Jiangdong Fittings Equipments Co. Ltd. v. ACIT

Case Laws Analysis
REFERRED Jt. CIT v. Siemens Aktiengesellschaft 2010 TaxPub(DT) 0563 (Mum-Trib)
REFERRED Seth Pushalal Mansinghka (P) Ltd. v. CIT 1967 TaxPub(DT) 0367 (SC)

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The Tax Publishers2024 TaxPub(DT) 1196 (Del-Trib) IN THE ITAT, DELHI BENCH SAKTIJIT DEY, V.P. & PRADIP KUMAR KEDIA, A.M. Jiangdong Fittings Equipments Co. Ltd. v. ACIT ITA No. 349/DEL/2023 5 March, 2024 Assessee by: Kamal Sawhney, Arun Bhadoriya & Puru Medheria, Advs. Revenue by: Vizay B. Vasanta, CIT-D.R. ORDER *Pradip Kumar Kedia, A.M.* The captioned appeal has been filed by the assessee against the assessment order passed by the assessing officer under section 143(3) read with section 144C(13) dated 22-12-2022 for assessment year 2020-21 in question. 2. As per the grounds of appeal, the taxability of receipts from offshore supply of equipments by the assessee is essentially in question. 3. Briefly stated, the assessee company Jiangdong Fittings is a company incorporated under the laws of China and is a tax resident of China. The assessee company is engaged in the business of manufacture and supply of composite long rod insulator and other hardware fittings for Optical Fibre Ground Wire (OPGW) used in the transmission lines. During the year under consideration, the assessee is stated to have received an amount of Rs. 14,28,30,433 on account of offshore supply made to Indian PSUs which the assessee had claimed to be not chargeable to tax under Indian Taxation and accordingly, claimed the refund of corresponding tax credit. 4. The assessing officer however followed same modus operandi as followed in assessment year 2018-19 and 2019-20 and bifurcated the said consideration of Rs. 14.28 crore into business income and Fee for Technical Service (FTS) in the ratio of 60%:40% taxable in India to arrive at an addition of Rs. 6,79,10,056. As per the methodology, 60% of the receipt of Rs. 14.48 crore was allocated for equipment supply and 40% for FTS. Further, the calculation on the attribution of profit was done by considering 25% of the equipment supply and 100% of FTS. The returned income was accordingly, enhanced by Rs. 6,18,89,441 on account of income chargeable on account of FTS and Rs. 58,02,135 towards taxable component of business receipts. The total income was accordingly assessed at Rs. 6,79,10,056 as against the return income of Rs. 2,18,480. 5. Aggrieved, by the aforesaid action of the assessing officer as per the final assessment order, the assessee is in appeal before the Tribunal. 6. When the matter was called for hearing, the learned counsel for the assessee submitted at the outset, that addition of Rs. 6,79,10,056 in aggregate as taxable income in conformity with DRP directions dated 18-11-2022 is based on identical facts in assessees own case for assessment year 2018-19 and 2019-20. The DRP has only followed its previous directions for assessment year 2018-19 and 2019-20 while rejecting the assessees contentions that consideration in question has been received from supply of goods outside India and also in rejecting assessee s contention that said consideration cannot be split into business income for sale of goods and FTS in 60%:40% ratio. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2024 TaxPub(DT) 1196 (Del-Trib)

IN THE ITAT, DELHI BENCH

SAKTIJIT DEY, V.P. & PRADIP KUMAR KEDIA, A.M.

Jiangdong Fittings Equipments Co. Ltd. v. ACIT

ITA No. 349/DEL/2023

5 March, 2024

Assessee by: Kamal Sawhney, Arun Bhadoriya & Puru Medheria, Advs.

Revenue by: Vizay B. Vasanta, CIT-D.R.

ORDER

Pradip Kumar Kedia, A.M.

The captioned appeal has been filed by the assessee against the assessment order passed by the assessing officer under section 143(3) read with section 144C(13) dated 22-12-2022 for assessment year 2020-21 in question.

2. As per the grounds of appeal, the taxability of receipts from offshore supply of equipments by the assessee is essentially in question.

3. Briefly stated, the assessee company Jiangdong Fittings is a company incorporated under the laws of China and is a tax resident of China. The assessee company is engaged in the business of manufacture and supply of composite long rod insulator and other hardware fittings for Optical Fibre Ground Wire (OPGW) used in the transmission lines. During the year under consideration, the assessee is stated to have received an amount of Rs. 14,28,30,433 on account of offshore supply made to Indian PSUs which the assessee had claimed to be not chargeable to tax under Indian Taxation and accordingly, claimed the refund of corresponding tax credit.

4. The assessing officer however followed same modus operandi as followed in assessment year 2018-19 and 2019-20 and bifurcated the said consideration of Rs. 14.28 crore into business income and Fee for Technical Service (FTS) in the ratio of 60%:40% taxable in India to arrive at an addition of Rs. 6,79,10,056. As per the methodology, 60% of the receipt of Rs. 14.48 crore was allocated for equipment supply and 40% for FTS. Further, the calculation on the attribution of profit was done by considering 25% of the equipment supply and 100% of FTS. The returned income was accordingly, enhanced by Rs. 6,18,89,441 on account of income chargeable on account of FTS and Rs. 58,02,135 towards taxable component of business receipts. The total income was accordingly assessed at Rs. 6,79,10,056 as against the return income of Rs. 2,18,480.

5. Aggrieved, by the aforesaid action of the assessing officer as per the final assessment order, the assessee is in appeal before the Tribunal.

6. When the matter was called for hearing, the learned counsel for the assessee submitted at the outset, that addition of Rs. 6,79,10,056 in aggregate as taxable income in conformity with DRP directions dated 18-11-2022 is based on identical facts in assessees own case for assessment year 2018-19 and 2019-20. The DRP has only followed its previous directions for assessment year 2018-19 and 2019-20 while rejecting the assessees contentions that consideration in question has been received from supply of goods outside India and also in rejecting assessee s contention that said consideration cannot be split into business income for sale of goods and FTS in 60%:40% ratio.