Profits from offshore, onshore services in India - KPMG Global
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India: Profits from offshore, onshore services attributable to permanent establishment

Profits from offshore, onshore services in India

The Delhi Bench of the Income-tax Appellate Tribunal held that profits relating to services rendered in and outside India by the taxpayer, in respect of Indian projects were taxable in India, as being attributable to the supervisory permanent establishment (PE) because the taxpayer and the PE were effectively connected with each other.


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The case is: Shanghai Electric Group Co. Ltd.


The taxpayer—a Chinese company engaged in the business of supply of boiler, turbine, and generator equipment to various companies for setting up of power plants in India—executed contracts with various parties for provisions of supervisory services and carried out all of the drawings, design and engineering for the construction and commissioning of equipment. 

During the year under consideration, the taxpayer filed its return of income for onshore supervisory services rendered in India. No portion of income arising from offshore supplies were offered to tax because the sale of the equipment was concluded outside of India. 

The taxpayer claimed that income from the offshore supplies was not taxable in India. The Assessing Officer, however, determined that the supervisory PE of the taxpayer in India was directly involved in the supervision and supply of equipment as was needed to set up a fully functional power plant. 

The tribunal held that the activities rendered by the taxpayer were inextricably linked with each other, and all the responsibility from supply to successful commissioning of projects rested on the taxpayer. 


Read an August 2017 report [PDF 367 KB] prepared by the KPMG member firm in India

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