The income tax law does not contain any specific provision for taxing the payment received by a foreign supplier for supply of machinery and/or other equipment to the Indian concerns.
Therefore, for such payments, the normal law prevails. In a situation where no business is carried on in India and sales are effected outside India, and the orders are accepted and the delivery is made outside India, and the price is also received by the non-resident outside India, no tax shall be levied in India. [See CIT vs Energomach Exports, (1998) 232 ITR 448 (Kar.)]
One of the important conditions for avoiding tax on the profits made on the supply is that the goods should be supplied outside India, or in other words, the sale of the goods should be completed outside India.
In this context, the international contracts frequently use the Inco terms as specified by the International Chamber of Commerce like FOB, CFR and CIF.
The term
