Profits from offshore, onshore services in India | KPMG | GLOBAL

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.

1000

Related content

The case is: Shanghai Electric Group Co. Ltd.

Summary

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

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit