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Delhi High Court Upholds the Non-taxability of Offshore Supplies

India

G Cable Ltd ("Taxpayer"), a company incorporated in Korea was awarded two contracts (on 6 February 2001) by Power Grid Corporation of India Limited (PGCIL). One contract was for rendering onshore services and the other for offshore supply and services. The Taxpayer established a Project Office (PO) in India for executing the onshore scope of work. The income generated from the onshore contract was offered to tax whereas the income earned from offshore contract was claimed to be non-taxable in India as the property was transferred outside India. The income generated from the onshore contract was offered to tax whereas the income earned from offshore contract was claimed to be non-taxable in India as the property was transferred outside India. Taxand India highlights the impact of the High Court's judgement the effect this will have on future offshore work with an Indian based company

Taxand's Take


This ruling re-affirms the findings recorded in the judgment of the Supreme Court in respect of a previous case concerning Ishikawajima - Harima Heavy Industries, which has become the bed rock for taxation of EPC contracts. The judgment emphasizes that courts can and will meticulously review the legal documentation in discovery of the tax outcome, and will map the facts before applying the concluding outcome from judicial precedents. Also, the courts have and continue to rely upon the legal principles that have been laid down in allied relevant laws such as The Sale of Goods Act in interpretation of aspects such as transfer of property and situs of sale of goods.

Read the full report from Taxand India here

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Bobby Parikh
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E. bobby.parikh@bmradvisors.com

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