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The Tax Publishers Offshore supply and Onshore hiring of mining equipment as lessor - Taxability of PE - Attribution of Income - Indo-Singapore DTAA *Facts:* Assessee for many years was supplying offshore sale/delivery of equipment outside India on FOB terms and was also leasing mining equipment in India to ONGC. Their plea was there was no PE for the offshore delivery of equipments and conceded that the onshore equipment leasing was taxable under Section 44BB as no PE arose out of only leasing the equipments. Revenue's plea was there was a PE for the assessee in India and to avoid protracted litigation, the assessee also conceded in a 1% attribution of Income on offshore sale/delivery of equipment in India for past years. During the AY 2018-19 revenue did not concede on taxing at the 1% logic and AO taxed/attributed 10% as income on the offshore leg. Assessee's plea was there was no PE for them in India, nonetheless out of consistency still revenue ought to have if at all taxed should have been only 1% of the offshore sale/delivery. DRP went against the assessee. On higher appeal - Held in favour of the assessee that out of consistency as per Article 7(6) of Indo-Singapore DTAA the attribution was capped at 1% on the offshore delivery of equipments. Indo-Singapore DTAA - "Article 7 (6) For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary". In the earlier asst. year the assessee's case was reopened by PCIT under Section 263 on the same point of 1% attribution and the ITAT had struck down the case in favour of the assessee. *Ed. Note:* The business/tax strategy of the assessee is also worth noting given that they wanted to avoid protracted litigation on attribution of income though they would have won their stand on the offshore delivery of equipments not being subject to tax in India normally. *Case:* Vetco Gray Pte. Ltd. v. DCIT 2023 TaxPub(DT) 1843 (Delhi D Bench)

The Tax Publishers

Offshore supply and Onshore hiring of mining equipment as lessor - Taxability of PE - Attribution of Income - Indo-Singapore DTAA

Facts:

Assessee for many years was supplying offshore sale/delivery of equipment outside India on FOB terms and was also leasing mining equipment in India to ONGC. Their plea was there was no PE for the offshore delivery of equipments and conceded that the onshore equipment leasing was taxable under Section 44BB as no PE arose out of only leasing the equipments. Revenue's plea was there was a PE for the assessee in India and to avoid protracted litigation, the assessee also conceded in a 1% attribution of Income on offshore sale/delivery of equipment in India for past years. During the AY 2018-19 revenue did not concede on taxing at the 1% logic and AO taxed/attributed 10% as income on the offshore leg. Assessee's plea was there was no PE for them in India, nonetheless out of consistency still revenue ought to have if at all taxed should have been only 1% of the offshore sale/delivery. DRP went against the assessee. On higher appeal -

Held in favour of the assessee that out of consistency as per Article 7(6) of Indo-Singapore DTAA the attribution was capped at 1% on the offshore delivery of equipments.

Indo-Singapore DTAA -

"Article 7 (6) For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary".

In the earlier asst. year the assessee's case was reopened by PCIT under Section 263 on the same point of 1% attribution and the ITAT had struck down the case in favour of the assessee.

Ed. Note: The business/tax strategy of the assessee is also worth noting given that they wanted to avoid protracted litigation on attribution of income though they would have won their stand on the offshore delivery of equipments not being subject to tax in India normally.

Case: Vetco Gray Pte. Ltd. v. DCIT 2023 TaxPub(DT) 1843 (Delhi D Bench)