Offshore delivery of goods on CIF in a composite contract done as a consortium - Income attribution in India

Facts:

Assessee a Chinese Company had entered into a composite contract with its Indian counterpart also as a consortium partner with Delhi and Maharashtra Metro Rail Corporation separately. As part of the MOU covenants assessee was supposed to deliver goods for the Metro Rail project on CIF basis from overseas, while its Indian counterpart would be subject to subsequent installation, assembly, testing etc. Consideration was separately mentioned for onshore and offshore leg in USD and in INR separately. AO gave a reading that the Indian arm of the assessee and the assessee created an AOP and thus in a composite contract even the offshore leg has to be taxed especially if the delivery of goods were on CIF basis and held the offshore leg taxable in India as an AOP. DRP upheld the same. On appeal -

Held in favour of the assessee that the offshore part was consideration which arose/accrued outside India. The consortium was entered with clear demarcation of roles/responsibilities and consideration. There can be no telescoping of income via an AOP reading in the same. There can be no tax which can be imposed for the offshore leg in the hands of the assessee. The delivery of goods on CIF basis has no consequence to the taxability as the term CIF is done only to cover the insurance and freight leg on the contract while the risk on the goods still pass only at the offshore destination for all contract conclusion purposes.

Applied:

JCIT v. Siemens Aktiengesellschaft, (2009) 34 SOT 16 (Mumbai) : 2010 TaxPub(DT) 0563 (Mum-Trib) and Ishikawajma-Harima Heavy Industries Ltd. v. DIT, (2007) 288 ITR 408 (SC) : 2007 TaxPub(DT) 0876 (SC)

Case: Schindler China Elevator Co. Ltd. v. Asstt. CIT 2023 TaxPub(DT) 1501 (Mum-Trib)