This case, identified as ITA No. 1799/DEL/2022, involves Vetco Gray Pte. Ltd., a corporate entity incorporated under the laws of Singapore and tax resident of Singapore, as the appellant, against the Deputy Commissioner of Income Tax, Circle-3(1)(1), International Taxation, New Delhi, as the respondent. The issue revolves around the tax treatment of offshore supply of equipment and associated services for the assessment year 2018-19, which culminated in a tribunal decision on March 15, 2023.
The appeal challenges the final assessment order dated July 18, 2022, made under sections 143(3) and 144C(13) of the Income-tax Act, 1961, following directions from the Dispute Resolution Panel (DRP). The primary contention involved the taxation of income derived from offshore supply of equipment and services provided to the Oil and Natural Gas Commission (ONGC) in India.
The tribunal considered the consistent historical treatment of similar transactions and noted that significant departures in the assessment approach were made without substantial justification. It was emphasized that under the India-Singapore Double Taxation Avoidance Agreement (DTAA), profits should only be taxed in India to the extent that they are attributable to activities performed through a Permanent Establishment (PE) in India.
The Tribunal ultimately set aside the assessment order, directing the income from offshore supplies to be taxed at only 1% of the receipts, reiterating the approach from previous years. This decision underscored the importance of consistency and adherence to bilateral treaty obligations.
The appeal by Vetco Gray Pte. Ltd. was partly allowed, emphasizing the principle of consistent tax treatment and the limits of taxation under international agreements. This case sets a significant precedent for the taxation of international transactions involving offshore supplies connected to services rendered within India.
Offshore Supply Tax Dispute: Vetco Gray Pte. Ltd. vs DCIT, Case ITA 1799/DEL/2022
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