Section 263 unsustainable

Delhi ITAT holds that Assessee’s offshore supplies revenue are not taxable in India under the provisions of Section 44BBB; In the extant case, Assessee, a Chinese company engaged in R&D, manufacturing of fibre-optic cable, wiring and communication network equipment etc., entered into an offshore supplies contract with twin Indian PSUs namely Power Grid Corporation Ltd. and Jharkhand Urja Sancharan Nigam Ltd.; Consequently, CIT(IT) issued revision directions under Section 263, holding the Assessing Officer’s assessment order as erroneous being prejudicial to the interest of the Revenue, and held the “offshore” revenue from sale of equipment from China as taxable under Section 44BBB; With regard to the applicability of Section 44BBB, Tribunal clarifies that the Assessee and its PSU clients separately arrived at offshore supplies and “onshore” services/supervision agreement involving varying sums wherein contract award duly provided that all offshore works contract was to be performed outside India including design, engineering, testing or commissioning etc.; Pursuant to consideration of other facets of the agreement, ITAT observes that in view of Supreme Court decisions in CIT, Meerut v. Hyundai Heavy Industries Co. Ltd. (2007) 291 ITR 482 (SC) and Ishikawajima Harima Heavy Industries Ltd. v. Director of Income-tax (2007) 288 ITR 408 (SC) the CIT(IT)’s impugned revision directions under Section 263 clubbing both Assessee’s offshore and onshore revenues and then holding the same to be taxable in India was clearly unsustainable; Articulates that in light of Assessee’s cogent supportive material involving all contract documents as well as the aforementioned judicial precedents the CIT(IT) erred in law and facts in treating the Assessee’s offshore supplies revenue as taxable in India.

[In favour of assessee]
(Related Assessment year : 2017-18) – [Shenhzhen SDG Information Co. Ltd. v. CIT (International Taxation) [TS-732-ITAT-2025(DEL)] –
Date of Judgement : 05.06.2025 (ITAT Delhi)]