Sec. 9 of Income Tax Act, 1961—Income— Income deemed to accrue or arise in India - Income not taxable in India as transaction of sale is on principal to principal basis since the transaction of supply of components by the assessee are on its own account.

Facts: Assessee , [SMCS for short], is a company incorporated under the laws of Italy and was engaged in the business of manufacture and supply of microwave transmission equipment. During the years under consideration, SMCS supplied microwave transmission equipment (including both hardware and software components) to its customers in India, being independent telecom operators viz., BPL Mobile Communications Ltd., Usha Martin Telecom Ltd., Tata Communications Ltd., Modicom Network Pvt. Ltd. and Aircel Digilink Pvt. Ltd. The quarrel is in respect of taxability of offshore supplies made by SMCS to the aforementioned telecom operators in India. Revenue has taken the consistent position that some portion of the profit relating to these offshore supplies should be brought to tax in India on the basis that activities relating to installation, commissioning and maintenance would require the presence of SMCS in India and hence some portion of the profit would trigger taxability in India.

Held, that we have no hesitation to hold that no business connection can be said to have been established, and therefore, no further income can be attributed to India in view of Circular no. 23 dated 23.07.1969 issued by the Central Board of Direct Taxes, wherein it has been stated that no liability will arise to a non-resident where transaction of sale is on principal to principal basis since the transaction of supply of components by the assessee are on its own account, unaffected by the services to be rendered by SPCNL (an Indian company, under direct and independent contracts with such telecom operators whom equipments were supplied by assessee), would make any exposure on SMCS . This itself would take the transaction of supply of components outside the purview of section 9(1)(i). - SIEMENS MOBILE COMMUNICATIONS SPA V/s DY. CIT - [2020] 182 ITD 479 (ITAT-DELHI)