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Tax Publishers Taxability of Designs and drawings as part of offshore sale of machinery/equipment - Indo Swiss DTAA - Taxability of supervision/technical consultancy in India alleging non-existence of a PE - Indo Swiss DTAA *Facts:* Assessee a Swiss company supplied machinery/equipment from offshore to JSW. As part of the sale of the equipment there were designs and drawings which were also sold for which consideration was received separately. The assessee also supervised the erection/commissioning of the said equipment in India by sending his technical team. AO was of the view that the sale of designs and drawings and supervision services was taxable as royalty/fee for technical services under the Indo-Swiss DTAA. Assessee's contention was that the designs and drawings were inextricably connected to the sale of the equipment as one piece and thus was not taxable in India. The supervisory services were also not taxable as they did not have a PE with more than 182 days presence in India for the erection/commissioning activity. On appeal - Held in favour of the assessee that the designs/drawings were not taxable in India as they were inextricably connected to the sale of plant/machinery/equipment. Held against the assessee that the supervisory charges were taxable no matter the existence or non-existence of PE as passive income. *Applied:* 1. Linde Engineering Division v. DIT, (2014) 365 ITR 1 (Delhi-HC) : 2014 TaxPub(DT) 2223 (Del-HC) 2. CIT v. Neyveli Lignite Corporation Ltd., (2000) 243 ITR 459 (Madras-HC) : 2000 TaxPub(DT) 0939 (Mad-HC) 3. CIT v. Mitsui Engineering and Ship Building (2003) 259 ITR 248 (Del-HC) : 2003 TaxPub(DT 0144 (Del-HC) 4. CIT v. Klayman P orcelains Ltd. (1998) 229 ITR 735 (AP-HC) : 1998 TaxPub(DT) 0639 (AP-HC) 5. DIT International Tax v. Nissho IWAI Corporation (ITA No.612 of 2013) 6. Quotech GmbHH v. DCIT, (2015) 58 taxmann.com 232 (Kol-Trib) *Ed. Note:* It is not known that for customs valuation of import duty the value of the designs and drawings were also included/considered. *Case:* SMS Concast AG v. DDIT 2023 TaxPub(DT) 3814 (Del-Trib)

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Taxability of Designs and drawings as part of offshore sale of machinery/equipment - Indo Swiss DTAA - Taxability of supervision/technical consultancy in India alleging non-existence of a PE - Indo Swiss DTAA

Facts:

Assessee a Swiss company supplied machinery/equipment from offshore to JSW. As part of the sale of the equipment there were designs and drawings which were also sold for which consideration was received separately. The assessee also supervised the erection/commissioning of the said equipment in India by sending his technical team. AO was of the view that the sale of designs and drawings and supervision services was taxable as royalty/fee for technical services under the Indo-Swiss DTAA. Assessee's contention was that the designs and drawings were inextricably connected to the sale of the equipment as one piece and thus was not taxable in India. The supervisory services were also not taxable as they did not have a PE with more than 182 days presence in India for the erection/commissioning activity. On appeal -

Held in favour of the assessee that the designs/drawings were not taxable in India as they were inextricably connected to the sale of plant/machinery/equipment.

Held against the assessee that the supervisory charges were taxable no matter the existence or non-existence of PE as passive income.

Applied:

1. Linde Engineering Division v. DIT, (2014) 365 ITR 1 (Delhi-HC) : 2014 TaxPub(DT) 2223 (Del-HC)

2. CIT v. Neyveli Lignite Corporation Ltd., (2000) 243 ITR 459 (Madras-HC) : 2000 TaxPub(DT) 0939 (Mad-HC)

3. CIT v. Mitsui Engineering and Ship Building (2003) 259 ITR 248 (Del-HC) : 2003 TaxPub(DT 0144 (Del-HC)

4. CIT v. Klayman P orcelains Ltd. (1998) 229 ITR 735 (AP-HC) : 1998 TaxPub(DT) 0639 (AP-HC)

5. DIT International Tax v. Nissho IWAI Corporation (ITA No.612 of 2013)

6. Quotech GmbHH v. DCIT, (2015) 58 taxmann.com 232 (Kol-Trib)

Ed. Note: It is not known that for customs valuation of import duty the value of the designs and drawings were also included/considered.

Case: SMS Concast AG v. DDIT 2023 TaxPub(DT) 3814 (Del-Trib)