstroy Export, Russia off-shore supply contracts were carried out and concluded outside Indi, the receipts from off- shore supply contracts cannot be deemed to accrue or arise in India. The operative portion from the order of the Tribunal is extracted herein below -

"15 Therefore after analyzing the various case laws, statutory provisfonc, DTA/ provisions and contractual terms and respectfully following judgment 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-"outside India and hence no income therefrom deemed to accrue or arise in India as per section 9(1) and DTAA provisions and accordingly, not chargeable to tax. The receipts thereof do not form part of receipts for the purpose of computational provisions of section 44BBB. Explanation-4 could not overcome the limitation imposed by Explanation-l(a) to section 9(i)(i) and hence,the impugned income do not form part of business receipts for computation of income u/s 448A8 of the Act. We held so."

8.There being no material difference in facts in the impugned assessment respectfully following the decision of the co-ordinate bench as referred to 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 under section 441BBB.Grounds no.1 to 5, are allowed."

Respectfully, following the above order of the Tribunal, we decide the effective ground of appeal in favour of the assessee."

8. We, therefore, respectfully following the order of co- ordinate bench of the Tribunal, decide the issue in favour of the assessee by holding that the amount received by the assessee from supply of material and equipment under offshore supply contracts would not form part of the business receipts for the purpose of section 44BBB of the Act.

9. Since we have decided the issues on merit in favour of the assessee as stated hereinabove, therefore the legal issue raised by the assessee challenging the jurisdiction of the AO under section 147 is rendered academic and is not being adjudicated.

M/s. Atomstroy Export, Russia ITA No.6945/M/2017 (A.Y. 2014-15)

10. The issue involved in this appeal is same as has been decided by us on merit in ITA No.6946/M/2017. Therefore, our findings on the said issue would, mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the assessee is allowed.

11. In the result, both the appeals of the assessee are allowed.

Order pronounced in the open court on 17.09.2018.

          Sd/-                                        Sd/-
   (Joginder Singh)                             (Rajesh Kumar)
  JUDICIAL MEMBER                            ACCOUNTANT MEMBER

Mumbai, Dated: 17.09.2018.
* Kishore, Sr. P.S.


Copy to: The Appellant
         The Respondent
         The CIT, Concerned, Mumbai
         The CIT (A) Concerned, Mumbai
         The DR Concerned Bench
//True Copy//                                 [




                                              By Order



                                Dy/Asstt. Registrar, ITAT, Mumbai.