INCOME TAX ACT, 1961

Section 9(1)(i)

Income deemed to accrue or arise in India - Under section 9(1)(i) - Attribution of profit to PE - Indian branch office was not involved in offshore supply of equipment

Assessee based at Singapore was a part of UK based business conglomerate-Smithis Group and was engaged in the business of manufacturing and trading of security equipment manufacturing and trading of security equipment. AO attributed profit on off shore sale of equipment to assessee's PE in India. Assessee vehemently stated that assessee's branch office had no role to play in the execution of contracts pertaining. to offshore supply of equipment. AO alleged that assessee assigned the aspect related to supply of equipment to itself and the other component of work, i.e., installation, testing, commissioning, AMC was assigned to the subsidiary of assessee in India. Suo moto bifurcation by assessee could not change the colour of transaction and attribution of profit by AO could not be faulted with.Held: Turnkey project was split into two parts-as per break-up and payments were also made by AAI and CIAL, i.e., the Indian entities separately for offshore supply and installation and commissioning. Therefore, allegation of AO that assessee suo moto bifurcated the contract did not hold any water as other parteis also concurred at the beginning itself and, therefore, made separate payments. Hence, there was no justification on AO's part to attribute profit on off-shore sale of equipment.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2019-20

INCOME TAX ACT, 1961

Section 56

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