M/s Scorpion Courageous Ltd., Mumbai V. DDIT, New Delhi

CO 59/DEL/2013

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3227 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 06-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA SH NAGESHWAR RAO
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Permanent establishment; Non-deduction of tax
• Section: 5(2); 234B; 194C; 28; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SH. I.C. SUDHIR, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 4619 /DEL/ 2012 ASSESSMENT YEAR: 2008 - 09 DDIT, CIRCLE - 2(2), NEW DELHI VS. M/S. SCORPION COURAGEOUS LTD., C/O - M. LAL & ASSOCIATES, L - 107, 2 ND FLOOR, LAJPAT NAGAR - II, GATE NO. 2, 1 ST FLOOR, NEW DELHI. GIR/PAN : AAKCS9967K (APPELLANT) (RESPONDENT) AND C.O. NO. 59/DEL/2013 [IN ITA NO. 4619/DEL/2012] ASSESSMENT YEAR: 2008 - 09 M/S. SCORPION COURAGEOUS LTD., C/O - SRBC & ASSOCIATES, 16 TH FLOOR, THE RUBY, 29, SENAPATI BAPAT MARG, DADAR WEST, MUMBAI. VS. DDIT, CIRCLE - 2(2), NEW DELHI GIR/PAN : AAKCS9967K (APPELLANT) (RESPONDENT) DEPARTMENT BY SH. ANUJ ARORA, CIT(DR) ASSESSEE BY SH. NAGESHWAR RAO, ADV. DATE OF HEARING 06.04.2016 DATE OF PRONOUNCEMENT 25.04.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL OF THE R EVENUE AND CROSS O BJECTION OF THE ASSESSEE ARE DIRECTED AGAINST ORDER DATED 25/06/2012 OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) - XXIX, NEW DELHI , IN RESPECT OF THE ASSESSMENT YEAR 2008 - 09. THE 2 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 GROUND S OF APPEAL AS MODIFIED BY THE R EVENUE VIDE LETTER DATED 31 ST JULY, 2013 , ARE AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HO LDING THAT THE PROFESSIONAL CHARGES RECEIVED BY THE ASSESSEE WERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SEC. 9(1 )(VII) OF THE ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THATTHE INCOME OF THE ASSESSEE WAS NOT TAXABLE UNDER THE PROVISIONS OF SEC 44DA R.W.S. 115 OF THE ACT, 1961, EVEN THOUGH THE PROVISIONS OF SEC 44DA R.W.S. 115A OF THE ACT, 1961, EVEN THOUGH THE NATURE OF SERVICES RENDERED BY THE ASSESSEE WERE TECHNICAL IN NATURE AND WERE NOT FOR A PROJECT UNDERTAKEN BY THE ASSESSEE, AS REQUIRED BY EXPLANATION 2 TO SECTION 9(1 )(VII). 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THATTHE INCOME OF THE ASSESSEE WAS TAXABLE UNDER THE PRESUMPTIVE PROVISIONS OF SEC 44BB AND IGNORING THE FACT THAT TAXABILITY U/S 44BB SHALL NOT APPLY IN RESPECT OF INCOME REFERRED TO IN SECTION 44DA IN VIEW OF THE CLARIFICATORY PROVISO TO SEC. 44BB AND SEC 44DA. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CI T(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PROVISO TO SECTION 44DA BROUGHT ABOUT BY THE FINANCE ACT, 2011 WAS ONLY CLARIFICATORY IN NATURE AND ITS APPLICATION HAS TO BE READ INTO THE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVISION CAME I N TO EFFECT IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING V/SCIT, DELIVERED ON 17.11.2005. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE INTEREST CHARGED U/ S 234B BY REL YING UPON THE DECISION OF THE H ON BLE DELHI HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATION/ MITSUBISHI CORPORATION (2010) ITR 578 (DELHI) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AGAINST WHICH SLP HAS BEEN FILED BEFORE THE HON BLE S UPREME COURT 6. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 2. T HE FACTS IN BRIEF AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED IN BERMUD A AND WAS ENGAGED IN BUSINESS OF PROVIDING DRILLING RIGS ON HIRE AND OTHER DRILLING RELATED SERVICES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ENTERED INTO A CONTRACT D ATED 30/06/2007 WITH M/S CAIRN ENERGY INDIA PRIVATE L IMITED (IN SHORT CAIRN ) FOR PROVIDING DRILLING RIGS AND OTHER RELATED SERVICES. THE ASSESSEE FILED RETURN OF INCOME ON 23 RD OF MARCH 2009, DE CLARING TOTAL INCOME OF RS. 15,58,98, 454/ - . THE INCOME RECEI VED BY THE ASSESSEE FROM SUCH HI RE OF RIGS AS WELL AS CONNECTED SERVICES WAS OFFERED TO TAX UND ER THE PROVISIONS OF SECTION 44 BB OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE WITHIN THE STIPULATED PERIOD. IN THE 3 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 COURSE OF SCRUTINY P ROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED FROM THE CERTIFICATES OF TAX DEDUCTED AT SOURCE ISSUED BY CAIRN THAT THE ASSESSE E RECEIVED INCOME OF USD 4, 75,55, 637.95, WHICH HE ASSESSED AS UNDER: PARTICULARS TAXABLE UNDER SECTION AMOUNT IN USD FOR HIRE OF DRILLING RIGS OFFSHORE COURAGEOUS 44 BB 2,52,02,396.25 TOWARDS TECHNICAL SERVICES RENDERED BY THE ASSESSEE 115A 2,23,53,241.70 4,75,55,637.95 3. FURTHER, ACCORDING TO THE ASSESSEE, THE INCOME RECEIVED FROM CAIRNS INCLUDED MOBILIZATION FEE OF RS. 31,20,76, 989/ - (USD 80,10, 189) WAS TOWARDS MOBILIZATION CHARGES OF THE RIG FROM TEXAS , USA TO THE OFFLOADING POINT , OFFSHORE WEST COAST OF INDIA AND THE MOBILIZATION FEE TO THE EXTENT OF MOBILIZATION ACTIVITIES ATTRIBUTABL E TO THE DISTANCE TRAVELLE D BY THE RIG INSIDE THE INDIAN TERRITORIAL W ATER I.E. RS. 15,60, 385 / - (BEING 0.5% OF RS. 31,20,76, 989 / - ) WAS OFFERED TO TAX IN THE RETURN OF INCOME AND BALANCE FEE WAS NOT TAXABLE. WHEREAS, THE ASSESSING OFFICER CONSIDERED SUCH MOBILIZATION CHARGES/FEE S AS RECEIVABLE TOWARDS TECHNICAL CHARGES AND LIABLE FOR TAX UNDER SECTION 9 (1)(VII) OF THE ACT, AND ACCORDINGLY HE APPLIED THE PROVISIONS OF SECTION 115A OF THE ACT AND TAX ED THE INCOME AT THE RATE OF 10% ON GROSS BASIS. 4. AGGRIE VED, THE ASSESSEE FILED APPEAL BEFORE THE LEAR NED COMMISSIONER OF INCOME - TAX( APPEALS), WHO HELD THAT LOOKING TO THE NATURE OF ACTIVITIES OF THE ASSESSEE AS PER CONTRACT , THE ASSESSEE WAS W ITHIN THE PURVIEW OF SECTION 44 BB OF TH E ACT AND NOT WITHIN SECTION 44 DA/115A(B) OF THE ACT. HE ALSO HELD THA T FOR THE PURPOSE OF SECTION 44 BB GROSS REVENUE/RECEIPT BASIS IS TO BE TAKEN AND MOBILIZATION REVENUE CANNOT BE APPORTIONED BASED ON THE VOYAGE DONE WITHIN AND OUTSIDE THE TERRITORIAL WATER OF INDIA. 5. AGGRIEVED, THE R EVENUE IS IN APPEAL AND THE ASSESSEE FILED CROSS OBJECTIONS TO THE APPEAL , BEFORE THE TRIBUNAL. 4 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 6. AT THE OUTSET OF HEARING , THE LD. COMMISSIONER OF I NCOME T AX (DEPARTMENTAL REPRESENTATIVE) [IN SHORT CIT(DR) ] SUBMITTED THAT GROUND NO. 1 TO 5 OF THE APPEAL WERE COVERED AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL , DELHI B E NCH IN THE CASE OF CGG VERITAS S ERVICES, SA VS. ADDITIONAL DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, DEHRADUN REPORTED IN (2012) 18 TAXMAN.COM 13 (DELHI). THE LEARNED A UTHORIZED REPRESENTATIVE (IN SHORT THE AR ) OF THE ASSESSEE CONCURRED WITH THE ABOVE SUBMISSION OF THE LD. CIT(DR). 6.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN PARA 46 OF ITS OR DER IN THE CASE OF CGG VERIT AS S ERVICES, SA (SUPRA) HELD THAT IN VIEW OF THE FACT THAT W.E.F. ASSESSMENT YEAR 2011 - 12 ONLY THE FEE FOR TECHNICAL SERVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL OR OTHERWISE WILL BE ASS ESSABLE EITHER UNDE R SECTION 44 DA OR SECTION 115A OF THE ACT DEPENDING ON THE FACT WHETHER SUCH RECEIPTS ARE EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE PROFESSION OR NOT, HOWEVER , FOR THE ASSESSMENT YEAR 2004 - 05 TO 2010 - 11 THE CONSIDERATION RECEIVED FOR FEE FOR TECHNICAL S ERVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL WOULD BE ASSESSABLE UNDER SECTION 44BB (1) OF THE ACT FOR THE SIMPLE REAS ON THAT PROVISION TO SECTION 44BB(1) DOES NOT CONTAIN SECTION 44 DA FOR THO SE YEARS. THE R ELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: 46. ON COMBINED READING OF SECTION 44DA(1) AND 115A(1)( B ) IT IS CLEAR THAT THE PROVISIONS OF SECTION 44DA(1) ARE APPLICABLE IN THE CASE OF A NON - RESIDENT ASSESSEE WHO CARRIES ON BUSINESS IN INDIA THROUGH A PERMANENT ESTABLISHMENT, OR PERFORMS PROFESSIONAL SERVICES FROM A FIXED PLACE OF PROFESSION, AND FEES FOR TECHNICAL SERVICES PAID UNDER THE CONTRACT IS EFFECTIVELY CONNECTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXED PLACE OF PROFESSION IN INDIA. IN SECTION 115A(1)( B ) THE FINANCE ACT, 2003 WITH EFFECT FROM 1.4.2004 SUBSTITUTED WORDS 'A NON - RESIDENT (NOT BEING A COMPANY) OR A FOREIGN COMPANY INCLUDES ANY INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICAL SERVICES OTHER THAN INCOME REFERRED TO IN SUB - SECTION (1) OF SECTION 44DA' FOR WORDS 'A FOREIGN COMPANY, INCLUDES ANY INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICA L SERVICES'. THEREFORE, W.E.F. 1.4.2004 FEE FOR TECHNICAL SERVICES WHICH IS NOT CONNECTED WITH PERMANENT ESTABLISHMENT OF BUSINESS OR FIXED PLACE OF PROFESSION IN INDIA, WILL BE TAXABLE U/S 115A(1)( B ) OF THE ACT. AS OBSERVED EARLIER SECTION 44DA WAS INSERT ED IN PROVISO TO SECTION 44BB (1) BY THE FINANCE ACT, 2010 WITH EFFECT FROM 1.4.2011 AND SIMULTANEOUSLY INSERTED SECOND PROVISO TO SECTION 44DA APPLICABLE FROM ASSESSMENT 5 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 YEAR 2011 - 12 ACCORDING TO WHICH PROVISIONS OF SECTION 44BB (1) WILL NOT BE APPLICABLE IN RESPECT OF INCOME REFERRED TO THIS SECTION. ON COMBINED READING OF PROVISO TO SECTION 44BB (1) AND SECOND PROVISO TO SECTION 44DA IT IS CLEAR THAT THE FEE FOR TECHNICAL SERVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL THOUGH EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE OF PROFESSION WILL FALL NOT UNDER SECTION 44BB(1) AND WILL BE ASSESSABLE UNDER SECTION 44DA OF THE ACT. TO MAKE IT MORE CLEAR THE FEE FOR TECHNICAL SERVICES CAN BE DIVIDED IN FOLLOWING CATEGO RIES: ( I ) FEE FOR TECHNICAL SERVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL HAVING BUSINESS PE OR FIXED PLACE OF PROFESSION - (SECTION 44DA); ( II ) FEE FOR TECHNICAL SERVICES RENDERED IN CONNECTION WITH PROSPE CTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL WITHOUT HAVING BUSINESS PE OR FIXED PLACE OF PROFESSION (SECTION 115A); ( III ) OTHER FEE FOR TECHNICAL SERVICES HAVING BUSINESS PE OR FIXED PLACE OF PROFESSION - (SECTION 44DA); ( IV ) OTHER FEE FOR TECHN ICAL SERVICES WITHOUT BUSINESS PE OR FIXED PLACE OF PROFESSION - (SECTION 115A); THUS IT IS ABUNDANTLY CLEAR THAT WITH EFFECT FROM ASSESSMENT YEAR 2011 - 12 FEE FOR TECHNICAL SERVICES WHETHER RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODU CTION OF MINERAL OIL OR OTHERWISE WILL BE ASSESSABLE EITHER U/S 44DA OR SECTION 115A OF THE ACT DEPENDING ON FACT WHETHER SUCH RECEIPTS ARE EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE OF PROFESSION, OR NOT. HOWEVER, FOR ASSESSMENT YEAR 2004 - 05 TO 2010 - 11 THE CONSIDERATION RECEIVED FOR FEE FOR TECHNICAL SERVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL THOUGH EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE OF PROFESSION WILL FALL OUTSIDE THE SCOPE OF SECTION 44DA A ND WILL BE ASSESSABLE UNDER SECTION 44BB (1) OF THE ACT FOR THE SIMPLE REASON THAT PROVISO TO SECTION 44BB(1) DOES NOT CONTAIN SECTION 44DA FOR THESE YEARS. 6.2 RESPECTFULLY , FOLLOWING THE AB OVE DECISION OF THE COORDINATE B ENCH OF THE TRIBUNAL, WE ARE OF THE OPINION THAT INCOME FROM THE SERVICES RENDERED IN CONNECTION WITH PROVIDING DRILLING RIGS/DRILLING SERVICES TO CAIRN IN INDIA ARE IN THE NATURE OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLYING PLANT AND MA CHINERY ON HIRE WHICH ARE USED IN PROSPECTING FOR EXTRACTION OR PRODUCTION OF MINERAL OIL AND THE PROVISIONS OF SECTION 44BB OF THE ACT WOULD APPLY AND THE INCOME WOULD BE TAXABLE ACCORDINGLY AND NOT AS FEE FOR TECHNICAL S ERVICES EITHER UNDER SECTION 44 DA OR SECTION 115A OF THE ACT. ACC ORDINGLY , WE UPHOLD THE FINDINGS OF THE LEARNED COMMISS IONER OF INCOME - TAX( APPEALS) ON THIS ISSUE. THUS GROUND S NO. 1 TO 5 OF THE APPEAL ARE DISMISSED. 6 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 7 . THE GROUND NO. 6 IS IN RE SPECT OF DELETION BY THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) OF INT EREST CHARGED UNDER SECTION 234B OF THE ACT BY THE AO. 7.1 THE LD. CIT(DR) SUBMITTED THAT THE LEA RNED COMMISSIONER OF INCOME - TAX( APPEALS), HAS FOLLOWED THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF DCIT VS. JACOBS CIVIL INCORPORATED , 330 ITR 578 (DEL), HOWEVER IN SUBSEQUENT JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. ALCATEL LUCENT USA, INC REPORTED IN (2 014) 45 TAXMANN.COM 422 (DELHI) , IT HAS B E E N HELD THAT IF THE ASSESSEE IS HAVING ROLE IN NON - DEDUCTION O F TAX AT SOURCE BY THE DEDUCTOR, THEN INTEREST UNDER SECTION 234B IS CHARGEABLE. HE REFERRED TO PAGE 32 OF THE ASSESSEE S PAPER BOOK AND DRAWN OUR ATTENTION TO THE CLAUSE NO. 7.3.1 OF THE CONTRACT AGREEMENT, WHICH CONTAINED PROVISION FOR LOWE R OR NO WITHHO LDING TAX BY THE C AIRN ON PRODUCTION OF LOWER OR NO WITHHOLDING TAX CERTIFICATE BY THE ASSESSEE. 7.2 ON THE OTHER HAND , LEARNED A UTHORIZED R EPRESENTATIVE OF THE ASSESSEE RELIED ON THE RECENT JUDGMENT OF THE HON BLE HIGH COURT OF DELHI IN THE CASE OF DI RECTOR OF INCOME TAX, INTERNATIONAL TAXATION VS. GE PACKAGED P OWER INC . REPORTED IN (2015) 56 TAXMANN.COM 190 (DELHI), WHEREIN IT IS HELD THAT WHERE THE ASSESSEE WERE NON - RESIDENT COMPANIES AND ENTIRE TAX WAS TO BE DEDUCTED AT SOURCE ON PAYMENTS MADE BY PA YEE TO IT AND THERE WAS NO QUESTION OF PAYMENT OF ADVANCE TAX BY THE ASSESSEE, IT WO ULD NOT BE PERMISSIBLE FOR THE R EVENUE TO CHARGE ANY INTEREST UNDER SECTION 23 4B OF THE ACT FROM THE ASSESSEE. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HON BLE DELHI HIGH COURT IN THE CASE OF GE PACKAGED P OWER INC . (SUPRA) HAS CONSIDERED THE JUDGMENT IN THE CASE OF JACABS CIVIL INCORPORATED/MITSUBISHI CORPORATION (SUPRA) AND THE JUDGMENT IN THE CASE OF ALCATEL LUCENT USA INC (SUPRA) AND HELD THAT IN THE CASE OF ALCATEL LUCENT USA INC. (SUPRA) THE DECISION WAS TURNING UPON ITS FACTS, IT SEEMINGLY WIDE OBSERVATIONS, LIMITED TO THE CIRCUMSTANCES OF THE CASE. THE HON BLE HIGH COURT ALSO CONSID ERED THE 7 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 JUDGMENTS OF THE OTHER COURTS ON THE ISSUE IN DISPUTE AND HELD THAT THE PRIMARY RESPONSIBILITY DEDUCTING TAX FOR THE PERIOD , PRIOR TO THE CHANGE AFTER THE FINANCE ACT , 2012, WAS THAT OF THE PAYER AND THE PAYER WILL BE AN ASSESSEE IN DEFAULT, ON FA ILURE TO DISCHARGE THE OBLIGATION TO DEDUCT TAX, UNDER SECTION 201 OF THE ACT. THE RELEVANT PART OF THE ABOVE JUDGMENT IS REPRODUCED AS UNDER: 15. APPARENTLY, IT IS THIS PART OF THE DECISION THAT THE REVENUE SEEKS TO RELY UPON, IN ARGUING THAT THE VIEW IN ALCATEL LUCENT USA INC ( SUPRA ) DID NOT TURN ON THE VOLTE FACE BY THE ASSESSEE AS TO ITS PE STATUS, BUT INSTEAD ON THE FACT THAT, AT THE TIME OF ASSESSMENT, THE ASSESSEE DENIED ITS TAX LIABILITY ALTOGETHER. THIS COURT, UPON CONSIDERATION, IS OF THE VIEW THA T THE FACT THAT WAS CENTRAL TO THE DECISION OF THIS COURT IN ALCATEL LUCENT USA INC ( SUPRA ) IS THE ASSESSEE'S INITIAL DENIAL OF PE STATUS, AND CONSEQUENTLY OF ITS TAX LIABILITY, THAT WAS AGGRAVATED BY ITS SUBSEQUENT VOLTE FACE BY WAY OF ITS ADMISSION THAT I T WAS A PE LIABLE TO TAX IN INDIA. THIS RESULTED IN THE COURT'S VIEW THAT THE ASSESSEE HAD PLAYED A ROLE IN INFLUENCING THE PAYER'S NON - DEDUCTION OF TAX AT SOURCE, AND WAS THUS REQUIRED TO COMPENSATE FOR SUCH A VOLTE FACE , BY PAYING INTEREST UNDER SECTION 234B. 16. THIS COURT RESPECTFULLY CANNOT APPLY THE VIEW TAKEN IN ALCATEL LUCENT USA INC ( SUPRA ) TO THIS CASE. THIS IS BECAUSE IF THE PAYER DEDUCTS TAX AT SOURCE ONLY WHEN THE ASSESSEE ADMITS TAX LIABILITY, THEN DEDUCTIONS WOULD NOT BE MADE IN CASES WHERE THE ASSESSEE EITHER FALSELY OR UNDER A BONA FIDE MISTAKE DENIES TAX LIABILITY. TAX OBLIGATIONS CANNOT BE FOUNDED ON ASSERTIONS OF INTERESTED PARTIES. IN SUCH CASES, THE PAYER'S OBLIGATION TO DEDUCT TAX WOULD DEPEND ON THE PAYEE'S OPINION OF WHETHER IT IS L IABLE TO TAX, WHICH MAY DIFFER FROM ITS ACTUAL LIABILITY TO TAX AS DETERMINED BY THE A.O'S FINAL ORDER. THIS EFFECTIVELY AUTHORIZES THE ASSESSEE AND THE PAYER TO CONTRACT OUT OF THE STATUTORY OBLIGATION TO DEDUCT TAX AT SOURCE, WHICH IN THIS CASE, IS LOCAT ED IN SECTION 195(1). SURELY THIS COULD NOT BE THE PARLIAMENTARY INTENT. IF SUCH WERE THE CASE, THERE WOULD HAVE BEEN NO NEED TO TREAT THE PAYER AS AN ASSESSEE - IN - DEFAULT FOR FAILURE TO DEDUCT TAX AT SOURCE, UNDER SECTION 201.THIS COURT IS THUS IN AGREEMEN T WITH THE POSITION OF LAW IN JACABS CIVIL INCORPORATED/MITSUBISHI CORPORATION ( SUPRA ), THAT THE OBLIGATION OF THE PAYER TO DEDUCT TAX IS ABSOLUTE 17. THE IMPLICATION OF AN ABSOLUTE OBLIGATION UPON THE PAYER TO DEDUCT TAX AT SOURCE UNDER SECTION 195(1) IS THAT IT BECOMES THE RESPONSIBILITY OF THE PAYER TO DETERMINE THE AMOUNT IT OUGHT TO DEDUCT FROM THE REMITTANCE TO BE PAID TO THE ASSESSEE, TOWARDS TAX. THIS DETERMINATION WOULD DEPEND DIRECTLY ON THE INCOME OF THE ASSESSEE THAT IS TAXABLE IN INDIA ON ACCOU NT OF BEING ATTRIBUTABLE TO ITS PE IN INDIA. THAT THIS DETERMINATION IS THE RESPONSIBILITY OF THE PAYER IS PROVIDED FOR, IN THE STATUTE, IN SECTION 195(2), WHICH READS: '(2) WHERE THE PERSON RESPONSIBLE FOR PAYING ANY SUCH SUM CHARGEABLE UNDER THIS ACT OTH ER THAN SALARY TO A NON - RESIDENT CONSIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE INCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAKE AN APPLICATION TO THE ASSESSING OFFICER TO DETERMINE, BY GENERAL OR SPECIAL ORDER, THE APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE, AND UPON SUCH DETERMINATION, TAX SHALL BE DEDUCTED UNDER SUB - SECTION (1) ONLY ON THAT PROPORTION OF THE SUM WHICH IS SO CHARGEABLE .' THUS, THE ASSESSEE'S LIABILITY TO TAX DOES NOT DEPEND ON ITS OWN VIEW OF ITS PE STATUS, OR ITS ADMI SSION OR DENIAL OF TAX LIABILITY. IF AN ASSESSEE FILES NIL RETURNS AT THE STAGE OF 8 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 ASSESSMENT, AND MAINTAINS THAT IT IS NOT LIABLE TO TAX IN INDIA, THE PAYER IS OBLIGED TO APPLY TO THE AO TO DETERMINE WHAT PORTION, IF ANY, OF ITS REMITTANCE TO THE ASSESSEE , IS LIABLE TO BE DEDUCTED AT SOURCE TOWARDS TAX. 18. THE VIEW OF THIS COURT FINDS CONFIRMATION IN THE POSITION OF LAW AS IT STANDS AT PRESENT, AFTER THE FINANCE ACT, 2012; SHOULD A SITUATION AKIN TO THAT IN ALCATEL LUCENT USA INC ( SUPRA ) ARISE, THE PAYER WOULD BE TREATED AS THE ASSESSEE - IN - DEFAULT ACCORDING TO SECTION 201, AND THE PAYEE/ASSESSEE WOULD NOT BE PERMITTED A TAX CREDIT UNDER THE PROVISO IN SECTION 209(1)(D). CLEARLY, THE ANOMALY OF AN ASSESSEE DENYING TAX LIABILITY (WHETHER UNDER A BONA FIDE MI STAKE OR BY DECEIT), THEREBY NOT SUFFERING A TAX DEDUCTION AT SOURCE, AND STILL BEING PERMITTED A TAX CREDIT FOR THE TAX DEDUCTIBLE, IS REMEDIED AFTER THE FINANCE ACT, 2012. 19. ALCATEL LUCENT USA INC ( SUPRA ), IN ANY EVENT, CAN BE DISTINGUISHED ON THE GROU ND THAT THE COURT WAS PERSUADED TO CONFIRM THE LEVY OF INTEREST UNDER SECTION 234B, ONLY ON ACCOUNT OF THE EQUITIES THAT NEEDED TO BE BALANCED IN THOSE PECULIAR FACTS, IN FAVOUR OF TAXABILITY. THIS IS EVIDENT FROM THE FOLLOWING WORDS OF THE COURT: '26. IT FURTHER SEEMS TO US INEQUITABLE THAT THE ASSESSEE, WHO ACCEPTED THE TAX LIABILITY AFTER INITIALLY DENYING IT, SHOULD BE PERMITTED TO SHIFT THE RESPONSIBILITY TO THE INDIAN PAYERS FOR NOT DEDUCTING THE TAX AT SOURCE FROM THE REMITTANCES, AFTER LEADING THEM TO BELIEVE THAT NO TAX WAS DEDUCTIBLE. THE ASSESSEE MUST TAKE RESPONSIBILITY FOR ITS VOLTE FACE . ONCE LIABILITY TO TAX IS ACCEPTED, ALL CONSEQUENCES FOLLOW; THEY CANNOT BE AVOIDED. AFTER HAVING ACCEPTED THE LIABILITY TO TAX AT THE FIRST APPELLATE STAGE, IT IS UNFAIR ON THE PART OF THE ASSESSEE TO INVOKE SECTION 201 AND POINT FINGERS AT THE INDIAN PAYERS. THE ARGUMENT ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE INDIAN PAYERS FAILED TO DEDUCT TAX AT THEIR OWN RISK SEEMS TO US TO BE ONLY AN ARGUM ENT OF CONVENIENCE OR DESPAIR. AS WE HAVE POINTED OUT EARLIER, IT IS DIFFICULT TO IMAGINE THAT THE INDIAN TELECOM EQUIPMENT DEALERS OF THE ASSESSEE WOULD HAVE FAILED TO DEDUCT TAX AT SOURCE EXCEPT ON BEING PROMPTED BY THE ASSESSEE. IT MAY BE TRUE THAT THE GENERAL RULE IS THAT EQUITY HAS NO PLACE IN THE INTERPRETATION OF TAX LAWS. BUT WE ARE OF THE VIEW THAT WHEN THE FACTS OF A PARTICULAR CASE JUSTIFY IT, IT IS OPEN TO THE COURT TO INVOKE THE PRINCIPLES OF EQUITY EVEN IN THE INTERPRETATION OF TAX LAWS. TAX L AWS AND EQUITY NEED NOT BE SWORN ENEMIES AT ALL TIMES. THE RULE OF STRICT INTERPRETATION MAY BE RELAXED WHERE MISCHIEF CAN RESULT BECAUSE OF THE INCONSISTENT OR CONTRADICTORY STANDS TAKEN BY THE ASSESSEE OR EVEN THE REVENUE. MOREOVER, INTEREST IS, INTER AL IA, COMPENSATION FOR THE USE OF THE MONEY. THE ASSESSEE HAS HAD THE USE OF THE MONEY, WHICH WOULD OTHERWISE HAVE BEEN PAID AS ADVANCE TAX, UNTIL IT ACCEPTED THE ASSESSMENTS AT THE FIRST APPELLATE STAGE. WHERE THE REVENUE HAS BEEN DEPRIVED OF THE USE OF THE MONIES AND THEREBY PUT TO LOSS FOR NO FAULT ON ITS PART AND WHERE THE LOSS AROSE AS A RESULT OF VACILLATING STANDS TAKEN BY THE ASSESSEE, IT IS NOT EXPECTED OF THE ASSESSEE TO SHIFT THE RESPONSIBILITY TO THE INDIAN PAYERS. WE ARE NOT TO BE UNDERSTOOD AS P ASSING A VALUE - JUDGMENT ON THE ASSESSEE'S CONDUCT. WE ARE ONLY SAYING THAT THE ASSESSEE SHOULD TAKE RESPONSIBILITY FOR ITS ACTIONS.' [EMPHASIS ADDED] THIS COURT FINDS THAT NO NEED IS MADE OUT IN THESE FACTS TO BALANCE ANY EQUITIES IN THESE FACTS, AS THE AS SESSEE HAS NOT VACILLATED IN ITS STAND AS TO THE EXISTENCE OF A PE IN INDIA OR OTHERWISE. IN ANY EVENT, AS OBSERVED EARLIER, THE POSITION OF LAW ITSELF REQUIRES THAT THE TAX BE DEDUCTED AT SOURCE, WHATEVER MAY BE THE ASSESSEE'S STANCE, FAILING WHICH THE PA YER IS TREATED AS AN ASSESSEE - IN - DEFAULT UNDER SECTION 201, AND THE PAYEE IS REQUIRED TO DISCHARGE ITS LIABILITY TO PAY THE TAX THAT WAS NOT DEDUCTED UNDER SECTION 191. 9 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 20. THIS COURT ALSO NOTICES THAT THE MADRAS HIGH COURT DECISION IN MADRAS FERTILIZERS L TD. ( SUPRA ) AND THAT OF THE UTTARAKHAND HIGH COURT IN SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. ( SUPRA ) WAS CONSIDERED AND AFFIRMED BY THE BOMBAY HIGH COURT IN NGC NETWORK ASIA LLC ( SUPRA ) THAT 'WE ARE CLEARLY OF THE OPINION THAT WHEN A DUTY IS CAST ON T HE PAYER TO PAY THE TAX AT SOURCE, ON FAILURE, NO INTEREST CAN BE IMPOSED ON THE PAYEE - ASSESSEE.' AN IMPORTANT DECISION IS THAT OF THE KARNATAKA HIGH COURT IN CIT V. SAMSUNG ELECTRONICS CO. LTD . [2012] 345 ITR 494/[2011] 203 TAXMAN 477/16 TAXMANN.COM 141 , WHICH ALSO CONSIDERED THE SAME ISSUE, I.E. THE OBLIGATION UNDER SECTION 195 (1). THE HIGH COURT IN THE FIRST IN STANCE HAD REJECTED THE REVENUE'S APPEAL; THE SUPREME COURT REMITTED THE MATTER - FOR DETERMINATION AS TO WHETHER INCOME BY WAY OF ROYALTY HAD BEEN MADE OUT IN THE FACTS OF THE CASE. THE HIGH COURT DECISION FIRST SET OUT THE ORDER OF THE SUPREME COURT INTE R ALIA, AS TO THE NATURE OF OBLIGATION CAST UPON THE PAYER UNDER SECTION 195: 'WHILE REMANDING THE MATTER, HON'BLE SUPREME COURT HAS MADE CERTAIN OBSERVATIONS WHILE ANALYSING THE PROVISIONS OF SECTION 195 OF THE ACT AS FOLLOWS: '7. UNDER SECTION 195(1), TH E TAX HAS TO BE DEDUCTED AT SOURCE FROM INTEREST (OTHER THAN INTEREST ON SECURITIES) OR ANY OTHER SUM (NOT BEING SALARIES) CHARGEABLE UNDER THE I.T. ACT IN THE CASE OF NON - RESIDENTS ONLY AND NOT IN THE CASE OF RESIDENTS. FAILURE TO DEDUCT THE TAX UNDER THI S SECTION MAY DISENTITLE THE PAYER TO ANY ALLOWANCE APART FROM PROSECUTION UNDER SECTION 276B. THUS, SECTION 195 IMPOSES A STATUTORY OBLIGATION ON ANY PERSON RESPONSIBLE FOR PAYING TO A NON - RESIDENT, ANY INTEREST (NOT BEING INTEREST ON SECURITIES) OR ANY O THER SUM (NOT BEING DIVIDEND) CHARGEABLE UNDER THE PROVISIONS OF THE I.T. ACT, TO DEDUCT INCOME TAX AT THE RATES IN FORCE UNLESS HE IS LIABLE TO PAY INCOME TAX THEREON AS AN AGENT. PAYMENT TO NON - RESIDENTS BY WAY OF ROYALTY AND PAYMENT FOR TECHNICAL SERVIC ES RENDERED IN INDIA ARE COMMON EXAMPLES OF SUMS CHARGEABLE UNDER THE PROVISIONS OF THE I.T. ACT TO WHICH THE AFORESTATED REQUIREMENT OF TAX DEDUCTION AT SOURCE APPLIES. THE TAX SO COLLECTED AND DEDUCTED IS REQUIRED TO BE PAID TO THE CREDIT OF CENTRAL GOVE RNMENT IN TERMS OF SECTION 200 OF THE I.T. ACT READ WITH RULE 30 OF THE I.T. RULES, 1962. FAILURE TO DEDUCT TAX OR FAILURE TO PAY TAX WOULD ALSO RENDER A PERSON LIABLE TO PENALTY UNDER SECTION 201 READ WITH SECTION 221 OF THE I.T. ACT. IN ADDITION, HE WOUL D ALSO BE LIABLE UNDER SECTION 201(1A) TO PAY SIMPLE INTEREST AT 12 PER CENT PER ANNUM ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID. THE MOST IMPORTANT EXPRESSION IN SECTION 195(1) CONSISTS OF THE WORDS 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT'. A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON - RESIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH IS NOT CHARGEABLE TO TAX UNDER THE I.T. ACT. FOR INSTANCE, WHERE THERE IS NO OBLIGATION ON T HE PART OF THE PAYER AND NO RIGHT TO RECEIVE THE SUM BY THE RECIPIENT AND THAT THE PAYMENT DOES NOT ARISE OUT OF ANY CONTRACT OR OBLIGATION BETWEEN THE PAYER AND THE RECIPIENT BUT IS MADE VOLUNTARILY, SUCH PAYMENTS CANNOT BE REGARDED AS INCOME UNDER THE I. T. ACT. IT MAY BE NOTED THAT SECTION 195 CONTEMPLATE NOT MERELY AMOUNTS, THE WHOLE OF WHICH ARE PURE INCOME PAYMENTS, IT ALSO COVERS COMPOSITE PAYMENTS WHICH HAS AN ELEMENT OF INCOME EMBEDDED OR INCORPORATED IN THEM. THUS, WHERE AN AMOUNT IS PAYABLE TO A N ON - RESIDENT, THE PAYER IS UNDER AN OBLIGATION TO DEDUCT TAS IN RESPECT OF SUCH COMPOSITE PAYMENTS. THE OBLIGATION TO DEDUCT TAS IS, HOWEVER, LIMITED TO THE APPROPRIATE PROPORTION OF INCOME CHARGEABLE UNDER THE ACT FORMING PART OF THE GROSS SUM OF MONEY PAY ABLE TO THE NON - RESIDENT. THIS OBLIGATION BEING LIMITED TO THE APPROPRIATE PROPORTION OF INCOME FLOWS FROM THE WORDS USED IN SECTION 195(1), NAMELY, 'CHARGEABLE UNDER THE 10 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 PROVISIONS OF THE ACT'. IT IS FOR THIS REASON THAT VIDE CIRCULAR NO. 728 DATED OCTOBE R 30, 1995 THE CBDT HAS CLARIFIED THAT THE TAX DEDUCTOR CAN TAKE INTO CONSIDERATION THE EFFECT OF WHILE DEDUCTING TAS. IT MAY ALSO BE NOTED THAT SECTION 195(1) IS IN IDENTICAL TERMS WITH SECTION 18(3B) OF THE 1922 ACT, IN CIT V. COOPER ENGINEERING [1968] 68 ITR 457 (BOM.) IT WAS POINTED OUT THAT IF THE PAYMENT MADE BY THE RESIDENT TO THE NON - RESIDENT WAS AN AMOUNT WHICH WAS NOT CHARGEABLE TO TAX IN INDIA, THEN NO TAX IS DE DUCTIBLE AT SOURCE EVEN THOUGH THE ASSESSEE HAD NOT MADE AN APPLICATION UNDER SECTION 18(3B) (NOW SECTION 195(2) OF THE I. T. ACT). THE APPLICATION OF SECTION 195(2) PRE - SUPPOSES THAT THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE NON - RESIDENT IS IN NO DOUBT THAT TAX IS PAYABLE IN RESPECT OF SOME PART OF THE AMOUNT TO BE REMITTED TO A NON - RESIDENT BUT IS NOT SURE AS TO WHAT SHOULD BE THE PORTION SO TAXABLE OR IS NOT SURE AS TO THE AMOUNT OF TAX TO BE DEDUCTED. IN SUCH A SITUATION, HE IS REQUIRED TO MA KE AN APPLICATION TO THE ITO (TDS) FOR DETERMINING THE AMOUNT. IT IS ONLY WHEN THESE CONDITIONS ARE SATISFIED AND AN APPLICATION IS MADE TO THE ITO (TDS) THAT THE QUESTION OF MAKING AN ORDER UNDER SECTION 195(2) WILL ARISE. IN FACT, AT ONE POINT OF TIME, T HERE WAS A PROVISION IN THE I. T. ACT TO OBTAIN A NOC FROM THE DEPARTMENT THAT NO TAX WAS DUE. THAT CERTIFICATE WAS REQUIRED TO BE GIVEN TO RBI FOR MAKING REMITTANCE. IT WAS HELD IN THE CASE OF CZECHOSLOVAK OCEAN SHIPPING INTERNATIONAL JOINT STOCK COMPANY V. ITO [1971] 81 ITR 162 (CALCUTTA) THAT AN APPLICATION FOR NOC CANNOT BE SAID TO BE AN APPLICATION UNDER SECTION 195(2) OF THE ACT. WHICH DECIDING THE SCOPE OF SECTION 1 95(2) IT IS IMPORTANT TO NOTE THAT THE TAX WHICH IS REQUIRED TO BE DEDUCTED AT SOURCE IS DEDUCTIBLE ONLY OUT OF THE CHARGEABLE SUM. THIS IS THE UNDERLYING PRINCIPLE OF SECTION195. HENCE, APART FROM SECTION 9(1), SECTIONS 4, 5, 9, 90, 91 AS WELL AS THE PROV ISIONS OF DTAA ARE ALSO RELEVANT, WHILE APPLYING TAX DEDUCTION AT SOURCE PROVISIONS. REFERENCE TO ITO (TDS) UNDER SECTION 195(2) OR 195(3) EITHER BY THE NON - RESIDENT OR BY THE RESIDENT PAYER IS TO AVOID ANY FUTURE HASSLES FOR BOTH RESIDENT AS WELL AS NON - R ESIDENT. IN OUR VIEW, SECTIONS 195(2) AND 195(3) ARE SAFEGUARDS. THE SAID PROVISIONS ARE OF PRACTICAL IMPORTANCE. THIS REASONING OF OURS IS BASED ON THE DECISION OF THIS COURT IN TRANSMISSION CORPORATION ( SUPRA ) IN WHICH THIS SAFEGUARD. FROM THIS IT FOLLOW S THAT WHERE A PERSON RESPONSIBLE FOR DEDUCTION IS FAIRLY CERTAIN THEN HE CAN MAKE HIS OWN DETERMINATION AS TO WHETHER THE TAX WAS DEDUCTIBLE AT SOURCE AND, IF SO, WHAT SHOULD BE THE AMOUNT THEREOF.' THE SUPREME COURT AFTER CONSIDERING THE SUBMISSIONS OF L EARNED COUNSEL APPEARING FOR THE PARTIES REGARDING THE VALIDITY OF THE ORDER PASSED BY THIS COURT DATED 24 - 9 - 2009 HAS OBSERVED AS FOLLOWS: '9. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. SECTION 195 FALLS IN CHAPTER XVII WHICH DEALS WITH COLLECTION AND RECOVE RY. CHAPTER XVII - B DEALS WITH DEDUCTION AT SOURCE BY THE PAYER. ON ANALYSIS OF VARIOUS PROVISIONS OF CHAPTER XVII ONE FINDS USE OF DIFFERENT EXPRESSIONS HOWEVER, THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' IS USED ONLY IN SECTION 195. F OR EXAMPLE, SECTION 194C CASTS AN OBLIGATION TO DEDUCT TAS IN RESPECT OF 'ANY SUM PAID TO ANY RESIDENT'. SIMILARLY, SECTIONS 194EE AND 194F INTER ALIA PROVIDE FOR DEDUCTION OF TAX IN RESPECT OF 'ANY AMOUNT' REFERRED TO IN THE SPECIFIED PROVISIONS. IN NONE OF THE PROVISIONS WE FIND THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT', WHICH AS STATED ABOVE, IS AN EXPRESSION USED ONLY IN SECTION 195(1). THEREFORE, THIS COURT IS REQUIRED TO GIVE MEANING AND EFFECT TO THE SAID EXPRESSION. IT FOLLOWS, THEREFORE, THAT THE OBLIGATION TO DEDUCT TAS ARISES ONLY WHEN THERE IS A SUM CHARGEABLE UNDER THE ACT. SECTION 195(2) IS NOT MERELY A PROVISION TO PROVIDE INFORMATION TO THE 11 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 ITO(TDS). IT IS A PROVISION REQUIRING TAX TO BE DEDUCTED AS SOURCE TO BE PAID TO THE REVENUE BY THE PAYER WHO MAKES PAYMENT TO A NON - RESIDENT. THEREFORE, SECTION 195 HAS TO BE READ IN CONFORMITY WITH THE CHARGING PROVISIONS, IE., SECTIONS 4, 5 AND 9. THIS REASONING FLOWS FROM THE WORDS 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' I N SECTION 195(1). THE FACT THAT THE REVENUE HAS NOT OBTAINED ANY INFORMATION PER SE CANNOT BE A GROUND TO CONSTRUE SECTION 195 WIDELY SO AS TO REQUIRE DEDUCTION OF TAS EVEN IN A CASE WHERE AN AMOUNT PAID IS NOT CHARGEABLE TO TAX IN INDIA AT ALL WE CANNOT R EAD SECTION 195, AS SUGGESTED BY THE DEPARTMENT, NAMELY, THAT THE MOMENT THERE IS REMITTANCE THE OBLIGATION TO DEDUCT TAS ARISES. IF WE WERE TO ACCEPT SUCH A CONTENTION IT WOULD MEAN THAT ON MERE PAYMENT INCOME WOULD BE SAID TO ARISE OR ACCRUE IN INDIA. TH EREFORE, AS STATED EARLIER, IF THE CONTENTION OF THE DEPARTMENT WAS ACCEPTED IT WOULD MEAN OBLITERATION OF THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' FROM SECTION 195(1). WHILE INTERPRETING A SECTION ONE HAS TO GIVE WEIGHTAGE TO EVERY WORD USED IN THAT SECTION. WHILE INTERPRETING THE PROVISIONS OF THE INCOME TAX ACT ONE CANNOT READ THE CHARGING SECTIONS OF THAT ACT DE HORS THE MACHINERY SECTIONS. THE ACT IS TO BE READ AS AN INTEGRATED CODE. SECTION 195 APPEARS IN CHAPTER XVII WHICH DEAL S WITH COLLECTION AND RECOVERY. AS HELD IN THE CASE OF C.I.T V. ELI LILLY & CO. (INDIA) (P.) LTD . [2009] 312 ITR 225 (SC) THE PREVISIONS FOR DEDUCTION OF TAS WHICH IS IN CHAPTER XVII DEALING WITH COLLECTION OF TAXES AND THE CHARGING PROVISIONS OF THE I.T ACT FORM ONE SINGLE INTEGRAL, INSEPARABLE CODE AND, THEREFORE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SUMS WHICH ARE 'CHARGEABLE TO TAX' UNDER THE I.T. ACT. IT IS TRUE THAT THE JUDGMENT IN ELI LILLY ( SUPRA ) WAS CONFINED TO SECTION 192 OF THE I.T. ACT. HOWEVER, THERE IS SOME SIMILARITY BETWEEN THE TWO. IF ONE LOOKS AT SECTION 192 ONE FINDS THAT IT IMPOSES STATUTORY OBLIGATION ON THE PAYER TO DEDUCT TAS WHEN HE PAYS ANY INCOME 'CHARGEABLE UNDER THE HEAD SALAR IES'. SIMILARLY, SECTION 195 IMPOSES A STATUTORY OBLIGATION ON ANY PERSON RESPONSIBLE FOR PAYING TO A NON - RESIDENT ANY SUM 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT', WHICH EXPRESSION, AS STATED ABOVE, DO NOT FIND PLACE IN OTHER SECTIONS OF CHAPTER XVII. IT IS IN THIS SENSE THAT WE HOLD THAT THE I.T. ACT CONSTITUTES ONE SINGLE INTEGRAL INSEPARABLE CODE. HENCE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SUMS WHICH ARE DEPARTMENT THAT ANY PERSON MAKING PAYMENT TO A NON - RESIDENT IS NECESSARILY REQU IRED TO DEDUCT TAS THEN THE CONSEQUENCE WOULD BE THAT THE DEPARTMENT THAT ANY PERSON MAKING PAYMENT TO A NON - RESIDENT IS NECESSARILY REQUIRED TO DEDUCT TAS THEN THE CONSEQUENCE WOULD BE THAT THE DEPARTMENT WOULD BE ENTITLED TO APPROPRIATE THE MONEYS DEPOSI TED BY THE PAYER EVEN IF THE SUM PAID IS NOT CHARGEABLE TO TAX BECAUSE THERE IS NO PROVISION IN THE I.T. ACT BY WHICH A PAYER CAN OBTAIN REFUND. SECTION 237 READ WITH SECTION 199 IMPLIES THAT ONLY THE RECIPIENT OF THE SUM. I.E., THE PAYEE COULD SEEK A REFU ND. IT MUST THEREFORE FOLLOW, IF THE DEPARTMENT IS RIGHT THAT THE LAW REQUIRES TAX TO BE DEDUCTED ON ALL PAYMENTS. THE PAYER, THEREFORE, HAS TO DEDUCT AND PAY TAX, EVEN IF THE SO - CALLED DEDUCTION COMES OUT OF HIS OWN POCKET AND HE HAS NO REMEDY WHATSOEVER, EVEN WHERE THE SUM PAID BY HIM IS NOT A SUM CHANGEABLE UNDER THE ACT. THE INTERPRETATION OF THE DEPARTMENT, THEREFORE, NOT ONLY REQUIRES THE WORDS 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT' TO BE OMITTED, IT ALSO LEADS TO AN ABSURD CONSEQUENCE. THE INTE RPRETATION PLACED BY THE DEPARTMENT WOULD RESULT IN A SITUATION WHERE EVEN WHEN THE INCOME HAS NO TERRITORIAL NEXUS WITH INDIA OR IS NOT CHARGEABLE IN INDIA, THE GOVERNMENT WOULD NONETHELESS COLLECT TAX. IN OUR VIEW, SECTION 195(2) PROVIDES A REMEDY BY WHI CH A PERSON MAY SEEK A DETERMINATION OF THE 'APPROPRIATE PROPORTION OF SUCH SO CHARGEABLE' WHERE A PROPORTION OF THE SUM SO CHARGEABLE IS 12 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 LIABLE TO TAX. THE ENTIRE BASIS OF THE DEPARTMENT'S CONTENTION IS BASED ON ADMINISTRATIVE CONVENIENCE IN SUPPORT OF IT S INTERPRETATION. ACCORDING TO THE DEPARTMENT HUGE SEEPAGE OF REVENUE CAN TAKE PLACE IF PERSONS MAKING PAYMENTS TO NON - RESIDENTS ARE FREE TO DEDUCT TAS OR NOT TO DEDUCT TAS. IT IS THE CASE OF THE DEPARTMENT THAT SECTION 195(2), AS INTERPRETED BY THE HIGH C OURT, WOULD PLUG THE LOOPHOLE AS THE SAID INTERPRETATION REQUIRES THE PAYER TO MAKE A DECLARATION BEFORE THE ITO(TDS) OF PAYMENTS MADE TO NON - RESIDENTS. IN OTHER WORDS, ACCORDING TO THE DEPARTMENT SECTION 195(2) IS A PROVISION BY WHICH PAYER IS REQUIRED TO INFORM THE DEPARTMENT OF THE REMITTANCES HE MAKES TO THE NON - RESIDENTS BY WHICH THE DEPARTMENT IS ABLE TO KEEP TRACK OF THE REMITTANCES BEING MADE TO NON - RESIDENTS OUTSIDE INDIA. SECTION 195(1)USES THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF TH E ACT'. WE NEED TO GIVE WEIGHTAGE TO THOSE WORDS. FURTHER, SECTION 195 USES THE WORD 'PRAYER' AND NOT THE WORD 'ASSESSEE'. THE PAYER IS NOT AN ASSESSEE. THE PAYER BECOMES AN ASSESSEE - IN - DEFAULT ONLY WHEN HE FAILS TO FULFIL THE STATUTORY OBLIGATION UNDER SE CTION 195(1). IF THE PAYMENT DOES NOT CONTAIN THE ELEMENT OF INCOME THE PAYER CANNOT BE MADE LIABLE. HE CANNOT BE DECLARED TO BE AN ASSESSEE - IN - DEFAULT. THE ABOVE MENTIONED CONTENTION OF THE DEPARTMENT IS BASED ON AN APPREHENSION WHICH IS ILL FOUNDED. THE PAYER IS ALSO AN ASSESSEE UNDER THE ORDINARY PROVISIONS OF THE I.T. ACT. WHEN THE PAYER REMITS AN AMOUNT TO A NON - RESIDENT OUT OF INDIA HE CLAIMS DEDUCTION OR ALLOWANCES UNDER THE INCOME TAX ACT FOR THE SAID SUM AS AN 'EXPENDITURE'. UNDER SECTION 40(A)(I), INSERTED VIDE FINANCE ACT, 1988 W.E.F. 1.4.89, PAYMENT IN RESPECT OF ROYALTY, FEES TECHNICAL SERVICES OR OTHER SUMS CHARGEABLE UNDER THE INCOME TAX ACT WOULD NOT GET THE BENEFIT OF DEDUCTION IF THE ASSESSEE FAILS TO DEDUCT TAS IN RESPECT OF PAYMENTS OUTSI DE INDIA WHICH ARE CHARGEABLE UNDER THE IT. ACT. THIS PROVISION ENSURES EFFECTIVE COMPLIANCE OF SECTION195 OF THE I.T. ACT RELATING TO TAX DEDUCTION AT SOURCE IN RESPECT OF PAYMENTS OUTSIDE INDIA IN RESPECT OF ROYALTIES, FEES OR OTHER SUMS CHARGEABLE UNDER THE I.T. ACT. IN A GIVEN CASE WHERE THE PAYER IS AN ASSESSEE HE WILL DEFINITELY CLAIM DEDUCTION UNDER THE I.T. ACT FOR SUCH REMITTANCE AND ON INQUIRY IF THE AO FINDS THAT THE SUMS REMITTED OUTSIDE INDIA COMES WITHIN THE DEFINITION OF ROYALTY OR FEES FOR T ECHNICAL SERVICE OR OTHER SUMS CHARGEABLE UNDER THE I.T. ACT THEN IT WOULD BE OPEN TO THE AO TO DISALLOW SUCH CLAIM FOR DEDUCTION. SIMILARLY, VIDE FINANCE ACT, 2008, W.E.F. 1.4.2008 SUB - SECTION (6) HAS BEEN INSERTED IN SECTION 195 WHICH REQUIRES THE PAYER TO FURNISH INFORMATION RELATING TO PAYMENT OF ANY SUM IN SUCH FORM AND MANNER AS MAY BE PRESCRIBED BY THE BOARD. THIS PROVISION IS BROUGHT INTO FORCE ONLY FROM 1.4.2008. IT WILL NOT APPLY FOR THE PERIOD WITH WHICH WE ARE CONCERNED IN THESE CASES BEFORE US. THEREFORE, IN OUR VIEW, THERE ARE ADEQUATE SAFEGUARDS IN THE ACT WHICH WOULD PREVENT REVENUE LEAKAGE.' THE KARNATAKA HIGH COURT FIRST ADDRESSED THIS QUESTION AND STATED THAT: '17. IT IS CLEAR FROM THE SCRUTINY OF THE MATERIAL ON RECORD AND THE CONTENTIONS OF THE PARTIES VIZ., REVENUE AND THE RESPECTIVE RESPONDENT IN THESE CASES THAT THE FACT THAT PAYMENTS HAVE BEEN MADE BY THE RESPONDENT HEREIN TO NON - RESIDENT FOR HAVING IMPORTED SHRINK WRAPPED SOFTWARE/OFF - THE - SHELF SOFTWARE IS NOT DISPUTED. THERE IS ALSO NO DISPUTE THAT NO TAX WAS DEDUCTED AT SOURCE BY THE RESPONDENT UNDER SECTION 195(1) OF THE ACT IN RESPECT OF SUCH PAYMENTS ON THE GROUND THAT THE SAME WERE MADE FOR THE PURPOSE OF PURCHASE OF SHRINK WRAPPED SOFTWARE/OFF - THE - SHELF SOFTWARE. IT IS CONTENDE D BY THE RESPONDENT THAT SINCE THERE IS NO PERMANENT ESTABLISHMENT OF THE NON - RESIDENT IN INDIA, THE SAID PAYMENTS HAVE TO BE TREATED AS INCOME FROM BUSINESS AND IS NOT TAXABLE UNDER THE INCOME TAX ACT IN INDIA AND 13 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 CONSEQUENTLY, THERE IS NO OBLIGATION ON T HE PART OF THE RESPONDENT TO DEDUCT THE ADVANCE TAX UNDER SECTION 195 OF THE ACT AND ALSO CONSEQUENTIAL PROCEEDINGS WOULD NOT BE ATTRACTED. THEREFORE, THE DISPUTE BETWEEN THE REVENUE AND THE RESPONDENT IN THESE CASES IS WHETHER PAYMENTS MADE BY THE RESPOND ENT TO THE NON - RESIDENT WOULD CONSTITUTE 'ROYALTY' OR 'INCOME FROM BUSINESS' AND IF IT IS TO BE TREATED AS 'INCOME FROM BUSINESS', WHETHER THE NON - RESIDENT IS REQUIRED TO HAVE A PERMANENT ESTABLISHMENT IN INDIA. FURTHER, IN THE ABSENCE OF ANY PERMANENT EST ABLISHMENT OF THE NON RESIDENT IN INDIA, IS THERE NO OBLIGATION ON THE PART OF THE PAYEE, THE RESPONDENT HEREIN TO DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE ACT. THEREFORE, THE FACT THAT THE PAYMENTS MADE BY THE PAYEE, THE RESPONDENT HEREIN TO THE NON - RESIDENT WOULD CONSTITUTE INCOME OF THE NON - RESIDENT IS INDISPUTABLE. HOWEVER, THE DISPUTE IS AS TO WHETHER SUCH INCOME IN THE HANDS OF THE NON - RESIDENT IS TO BE TREATED AS SALE AND INCOME FROM BUSINESS COVERED UNDER ARTICLE 7 OF THE DTAA WITH RESPECTIVE C OUNTRIES OR WHETHER THE PAYMENTS WOULD AMOUNT TO ROYALTY IN THE HANDS OF THE NON - RESIDENT, FOR WHICH NO PERMANENT ESTABLISHMENT IS REQUIRED FOR MAKING PAYMENT IN INDIA. THERE IS ALSO NO DISPUTE THAT IF THE PAYMENTS MADE BY THE RESPONDENT ARE HELD TO BE ROY ALTY AND NOT 'INCOME FROM BUSINESS', THERE IS AN OBLIGATION ON THE PART OF THE PAYEE, THE RESPONDENT HEREIN TO DEDUCT THE TAX AT SOURCE AND IN DEFAULT, THE RESPONDENT HEREIN WOULD BE CONSIDERED AS A DEFAULT ASSESSEE. ONCE THERE IS AN OBLIGATION TO DEDUCT T AX AT SOURCE UNDER SECTION 195 OF THE ACT, WHICH IMPOSES A STATUTORY RIGHT ON ANY PERSON RESPONSIBLE FOR PAYING TO A NON - RESIDENT, ANY INTEREST (NOT BEING INTEREST ON SECURITIES) OR ANY OTHER SUM (NOT BEING DIVIDEND) CHARGEABLE UNDER THE PROVISIONS OF THE ACT, TO DEDUCT INCOME - TAX AT THE RATES IN FORCE UNLESS HE IS LIABLE TO PAY INCOME - TAX THEREON AS AN AGENT. PAYMENT TO NON - RESIDENTS BY WAY OF ROYALTY AND PAYMENT FOR TECHNICAL SERVICES RENDERED IN INDIA ARE COMMON EXAMPLES OF SUMS CHARGEABLE UNDER THE PROV ISIONS OF THE ACT TO WHICH THE AFORESTATED REQUIREMENT OF TDS APPLIES. THE TAX SO COLLECTED AND DEDUCTED IS REQUIRED TO BE PAID TO THE CREDIT OF CENTRAL GOVERNMENT IN TERMS OF SECTION 200 OF THE ACT READ WITH RULE 30 OF THE INCOME TAX RULES, 1962. FAILURE TO DEDUCT TAX OR FAILURE TO PAY TAX WOULD ALSO RENDER A PERSON LIABLE TO PENALTY UNDER SECTION 201 READ WITH SECTION 221 OF THE ACT. IN ADDITION, HE WOULD ALSO BE LIABLE UNDER SECTION 201(1A) TO PAY SIMPLE INTEREST AT 12 PER CENT PER ANNUM ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID. THEREFORE, IF THE AMOUNT IS HELD TO BE ROYALTY, THE OTHER CONSEQUENCES AS REFERRED TO ABOVE WOULD FOLLOW.' AFTER HOLDING THAT THE TRANSACTION IN THAT C ASE AMOUNTED TO ROYALTY AND, THEREFORE, TAXABLE, THE COURT RULED THAT THE OBLIGATION TO DEDUCT TAX WAS WITH THE PAYER: 'IN ANY VIEW OF THE MATTER, IN VIEW OF THE PROVISIONS OF SECTION 90 OF THE ACT, AGREEMENTS WITH FOREIGN COUNTRIES DTAA WOULD OVERRIDE THE PROVISIONS OF THE ACT. ONCE IT IS HELD THAT PAYMENT MADE BY THE RESPONDENTS TO THE NON - RESIDENT COMPANIES WOULD AMOUNT TO 'ROYALTY' WITHIN THE MEANING OF ARTICLE 12 OF THE DTAA WITH THE RESPECTIVE COUNTRY, IT IS CLEAR THAT THE PAYMENT MADE BY THE RESPONDE NTS TO THE NON - RESIDENT SUPPLIER WOULD AMOUNT TO ROYALTY. IN VIEW OF THE SAID FINDING, IT IS CLEAR THAT THERE IS OBLIGATION ON THE PART OF THE RESPONDENTS TO DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE ACT AND CONSEQUENCES WOULD FOLLOW AS HELD BY THE HON 'BLE SUPREME COURT WHILE REMANDING THESE APPEALS TO THIS COURT.' 21. A COURT'S TASK IS TO UNRAVEL THE LEGISLATIVE INTENT, IF IT IS NOT DISCERNABLE. WHERE, HOWEVER, THE PROVISIONS ARE CLEAR, THE COURT'S DUTY IS TO ADMINISTER THE LAW IN ITS TERMS. 14 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 IT IS BOUN D TO ADHERE TO ITS PRECEDENTS; YET ITS DEVOTION TO A PREVIOUS HOLDING CANNOT BLIND IT TO THE CLEAR TERMS OF THE STATUTE, WHEREVER FOUND. IF ALCATEL LUCENT USA INC ( SUPRA ) IS CORRECT AND IS TO BE APPLIED IN ALL SITUATIONS, THERE WOULD BE DISSIMILAR AND ASYMM ETRICAL RESULTS ENTIRELY DEPENDENT ON THE FACTS PRESENTED IN EACH CASE. IT IS UNCLEAR WHAT WOULD BE THE OUTCOME WHERE THE PAYEE IS, IN FACT, UNDER THE BONA FIDE BELIEF THAT IT DOES NOT HAVE A PE, OR HOW THE PAYER IS TO DISCERN THAT A PAYEE'S ASSERTION IS I NTENDED TO DEFEAT THE LAW. THIS COURT THEREFORE, NOTES THAT THIS PRECISE QUESTION WAS ADDRESSED IN SAMSUNG ELECTRONICS CO. LTD. ( SUPRA ) BY THE SUPREME COURT, WHILE REMITTING THE MATTER FOR RECONSIDERATION BY THE HIGH COURT. THE COURT PERCEPTIVELY HELD THAT : 'HENCE, APART FROM SECTION 9(1), SECTIONS 4, 5, 9, 90, 91 AS WELL AS THE PROVISIONS OF DTAA ARE ALSO RELEVANT, WHILE APPLYING TAX DEDUCTION AT SOURCE PROVISIONS. REFERENCE TO ITO (TDS) UNDER SECTION 195(2) OR 195(3) EITHER BY THE NON - RESIDENT OR BY THE R ESIDENT PAYER IS TO AVOID ANY FUTURE HASSLES FOR BOTH RESIDENT AS WELL AS NON RESIDENT. IN OUR VIEW, SECTIONS 195(2) AND 195(3) ARE SAFEGUARDS. THE SAID PROVISIONS ARE OF PRACTICAL IMPORTANCE. THIS REASONING OF OURS IS BASED ON THE DECISION OF THIS COURT I N TRANSMISSION CORPORATION ( SUPRA ) IN WHICH THIS SAFEGUARD. FROM THIS IT FOLLOWS THAT WHERE A PERSON RESPONSIBLE FOR DEDUCTION IS FAIRLY CERTAIN THEN HE CAN MAKE HIS OWN DETERMINATION AS TO WHETHER THE TAX WAS DEDUCTIBLE AT SOURCE AND, IF SO, WHAT SHOULD BE THE AMOUNT THEREOF.' 22. THIS COURT, THEREFORE, HOLDS THAT JACABS CIVIL INCORPORATED/MITSUBISHI CORPORATION ( SUPRA ) APPLIES IN SUCH SITUATIONS; ALCATEL LUCENT USA INC ( SUPRA ) CAN BE EXPLAINED AS A DECISION TURNING UPON ITS FACTS; ITS SEEMINGLY WIDE OBSERV ATIONS, LIMITED TO THE CIRCUMSTANCES OF THE CASE. THIS COURT, THEREFORE, HOLDS THAT THE VIEW TAKEN BY ITAT WAS CORRECT; THE PRIMARY LIABILITY OF DEDUCTING TAX (FOR THE PERIOD CONCERNED, SINCE THE LAW HAS UNDERGONE A CHANGE AFTER THE FINANCE ACT, 2012) IS T HAT OF THE PAYER. THE PAYER WILL BE AN ASSESSEE IN DEFAULT, ON FAILURE TO DISCHARGE THE OBLIGATION TO DEDUCT TAX, UNDER SECTION 201 OF THE ACT. 23. FOR THE ABOVE REASONS, THIS COURT FINDS THAT NO INTEREST IS LEVIABLE ON THE RESPONDENT ASSESSEES UNDER SECTI ON 234B, EVEN THOUGH THEY FILED RETURNS DECLARING NIL INCOME AT THE STAGE OF REASSESSMENT. THE PAYERS WERE OBLIGED TO DETERMINE WHETHER THE ASSESSEES WERE LIABLE TO TAX UNDER SECTION 195(1), AND TO WHAT EXTENT, BY TAKING RECOURSE TO THE MECHANISM PROVIDED IN SECTION 195(2) OF THE ACT. THE FAILURE OF THE PAYERS TO DO SO DOES NOT LEAVE THE REVENUE WITHOUT REMEDY; THE PAYER MAY BE REGARDED AN ASSESSEE - IN - DEFAULT UNDER SECTION 201, AND THE CONSEQUENCES DELINEATED IN THAT PROVISION WILL VISIT THE PAYER. THE APPE AL OF THE REVENUE IS ACCORDINGLY DISMISSED WITHOUT ANY ORDER AS TO COSTS. 7.4 WE FIND THAT THE CLAUSE OF THE CONTRACT AGREEMENT CONTAINED PROVISION FOR PRODUCTION OF LOWER OR NO WITHHOLDING TAX CERTIFICATE BY THE ASSE SSEE TO THE CAIRN , HOWEVER , THE R EVENUE HA S NOT PRODUCED ANY EVIDENCES THAT ANY SUCH CERTIFICATE OF LOWER OR NO WITHHOLDING TAX WAS EVER SU BMITTED BY THE ASSESSEE TO THE C AIRN , AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE PLAYED ANY ROLE IN LOWER OR NO WITHHOLDING TAX BY THE PAYER. THUS , RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BL E HIGH COURT IN THE CASE OF GE P ACKAGED P OWER INC, WE 15 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 ARE OF THE OPINION THAT THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR LOWER OR NO WITHHOLDING TAX AND CONSEQUENT RESPONSIBILITY OF INTEREST UNDER SE CTION 234B OF THE ACT FOR NON - PAYMENT OF ADVANCE TAX ON ITS INCOME. ACCORDINGLY , WE UPHOLD THE FINDING OF THE LEARNE D COMMISSIONER OF INCOME - TAX( APPEALS) ON T HE ISSUE AND THE GROUND OF THE R EVENUE IS DISMISSED. 8. THE GROUND NO. 7 OF THE APPEAL BEING GENERAL IN NATURE, NOT REQUIRED TO ADJUDICATE UPON BY US. 9. IN THE RESULT , APPEAL OF THE R EVENUE IS DISMISSED. C . O . NO. 59/DEL/2013 10. NOW , WE TAKE UP THE CROSS OBJECTION OF THE ASSESSEE IN C . O . NO. 59/DEL/ 2013, RAISING FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE PROFESSIONAL CHARGES RECEIVED BY THE ASSESSEE WERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SEC. 9(1 ){VII) OF THE ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT{A) HAS ERRED IN HOLDING T HAT THE INCOME OF THE ASSESSEE WAS NOT TAXABLE UNDER THE PROVISIONS OF SEC 44DA R.W.S. 115 OF THE ACT, 1961, EVEN THOUGH THE PROVISIONS OF SEC 44DA R.W.S. 115A OF THE ACT, 1961, EVEN THOUGH THE NATURE OF SERVICES RENDERED BY THE ASSESSEE WERE TECHNICAL IN NATURE AND WERE NOT FOR A PROJECT UNDERTAKEN BY THE ASSESSEE, AS REQUIRED BY EXPLANATION 2 TO SECTION 9(1)(VII). 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN H OLDING THAT THE INCOME OF THE ASSESSEE WAS TAXABLE UNDER THE PRESUMPTIVE PROVISIONS OF SEC 44BB AND IGNORING THE FACT THAT TAXABILITY U/S 44BB SHALL NOT APPLY IN RESPECT OF INCOME REFERRED TO IN SECTION 44DA IN VIEW OF THE CLARIFICATORY PROVISO TO SEC. 44BB AND SEC 44DA. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PROVISO TO SECTION 44DA BROUGHT ABOUT BY THE FINANCE ACT, 2011 WAS ONLY CLARIFICATORY IN NATURE AND ITS APPLICATIO N HAS TO BE READ INTO THE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVISION CAME IN TO EFFECT IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING V/S CIT, DELIVERED ON 17.11.2005. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE INTEREST CHARGED U/S 234B BY RELYING UPON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATION/ MITSUBISHI CORPORATION (2010) ITR 578 (DELHI) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AGAINST WHICH SLP HAS BEEN FILED BEFORE THE HON BLE SUPREME COURT 6. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL 11. I N GROUND NO. 1, THE ASSESSEE HAS CHALLENGED CONSIDERING THE ENTIRE MOBILIZATION CHARGES BY LEARNED COMMISSIONER OF INCOME - TAX(APPEA LS) FOR TAXING UNDER SECTION 44 BB OF THE ACT. 16 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 1 1.1 THE LD. AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE, AT THE OUTSET OF HEARI NG, FAIRLY SUBMITTED THAT THE ISSUE IN DISPUTE WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, DELHI IN THE CASE OF WESTERNGECO I NTERNATIONAL LTD . VS. 88 INTERNATIONAL T AXATION IN ITA NO. 4906/DEL/2012, HOWEVER , S UBMITTED THAT SUBMISSIONS RAISED ON BEHALF OF THE ASSESSEE IN THAT CASE SHOULD BE CONSIDERED AS SUBMISSIONS IN THE CASE IN HAND. ON THE OTHER HAND, LD. CIT( DR) COULD NOT CONTROVERT THE SUBMISSION OF THE LD. AR. 11.2 WE HAVE CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL, DELHI IN THE CASE OF W ESTERNGECO INTERNATIONAL LTD . VS. ADIT (SUPRA) AFTER CONSIDERING THE SUBMISSIONS OF THE RIVAL PARTIES HELD THAT ENTIRE MOBILIZATION CHARGES ARE T O BE CONSIDERED FOR ESTIMATING INCOME FROM THE CONTRACT ACTIVITY CARRIED OUT IN INDIA. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: 8. ON GROUND NO.5 AND 6 THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE ARE AS FOLLOWS. 2. TAXABILITY OF MOBI LIZATION/DEMOBILIZATION REVENUES NATURE OF MOBILIZATION/DEMOBILIZATION ACTIVITIES MOBILIZATION/DEMOBILIZATION ACTIVITIES INCLUDE ALL THE ACTIVITIES INVOLVED IN MOVEMENT OF EQUIPMENT FROM ONE OPERATING AREA TO ANOTHER. IN THE OIL AND GAS SECTOR AS A NORMAL PRACTICE, CUSTOMERS GENERALLY COMPENSATE A CONTRACTOR FOR SUCH MOVEMENTS KNOWN AS MOBILIZATION/DEMOBILIZATION FEE. FURTHER, WHEN DRILLING EQUIPMENT IS MOBILIZED FROM OUTSIDE INDIA AND THE SAME IS DEMOBILIZED FROM INDIA, SUBSTANTIAL PORTION OF OPERATIONS ARE ACTUALLY PERFORMED OUTSIDE INDIA. DEFINITION OF THE TERM 'INDIA' THE DEFINITI ON OF 'INDIA' FOR THE PURPOSES OF LEVYING INCOME TAX INCLUDES EXCLUSIVE ECONOMIC ZONES OF INDIA AND THEREFORE THE PROVISIONS OF THE ACT EXTENDS TO 200 NAUTICAL MILES FROM THE INDIAN COAST. TAXABILITY OF MOBILIZATION/ DEMOBILIZATION ACTIVITY IN INDIA SE CTION 4 OF THE ACT IS THE CHARGING SECTION. SECTION 5(2) PROVIDES FOR THE SCOPE OF TOTAL INCOME OF A NON - RESIDENT PERSON AS PER WHICH THE TOTAL INCOME OF A NON - RESIDENT IN ANY PREVIOUS YEAR INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH: IS REC EIVED OR IS DEEMED TO BE RECEIVED IN INDIA; OR ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA. 17 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 DURING AY 2009 - 10, WGIL HAS RECEIVED REVENUES AMOUNTING TO RS 53.37 CRORES IN RESPECT OF MOBILIZATION/ DEMOBILIZATION OF VESSELS. PAYMENT IN RESPECT OF THE MOBILIZATION/ DEMOBILIZATION WAS RECEIVED BY WGIL OUTSIDE INDIA. OUT OF THE SAME, WGIL HAS OFFERED RS 6.31 CRORES TO TAX ON ACCOUNT OF MOBILIZATION/ DEMOBILIZATION ACTIVITIES ATTRIBUTABLE TO INDIAN OPERATIONS FOR THE SUBJECT AY UNDER SECTION 44 (BB) OF THE ACT. HOWEVER, REVENUES AMOUNTING TO RS 47.06 CRORES WERE NOT OFFERED TO TAX BY WGIL AS THE SAME WERE ATTRIBUTABLE TO ACTIVITY/ DISTANCE TRAVELLED OUTSIDE INDIA. IT WAS CLAR IFIED THAT THE MOBILIZATION/ DEMOBILIZATION CONSIDERATION IS AGREED AND MENTIONED SEPARATELY IN THE CONTRACT AS IT IS SEPARATE FROM THE CONSIDERATION FOR SERVICES FOR EXPLORATION, WHICH ARE THE SUBJECT MATTER OF ASSESSMENT UNDER SECTION 4488 OF THE ACT. I T WAS SUBMITTED THAT AS PER THE CHARGING PROVISIONS OF SECTIONS 4 AND 5 OF THE ACT, THE MOBILIZATION/ DEMOBILIZATION REVENUES COULD BE SUBJECT TO TAX IN INDIA ONLY IF THE SAME ACCRUED OR AROSE IN INDIA OR WERE DEEMED TO ACCRUE OR ARISE IN INDIA. FURTHER, S ECTION 9(1)(I) OF THE ACT, INTER ALIA, PROVIDES THAT INCOME ARISING THROUGH OR FROM ANY BUSINESS CONNECTION IS DEEMED TO ACCRUE OR ARISE IN INDIA. CLAUSE (A) OF EXPLANATIONS TO SECTION 9(1)(I) OF THE ACT, UNDER WHICH CERTAIN INCOME DEEMED TO ACCRUE OR AR ISE IN INDIA, PROVIDES THAT IN THE CASE OF A BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTA BLE TO THE OPERATIONS CARRIED OUT IN INDIA. THUS, THE ACT SPECIFICALLY PROVIDES THAT IN A SITUATION WHERE THE OPERATIONS ARE CARRIED ON PARTLY IN INDIA AND PARTLY OUTSIDE INDIA, ONLY SUCH PORTION OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATI ONS CARRIED OUT IN INDIA IS DEEMED TO ACCRUE OR ARISE IN INDIA AND HENCE, TAXABLE IN INDIA. IN VIEW OF THE ABOVE, MOBILIZATION/ DEMOBILIZATION REVENUES SHOULD BE APPORTIONED ON THE BASIS OF TOTAL JOURNEY UNDERTAKEN BY THE EQUIPMENT IN INDIAN TERRITORIES. ACCORDINGLY, MOBILIZATION/ DEMOBILIZATION REVENUES TAXABLE IN INDIA SHOULD BE RESTRICTED ONLY TO THE REVENUES ATTRIBUTABLE TO THE DISTANCE TRAVELLED IN THE INDIAN TERRITORIAL WATERS AS COMPARED TO THE TOTAL DISTANCE TRAVELLED. LEGAL PRECEDENTS IN SUPPORT OF NON - TAXABILITY OF MOBILIZATION/DEMOBILIZATION REVENUES ATTRIBUTABLE TO DISTANCE TRAVELLED OUTSIDE INDIA AS SUBMITTED BEFORE THE LOWER AUTHORITIES ALSO THE REVENUES FROM MOBILIZATION! DEMOBILIZATION ATTRIBUTABLE TO DISTANCE TRAVELLED OUTSIDE INDIA SHO ULD NOT BE TAXABLE, THE APPELLANT PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENTS: RAND B FALCON DRILLING CO VS. ACIT [(2007) 14 SOT 281(DELHI ITAT)] SAIPEM S.P.A. VS DEPUTY COMMISSIONER OF INCOME TAX [(2003) 86 ITD 572 (DELHI ITAT)] ASSIS TANT COMMISSIONER OF INCOME TAX VS JINDAL DRILLING LEASING [(1991) ITA NO 6452 (MUMBAI ITAT)] (UNREPORTED JUDGMENT) DEPUTY COMMISSIONER OF INCOME TAX VS SONAT OFFSHORE DRILLING INC [(1994) ITA NO 7414 (MUMBAI ITAT)](UNRE PORTED JUDGMENT) 12 ITA NO.49 06 /DEL/2012 JOINT COMMISSIONER OF INCOME TAX VS FUGRO ENGINEERS BV [(1999) ITA NO 6246 (MUMBAI ITAT)](UNREPORTED JUDGMENT) 18 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 MCDERMOTT ETPM VS DEPUTY COMMISSIONER OF INCOME TAX [(2005) 92 ITD 385 (MUMBAI ITAT)] JOINT DIRECTOR OF INCOME - TAX (OSD) VS J RAY MCDERMOTT EASTERN HEMISPHERE LIMITED - (2010) ITA NO 1557/ MUM/2007 IT WAS SUBMITTED THAT EVEN IN A CASE WHEREIN A COMPOSITE AND LUMP - SUM CONSIDERATION IS AGREED, THE HON'BLE SUPREME COURT IN THE CASE OF ISHI KAWAJIMA AND HYUNDAI HEAVY INDUSTRIES CLARIFIED THAT THE REVENUE AUTHORITIES ARE DUTY BOUND TO DETERMINE THE PORTION ATTRIBUTABLE TO TAXABLE ACTIVITIES UNDER THE ACT AND THE NON - TAXABLE PORTION. ACCORDINGLY, IT IS SUBMITTED THAT IN THE INSTANT CASE FOR A Y 2009 - 10, OUT OF THE TOTAL REVENUES RECEIVED BY WGIL WITH RESPECT TO MOBILIZATION! DEMOBILIZATION OF VESSELS AMOUNTING TO RS 53.37 CRORES, ONLY REVENUES AMOUNTING TO RS 63.13 CRORES SHOULD BE SUBJECT TO TAX (UNDER SECTION 44BB) ON ACCOUNT OF MOBILIZATION/ DEMOBILIZATION ACTIVITIES ATTRIBUTABLE TO INDIAN OPERATIONS. DISTINGUISHING THE RULING OF SEDCO FOREX INTEMATIONAL INC. DURING THE COURSE OF THE HEARING, THE LEARNED DEPARTMENT REPRESENTATIVE ('DR') PLACED RELIANCE ON UTTARAKHAND HC RULING IN SEDCO FOREX INTERNATIONALLNC ('SEDCO FOREX') TO SUPPORT DEPARTMENT'S CONTENTION THAT THE ENTIRE AMOUNT MOBILIZATION! DEMOBILIZATION REVENUES RECEIVED BY WGIL SHOULD BE TAXABLE IN INDIA WHILE COMPUTING ITS INCOME UNDER SECTION 44BB OF THE ACT. AS SUBMITTED BY THE APPELLANT'S COUNSEL THE DECISION IN SEDCO FOREX IS DISTINGUISHABLE AS THE FOLLOWING ASPECTS DID NOT RECEIVE THE CONSIDERATION OF THE HON'BLE HC: WGIL HAS SUBMITTED THE CERTIFICATES ISSUED BY NOBLE DENTON, CHARTERED MARINE ENGINEERS, CERTIFYING THE DI STANCE TRAVELLED WITHIN INDIA AND OUTSIDE INDIA SECTION 44BB OF THE ACT SPECIFICALLY OVERRIDES THE PROVISIONS OF SECTIONS 28 - 41 OF THE ACT (THE COMPUTATION MECHANISM)'. HOWEVER, SECTION 44BB DOES NOT OVERRIDE THE PROVISIONS OF CHARGING SECTIONS 4, 5, AND 9 OF THE ACT. ACCORDINGLY, BASED ON THE COMBINED READING OF SECTIONS 4, 5 AND 9 AND THE DECISION OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD, IN THE INSTANT CASE, IT WAS SUBMITTED THAT ONLY THE MOBILIZATION/ DEMOBILIZATION INCOME ATTRIBUTABLE TO DISTANCE TRAVELLED IN INDIA SHOULD BE TAXABLE IN INDIA. THE MEASURE OF TAX CANNOT ALSO BE ASSUMED TO EXTEND BEYOND THE VERY SCOPE OF CHARGING SECTION. AS UNLIKE IN CASE OF SEDCO FOREX THE APPELLANT IS NOT SEEKING A DEDUCTION FROM TAXABLE INCOME ON THE GROUND OF REIMBURSEMENT BUT IS CONTENDING THAT A PORTION OF THE REVENUE CANNOT FORM PART OF INCOME AT ALL. BY REFERENCE TO THE FACTS IN THE SED CO FOREX DECISION IT WAS SUBMITTED THAT THE DISPUTE CONSIDERED BY HON'BLE HC THEREIN WAS WHETHER REIMBURSEMEN T COULD BE EXCLUDED FOR PURPOSES OF SECTION 44BB OF THE ACT. THE HON'BLE HE DID NOT HAVE TO DEAL WITH THE FACTUAL ASPECTS, AS INVOLVED IN PRESENT CASE OR THE LEGAL DISPUTES ARISING IN PRESENT CASE. BASED ON THE ABOVE ARGUMENTS, THE HE RULING OF SEDCO FOREX IS NOT APPLICABLE TO THE FACTS OF APPELLANT'S CASE. 19 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 THE DEPARTMENTAL REPRESENTATIVE OTHER SUBMISSION WAS THAT EVEN PAYMENTS MADE OUTSIDE INDIA ARE INCLUDABLE FOR PURPOSES OF SECTION 44BB. REFERENCE WAS MADE TO SECTION 44BB(2)(A) WHEREIN THE PHRASE 'WHET HER IN OR OUT OF INDIA' WAS USED. APPELLANT RESPECTFULLY SUBMITS THAT SUCH AN INTERPRETATION WOULD BE INCORRECT AS SUCH PHRASE HAS TO BE READ IN THE CONTEXT AND THE ONLY POSSIBLE INTERPRETATION WOULD BE THAT CONSIDERATION RECEIVED FOR PROVISION OF SERVICES REFERRED TO IN THAT CLAUSE FOR PROSPECTING ETC., WOULD BE TAXABLE WHETHER THE SAME ARE RECEIVED IN INDIA OR OUTSIDE OF INDIA. SUCH A PHRASE CANNOT BE READ IN A WAY TO SUBJECT TRANSACTIONS WHICH ARE EFFECTED OUTSIDE INDIA AND PAID OUTSIDE INDIA AND WHICH A RE CLEARLY OUTSIDE THE SCOPE OF CHARGING SECTION OF THE ACT. PRAYERWE REQUEST YOUR HONOURS TO KINDLY TAKE THE ABOVE SUBMISSION ON RECORD, CONSIDER THE SAME AND TO ALLOW OUR APPEAL IN TOTO. IN CASE YOUR HONOURS REQUIRE ANY CLARIFICATIONS, WE WOULD BE MOST WILLING AND FEEL DUTY BOUND TO SUBMIT THE SAME. 9. THE LD.D.R. ON THE OTHER HAND SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE JUDGEMENTS OF THE UTTARAKHAND HIGH COURT IN THE CASES OF (A) SEDCO FOREX INTERNATIONAL I NC. REPORTED IN 299 ITR 238; (B) IN THE CASE OF HALLIBURTON OFFSHORE SERVICE INC. REPORTED IN 300 ITR 265 AND (C) IN THE CASE OF TRANS OCEAN OFFSHORE INC. 299 ITR 248. HE FURTHER RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE FINDINGS OF THE D.R.P. HE SUBMITTED THAT : THE ISSUE OF TAXABILITY OF THESE AMOUNTS IS SETTLED BY A NUMBER OF THE DECISIONS OF THE HON'BLE UTTARAKHAND HIGH COURT. SOME OF THESE DECISIONS ARE: SEDCO FOREX INTERNATIONALLNC 2991TR 238; HALLIBURTON OFFSHORE SERVICE INC 3 00 ITR 265; AND TRANS OCEAN OFFSHORE INC 299 ITR 248. THE HON'BLE HIGH COURT HAS HELD THAT SECTION 44BB IS A COMPLETE CODE IN ITSELF. IF THE ASSESSEE CHOOSES TO BE TAXED UNDER SECTION 44BB OF THE ACT THEN THE PROVISIONS OF THE SECTION APPLY. THE AMOUNT S THAT ARE TAXABLE ARE EXPLICITLY STATED IN SECTION 44 BB (2). THE WORDING OF THE SECTION LEAVES NO DOUBT THAT ANY AMOUNT RECEIVED BY THE ASSESSEE IS NOT BE TAXABLE. THE AMOUNTS RECEIVED BY THE ASSESSEE FOR MOBILIZATION/DEMOBILIZATION ARE ON ACCOUNT OF TH E PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY (SECTION 44 BB92)). THE ASSESSEE HAS CLAIMED THAT REVENUE OF INR 47.06 CRORES WERE NOT OFFERED TO TAX BY WGIL AS THE SAME WERE ATTRIBUTABLE TO ACTIVITY/DISTANCE T RAVELLED OUTSIDE INDIA. THE MAIN ARGUMENTS OF THE ASSESSEE ARE DEALT BELOW: PROVISIONS OF SECTION 5 (2)(B) APPLIES TO THE ASSESSEE BEING A NON - RESIDENT. IT REFERRED TO CLAUSE (A) OF EXPLANATION TO SECTION 9 (1) (I ) OF THE ACT TO CLAIM THAT ONLY SUCH PORTION OF REVENUE AS IS REASONABLE ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA IS DEEMED TO ACCRUE OR ARISE IN INDIA AND ACCORDINGLY REVENUE TAXABLE IN INDIA SHOULD BE RESTRICTED ONLY TO THE REVENUE ATTRIBUTABL E TO THE DISTANCE TRAVELLED IN THE INDIAN TERRITORIAL WATERS AS COMPARED TO THE TOTAL DISTANCE TRAVELLED. THIS CLAIM OF THE ASSESSEE IS NOT PROPER AND UNACCEPTABLE FOR THE FOLLOWING REASONS: 20 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 SECTION 28 DEFINES THE SCOPE OF PROFITS AND GAINS OF THE BUSINE SS OR PROFESSION. SECTION 28(I) DEALS WITH THE PROFITS AND GAINS OF ANY BUSINESS OR PROFESSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY GIVEN TIME DURING THE PREVIOUS YEAR. THEREFORE, WHAT IS IMPORTANT IS THE BUSINESS OR PROFESSION CARRIED OUT BY THE A SSESSEE. SECTION 44BB OVERRIDES SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A. HERE EMPHASIS IS ON THE BUSINESS CARRIED OUT BY THE ASSESSEE. MOBILIZATION AND DEMOBILIZATION ARE ACTIVITIES IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE IN INDIA. THE MOVEMENT O F THE RIG IS A PART OF THE BUSINESS OF THE ASSESSEE AND IT IS NOT AN INDEPENDENT BUSINESS OR EVEN AN INDEPENDENT ACTIVITY. THE INCOME IN THE CASE OF THE ASSESSEE IS NO DOUBT ACCRUING OR ARISING IN INDIA AS THE BUSINESS IS BEING UNDERTAKEN IN INDIA. THE ASSESSEE CLAIM THAT SECTION 9 REFERS TO THE REVENUES AND REVENUES CANNOT BE ATTRIBUTED TO THE OUT OF INDIA ACTIVITIES, IS BASELESS AND UNTENABLE. FIRST, SECTION 9 REFERS TO INCOME AND NOT TO REVENUE. SECTION 9 TAKES INTO ACCOUNT SITUATIONS WHERE A BUSINES S CONSISTS OF MANY OPERATIONS/ACTIVITIES WHICH ARE MAINLY CARRIED OUT 'OUT OF INDIA' BY THE NON - RESIDENT AND DUE TO SOME BUSINESS CONNECTION IN INDIA IN RELATION TO THE SAME BUSINESS, THE INCOME ACCRUING OR ARISING, WHETHER DIRECTLY OR INDIRECTLY, IS TAXAB LE IN INDIA. IN THE CASE OF THE ASSESSEE THE BUSINESS IS BEING CARRIED OUT IN INDIA. IT CANNOT BE THE CASE OF THE ASSESSEE THAT IT IS CARRYING OUT ITS MAIN 'BUSINESS' OUTSIDE INDIA AND ONLY INCOME FROM THE OPERATIONS CARRIED OUT IN INDIA IS TAXABLE. THE AS SESSEE HAS CARRIED OUT ITS BUSINESS IN INDIA AND ALL RECEIPTS ARE TAXABLE IN INDIA. IN CASE OF THE ASSESSEE THERE ARE NO BUSINESS OPERATIONS OUTSIDE INDIA IN CONNECTION WITH THE PAYMENTS RECEIVED BY IT. THE ASSESSEE'S CLAIM COULD BE JUSTIFIED WHEN THE RI G FOR EXAMPLE WAS WORKING OR USED OUTSIDE INDIA FOR EXAMPLE ALSO TO DRILL A WELL IN THE NORTH SEA FOR THE SAME CLIENT. IN THAT CASE, SOME OF THE OPERATIONS WERE CARRIED OUT OUTSIDE INDIA AND INCOME IN RELATION THOSE OPERATIONS MAY NOT BE TAXABLE IN INDIA. THE MOVEMENT OF RIG FROM ANY PLACE WAS FOR THE PURPOSE OF THE BUSINESS IN INDIA AND THAT IS THE REASON THAT THE PROJECT OWNER AGREES TO PAY THE MOVING CHARGES. THE RELIANCE OF THE ASSESSEE ON VARIOUS CASE LAWS INCLUDING THE DECISION IN THE CASE OF I SHIKAWAJIMA AND HYUNDAI HEAVY INDUSTRIES ARE OF NO HELP BECAUSE IN THOSE CASES THE CONTRACTS CONSISTED OF VARIOUS DIVISIBLE PARTS. VARIOUS PARTS TAKEN TOGETHER FORMED THE FULL CONTRACT. SOME OF THESE PARTS WERE CARRIED OUTSIDE INDIA AND THE DECISIONS OF TH E HON'BLE SUPREME COURT DEALT WITH INCOME FROM THOSE STIPULATED ACTIVITIES AS PER CONTRACT CARRIED OUTSIDE INDIA. IN THE PRESENT CASE NO CLEARLY IDENTIFIABLE ACTIVITIES OTHER THAN THE BUSINESS OF THE ASSESSEE IN INDIA ARE CARRIED OUT OF INDIA. THE CER TIFICATE OF NOBLE DENTON CLARIFYING THAT DISTANCE ARE TRAVELLED CANNOT BE ANY BASIS TO DECIDE THE TAXABILITY AS THE CERTIFICATE ONLY CERTIFY THE MOVEMENTS OF SHIP IN INDIAN WATER OR OUT OF INDIAN WATER. IT DOES NOT JUSTIFY THAT THESE ARE DIFFERENT OPERATIO NS. THE MOVEMENTS WHETHER IN INDIAN WATER OR OUT OF INDIAN WATER ARE FOR THE PURPOSE OF BUSINESS IN INDIA? THE ASSESSEE NEED TO APPRECIATE THAT SHIP STARTED MOVING OF ITS PRESENT LOCATION FOR CARRYING OUT THE WORK IN INDIA. THE MOVEMENT ITSELF IS NOT A SEP ARATE OPERATION. 21 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 THE CLAIM THAT MEASURE OF TAX CANNOT ASSUMED TO EXTEND BEYOND THE VERY SCOPE OF CHARGING SECTION AND PORTION OF THE REVENUE IS NOT TAXABLE. THIS IS AGAIN UNACCEPTABLE PROPOSITION, AS ALL RECEIPTS ARE TAXABLE AS PER THE PROVISIONS OF S ECTION 5 AND 9 OF THE ACT. FURTHER, SECTION 44 BB (2) EXPLICITLY DEFINES THE CHARGEABLE AMOUNTS. THE CLAIM THAT IN THE CASE OF SEDCO THE ISSUE WAS OF REIMBURSEMENTS. IT DOES NOT CHANGE THE ISSUE BECAUSE THE REIMBURSEMENT WAS ALSO A RECEIPT. THE P ROPOSITION ADVANCED BY THE ASSESSEE IF APPLIED TO SECTION 44B (SIMILAR DEEMING/PRESUMPTIVE SECTION) WILL LEAD TO ABSURD RESULTS AS THEN ONLY AMOUNTS PROPORTIONATE TO DISTANCE TRAVELLED IN INDIAN WATER WOULD BE TAXABLE. THE RESULTS ARE NOT WHAT THE LEGISLAT URE HAS INTENDED. 10. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL INC.(SUPRA). WE ARE NOT CONVINCED WITH THE ARGUME NTS OF THE LD. COUNSEL FOR THE ASSESSEE TRYING TO DISTINGUISH THIS CASE LAW FOR THE REASON THAT THE ENTIRE PAYMENT IN QUESTION WAS MADE FOR THE PURPOSE OF EXECUTION OF THE CONTRACT IN INDIA. MOBILIZATION IS A STAGE PAYMENT, AS PART OF THE TOTAL CONSIDERATI ON FOR EXECUTION OF THE CONTRACT. THE ASSESSEE WOULD BE MOVING ITS MACHINERY FROM ONE PLACE OF WORK TO ANOTHER PLACE OF WORK. MOBILIZATION IS PAID AS AN ADVANCE FOR SUCH MOVEMENT AND IS GENERALLY ADJUSTED AGAINST RUNNING BILLS. IT IS NOT A CASE WHERE A SEP ARATE PAYMENT IS MADE FOR A TRANSPORTATION CONTRACT. THE SUBMISSION THAT THE ASSESSEE WOULD TRY TO WORK OUT, BASED ON SOME BASIS, THE REVENUES ATTRIBUTABLE TO THE ACTIVITY OF MOBILIZATION CARRIED OUT OUTSIDE INDIA, CANNOT BE ACCEPTED, AS SUCH AN EXERCISE W OULD AMOUNT TO ESTIMATING INCOME FOR ACTIVITIES OUTSIDE INDIA, WHEN THE SCOPE OF THE CONTRACT IS FOR EXECUTION OF THE CONTRACT IN INDIA. MOBILIZATION IN OUR VIEW IS AN INCIDENTAL ACTIVITY TO THE MAIN ACTIVITY OF CARRYING OUT THE CONTRACT IN INDIA. THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA AND HYUNDAI HEAVY INDUSTRIES LTD. VS. DIT, REPORTED IN 288 ITR 408 HAS BEEN DISCUSSED BY THE HON BLE HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL INC. (SUPRA). THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THAT CASE IS NOT APPLICABLE HERE AS IT IS NOT A CASE WHERE SEPARATE PARTS OF A CONTRACT ARE EXECUTED AT DIFFERENT PLACES. THE ARGUMENT THAT THE PAYMENT WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE COM PANY AND HENCE NOT INCOME WAS ALSO REJECTED BY THE HON BLE HIGH COURT. THUS, WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THUS THESE GROUNDS OF THE ASSESSEE ARE DISMISSED. 11.3 RESPECTFULLY FOLLOWING THE ABOVE DECISI ON OF THE TRIBUNAL, WE ARE OF THE OPINION THAT THAT THE ENTIRE PAYMENT OF MOBILIZATION CHARGES IN QUESTION WAS PAID FOR THE PURPOSE OF EXECUTION OF THE CONTRAC T BETWEEN THE ASSESSEE AND THE C AIRN AND THEREFORE THE ENTIRE SUM WAS LI ABLE FOR TAXED UNDER SE CTION 44 BB OF THE ACT. ACCORDINGLY , WE UPHOLD THE FINDING OF THE LEARNE D COMMISSIONER OF INCOME - TAX( A PPEALS) ON THE ISSUE IN DISPUTE AND THE GROUND OF THE ASSESSEE IS DISMISSED. 22 ITA NO. 4619/DEL/2012 & C.O. NO. 59/DEL/2013 12. IN GROUND NO. 2 TO 4, THE ASSESSEE HAS CHALLENGED THE TAXABILITY OF CONTRACTUAL REVENUE AS FEE FOR TECHNICAL SERVICES BY THE AO. AS WE HAVE ALREADY DECIDED THE ISSUE IN DISPUTE IN GROUND NO. 1 TO 5 OF THE APPEAL OF THE REVENUE IN ITA NO. 4619/DEL/2012 , ACCORDINGLY , THESE GROUNDS OF THE ASSESSEE STANDS ALLOWED. 13. IN GROU ND NO. 5 , THE ASSESSEE HAS CHALL ENGED THE FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) THAT INTEREST UNDER SECTION 234B IS LEVIABLE EVEN THE CASE OF NON - RESIDENT WHOSE INCOME IS SUBJECTED TO TAX DEDUCTION AT SOURCE. AS THE ISSUE OF APPLICABIL ITY OF INTEREST UNDER SECTION 234B OF THE ACT HAS ALREADY BEEN DECIDED BY US IN GROUND NO. 6 OF THE R EVENUE IN ITA NO. 4619/DEL/2012 , ACCORDINGLY, WE ALLOW THIS GROUND OF THE ASSESSEE. 14. IN THE RESULT , THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLO W ED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 5 T H APRIL , 2016 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 5 T H APRIL , 2016 . LAPTOP/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI