Addl. DIT, Dehradun V. M/s Schumberger Asia Services Ltd., Gurgaon

ITA 1088/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61636 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 01-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHINESH VERMA
• Keywords: Question of law; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER ITA NO: 1088/DEL/2011 A.Y. : 2005-06. DDIT, INTERNATIONAL TAXATION VS. M/S SCHUMBERGER AS IA SERVICES LTD. 13 A, SUBHASH ROAD C/O S.R.BATLIBOI & CO. C.AS AAYAKAR BHAWAN SECTOR 42, SECTOR ROAD DEHRADUN GURGAON 122 002, HARYANA (APPELLANT) (RESPON DENT) APPELLANT BY : SHRI MOHINESH VERMA, CIT, D.R. RESPONDENT BY : SHRI VIJAY IYER, C.A. SHRI MANMEE T DALAL, ADV. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DT. 4.8.2010 OF CIT(A)-II, DEHRADUN PERTAINING TO A.Y. 2005-06 ON THE FOLLOWING GROUNDS. 1. IN VIEW OF THE NON-OBSTANTE CLAUSE WHICH GIVES SECTION 44BB OVERRIDING EFFECT ON PROVISIONS OF S.28 TO 41, THUS BRINGING ANY SUM RECEIVED BY THE ASSESSEE COMPANY UNDER PURVIEW OF TAXATION WITHOUT DIFFERENTIATING SUCH SUM BETWEEN R EVENUE OR CAPITAL OR REIMBURSEMENT RECEIPTS, THUS ON THE FACT S AND CIRCUMSTANCES OF THE CASE, THE LDCIT(A) HAS ERRED I N HOLDING THAT THE RECEIPTS ON ACCOUNT OF REIMBURSEMENT OF CUSTOMS DUTY AND EQUIPMENT LOST IN HOLE SHALL NOT FALL IN PURVIEW OF S.44BB OF THE ACT. 2. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MOD IFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEA RING OF THE APPEAL. ITA 108 8/DEL/2011 PAGE 2 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . 2. RIGHT AT THE OUTSET IT WAS SUBMITTED BY THE A.R . THAT THOUGH THE PRESENT APPEAL HAS BEEN FILED BY THE DEPARTMENT, HO WEVER, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS THE FIRST ISS UE BY WHICH THE DEPARTMENT IS AGGRIEVED AS PER THE IMPUGNED ORDER P ERTAINS TO THE CUSTOM DUTY REIMBURSED TO THE ASSESSEE BY ONGC WHIC H IS COVERED IN ASSESSEES FAVOUR AS DISCUSSED IN PARA 6 OF THE IM PUGNED ORDER. THE ISSUE THEREIN IS CONCLUDED IN ASSESSEES FAVOUR AS PER THE JUDGEMENT OF JURISDICTIONAL HIGH COURT I.E. HONBLE HIGH COURT O F UTTARAKHAND AT NAINITAL WHEREIN VIDE ITS ORDER DT. 24.7.09 IN ITA 204/2007 THEIR LORDSHIPS SEIZED OF THE ORDER DT. 13.4.2007 IN ITA 4180/DEL/2006 PERTAINING TO A.Y. 2002-03 CONSIDERING THE PROVISIO NS OF S.44 BB SUB- SECTION(2) HELD THAT THE REIMBURSEMENT TOWARDS THE CUSTOMS DUTY PAID BY THE ASSESSEE BEING STATUTORY IN NATURE CANNOT FO RM PART OF DEEMED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS R EIMBURSEMENT. COPY OF THE SAID ORDER WAS FILED BY THE LD.A.R. 3. INVITING ATTENTION TO THE NEXT ISSUE AGITATED BY THE REVENUE IN REGARD TO THE CLAIM OF THE ASSESSEE HAVING RECEIVED A SUM OF RS.48,27,976/- AGAINST LOSS OF EQUIPMENT IN WHOLE I T WAS SUBMITTED THAT THE SAID ISSUE HAS BEEN DISCUSSED AT PARA 7 AND 8 O F THE IMPUGNED ORDER WHEREIN RELYING UPON THE JURISDICTIONAL HIGH COURT JUDGEMENT IN ITA 58/2006 THE ISSUE WAS ALSO CONCLUDED IN FAVOUR OF A SSESSEE. COPY OF THE SAID ORDER WAS ALSO FILED BY THE LD.A.R. ITA 108 8/DEL/2011 PAGE 3 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . 4. LD.CIT, D.R. SOUGHT TIME TO GO THROUGH THE JUDGE MENTS OF THE JURISDICTIONAL HIGH COURT ESPECIALLY SINCE THE ORD ER OF THE TRIBUNAL WHICH HAS BEEN CONSIDERED BY THE JURISDICTIONAL HI GH COURT IN ITA 3150/DEL/2001 PERTAINING TO A.Y. 1995-96 WAS NOT AV AILABLE WITH THE LD.A.R. AS SUCH ACCEDING TO THE ORAL REQUEST FOR TI ME THE APPEAL WAS ADJOURNED. 5. ON THE NEXT DATE OF HEARING LD.D.R. FILED A COPY OF THE SAID ORDER DT. 25 TH APRIL, 2005 IN ITA 3150/DEL PERTAINING TO A.Y. 199 6-97 STATING IN RESPONSE TO QUERY OF THE BENCH THAT THE SAID ISSUE IN THE INTERVENING YEARS DID NOT ARISE AND THIS IS THE ONLY ORDER OF T HE TRIBUNAL AVAILABLE ON THE ISSUE. 6. LD.D.R. ON A PERUSAL OF THE IMPUGNED ORDER STATE D THAT NO DOUBT THESE ARE THE TWO ADDITIONS DELETED BY THE CIT(A). HOWEVER INVITING ATTENTION TO THE ASSESSMENT ORDER ON WHICH RELIANCE HAS BEEN PLACED IT WAS HIS SUBMISSION THAT THE A.O. SPECIFICALLY PUT THE ASSESSEE TO NOTICE THAT RS.2,08,23,351/- PERTAINING TO REIMBURSEME NT HAS NOT BEEN INCLUDED BY THE A SSESSEE AND HE MADE AN ADDITION OF THIS AMOUNT. IT WAS HIS SUBMISSION THAT PRINCIPALLY ON THE LEGAL IS SUES ADDRESSED BY THE LD.A.R. THE ISSUES STAND CONCLUDED IN ASSESSEES FA VOUR HOWEVER WHETHER THESE WERE THE REASONS PREVAILING WITH THE A.O. FAC TS ARE NOT EMERGING FROM THE ASSESSMENT ORDER UNLESS THE LDAR CAN THR OW SOME LIGHT ON THE ISSUE. THE LD.A.R. FAIRLY STATED THAT NO DO UBT THESE FACTS ARE ITA 108 8/DEL/2011 PAGE 4 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . NOT FOUND DISCUSSED IN THE ASSESSMENT ORDER, HOWEVE R VERIFICATION CAN BE DONE AS THE ISSUES ARE COVERED IN ASSESSEES FAVOUR . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME IT IS SEEN THAT IN REGARD TO THE CUSTOMS DUTY REIMBURSEMENT TH E ISSUE WAS DECIDED BY CIT(A) HOLDING AS UNDER:- 6. GROUND NO.3 IS REGARDING TAXATION OF RS. 1,97,3 4,541/- AN AMOUNT CLAIMED TO BE PAID BY THE APPELLANT AS CUSTO MS DUTY AND REIMBURSED TO IT BY THE ONGC. THE LD.ARS HAVE STAT ED THAT THE ADDITION IS NOT SUSTAINABLE AS THE VERY ISSUE IS CO VERED IN THE DECISION OF HONBLE HIGH COURT OF UTTARAKHAND IN A. NO. 204 OF 2007 IN APPELLANTS OWN CASE. THE PUNCH LINE FROM THAT DECISION IS REPRODUCED AS UNDER: HAVING CONSIDERED SUBMISSIONS OF LD.COUNSEL FOR T HE PARTIES, WE ARE OF THE VIEW THAT REIMBURSEMENT TOWARDS THE C USTOM DUTY, PAID BY THE ASSESSEE, BEING STATUTORY IN NATURE, CA NNOT FORM PART OF AMOUNT FOR THE PURPOSES OF DEEMED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. KEEPING IN VIEW THE ABOVE DECISION, THE ADDITION IS DELETED. 6. A PERUSAL OF THE JUDGEMENT OF JURISDICTIONAL HIG H COURT SHOWS THAT THE FACTS AND ISSUES ALONG WITH CONCLUSIONS ARE DIS CUSSED AS UNDER. '4. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THA T RESPONDENT/ASSESSEE M/S SCHLUMBERGER ASIA SERVICES LTD. (FOR SHORT SASL), IS A COMPANY INCORPORATED UNDER T HE LAWS OF HONGKONG, WHICH FILED ITS RETURN OF INCOME ON 31.10 .2002, DECLARING INCOME OF RS.19,60,06,200/-. THE A.O. NO TICED THAT SASL HAS NOT OFFERED FOR TAX ON CERTAIN AMOUNTS, RE CEIVED BY IT TOWARDS THE REIMBURSEMENT OF EXPENSES, WHICH INCLUD ED CUSTOM DUTY, AND ACCORDINGLY ASSESSED THE INCOME TO RS. 19,72,63,659/-. AGGRIEVED BY SAID ORDER, THE ASSES SEE FILED APPEAL BEFORE THE CIT. THE SAID AUTHORITY VIDE ITS ORDER DT. 11.10.2006, PARTLY ALLOWED THE APPEAL HOLDING THAT THE CUSTOM DUTY, PAID IN IMPORTING THE EQUIPMENTS FOR RENDERIN G SERVICES, ITA 108 8/DEL/2011 PAGE 5 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . CANNOT FORM PART OF THE AMOUNT TAXABLE U/S 44 BB O F THE ACT. THEREAFTER, THE REVENUE FILED ITA NO.4180/DEL/2006 (A.Y. 2002-03), BEFORE THE ITAT, WHICH HAS DISMISSED SAID APPEAL, VIDE ITS IMPUGNED ORDER DT. 13.4.2007. 5. LD.COUNSEL FOR THE RESPONDENTS DREW ATTENTION OF THIS COURT TO SUB SECTION (2) OF SECTION 44BB OF THE ACT , WHICH READS AS UNDER. 2. THE AMOUNTS REFERRED TO IN SUB SECTION (1) SHAL L BE THE FOLLOWING, NAMELY:- A) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF IN DIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED, OR TO B E USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF , MINERAL OILS IN INDIA; AND B) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN IND IA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE PROVISI ON OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPP LY OF PLANT AND MACHINERY ON HIRE USED, OR TO BE USED, IN THE P ROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF MINERALS OILS O UTSIDE INDIA. 6. ATTENTION OF THIS COURT IS ALSO DRAWN TO THE PRI NCIPLE OF LAW LAID DOWN BY THIS COURT IN CIT VS. HALLIBURTON OFFSHORE SERVICES INC. (2008) 169 TAXMAN 138, SEDCO FOREX INTERNATIONAL INC. VS CIT (2008) 170 TAXMAN 459, CI T VS BJ SERVICES CO. MIDDLE EAST (2008) 170 TAXMAN 286, CIT VS. TRANS OCEAN OFFSHORE INC. (2008) 173 TAXMAN 429, CI T VS. ENSO MARITIME LTD. (2009) 181 TAXMAN 46, AND CIT VS RBF RIG CORP. (2009) 313 ITR 369. RELYING ON THESE CAS ES, IT IS CONTENDED ON BEHALF OF THE APPELLANT/REVENUE THAT A LL KINDS OF AMOUNT ARE TO BE INCLUDED FOR THE PURPOSES OF CALCU LATING AMOUNT ON WHICH 10% PROFITS UNDER SUB SECTION 1 OF SECTION 44BB OF THE ACT. PERUSAL OF THE AFORESAID CASE LAWS , SHOW THAT THESE RELATE TO FREIGHT AND TRANSPORTATION CHARGES, MOBILIZATION CHARGES, SUPPLY OF SPARE PARTS, CATERING CHARGES AN D FUEL CHARGES. NONE OF THESE CASES REFER TO THE REIMBURSE MENT OF THE CUSTOM DUTY TO THE ASSESSEE. 7. LD.COUNSEL FOR THE RESPONDENT SUBMITTED THAT FOR IMPORT OF THE MACHINERY OR EQUIPMENT, LIABILITY TO PAY THE CUSTOM DUTY WAS ON THE ONGC WHO HAS HIRED THE SERVICES OF THE A SSESSEE IN CONTRACT. IT IS FURTHER SUBMITTED THAT THERE CA NNOT BE ELEMENT OF PROFIT IN REIMBURSEMENT OF THE CUSTOM DU TY, PAID BY ITA 108 8/DEL/2011 PAGE 6 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . THE ASSESSEE. AS SUCH, IT IS CONTENDED ON BEHALF O F THE RESPONDENT/ASSESSEE THAT CIT(A) AND ITAT, HAS RIGHT LY HELD THAT SAID AMOUNT, RECEIVED BY THE ASSESSEE IS TO BE EXCLUDED IN COMPUTING PROFITS U/S 44BB OF THE ACT. 8. HAVING CONSIDERED SUBMISSIONS OF LD.COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT REIMBURSEMENT TOWA RDS THE CUSTOM DUTY, PAID BY THE ASSESSEE, BEING STATUTORY IN NATURE, CANNOT FORM PART OF AMOUNT FOR THE PURPOSES OF DEEM ED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSE MENT. THEREFORE, WE DO NOT FIND ANY SUFFICIENT REASON TO INTERFERE WITH THE IMPUGNED ORDERS, PASSED BY ITAT;, WHICH HA S AFFIRMED THE VIEW TAKEN BY THE CIT(A). QUESTION OF LAW STANDS ANSWERED ACCORDINGLY. 9. FOR THE REASONS, AS DISCUSSED ABOVE, THE APPEAL IS DISMISSED. 7. SIMILARLY IN REGARD TO THE NEXT ISSUE DISCUSSED BY THE CIT(A) THE FACTS ARE FOUND DISCUSSED IN PARA 7 OF THE IMPUGNED ORDER WHEREIN RELIANCE IS PLACED ON THE JUDGEMENT OF THE JURISDIC TIONAL HIGH COURT IN ITA 58/2006 FOR A.Y. 1996-97 AT PARA 8 AND 9 WHER EIN CONSIDERING THE QUESTION THEIR LORDSHIPS CONCLUDED AS UNDER:- 8. SO FAR AS QUESTION NO.1 REGARDING THE ADDITION OF AMOUNT OF COMPENSATION OF RS.2,38,01,048/- AND RS. 3,01,41,314/- RECEIVED FROM THE ONGC AND INSURANCE CO. RESPECTIVELY FOR THE PURPOSE OF COMPUTATION OF INCO ME OF THE ASSESSEE COMPANY IS CONCERNED, THE ITAT HAS RECORDE D A CLEAR CUT FINDING IN PARA 4 OF ITS JUDGEMENT, THE RELEVAN T PORTION THEREOF IS REPRODUCED AS UNDER. IT IS NOT THE CASE OF THE REVENUE THAT TWO AMOUNTS REFERRED TO ABOVE WERE RECEIVED BY THE ASSESSEE ON ACCOUNT OF S UPPLY OF PLANT AND MACHINERY ON HIRE TO THE ONGC USED OR TO BE USED IN PROSPECTING FOR, EXTRACTION OR PRODUCTION OF MINERA L OIL IN INDIA. THE CLEAR CLAIM OF THE ASSESSEE THAT THESE AMOUNTS WERE RECEIVED AS CAPITAL RECEIPT FROM ONGC AND INSURANCE CO. TOWARDS COMPENSATION FOR DESTRUCTION OF ITS MACHINE RY UTILIZED ON A RIG OWNED BY ONGC HAS NOT BEEN DENIED BY THE A .O. THE A.O. WAS OF THE VIEW THAT ALL RECEIPTS INCLUDING CA PITAL RECEIPTS ARE LIABLE TO BE CHARGED TO TAX U/S 44BB OF THE ACT . THIS VIEW ITA 108 8/DEL/2011 PAGE 7 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . HAS BEEN APPROVED BY THE LDCIT(A) IN HIS BRIEF AND CRYPTIC ORDER. HOWEVER, THE REVENUE AUTHORITIES HAVE NOT G IVEN ANY BASIS FOR ADOPTING ABOVE VIEW. AS NOTED EARLIER U/ S 44BB OF THE ACT, AMOUNTS THAT CAN BE CHARGED TO TAX, ARE TH E AMOUNTS RECEIVED FOR PROVIDING SERVICES AND FACILITIES IN T HE PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS. T HE STATUTORY PROVISION AS PER LANGUAGE EMPLOYED, ENVISAGES TAXIN G OF ONLY REVENUE RECEIPT I.E. A RECEIPT CONNECTED WITH PROV ISION OF SERVICES OR FACILITIES OR SUPPLY OF PLANT AND MACHI NERY ON HIRE USED TO BE IN EXTRACTION OR PRODUCTION ETC. OF MINE RAL OIL IN INDIA. THERE IS NOTHING TO SUGGEST IN THE SECTION THAT ALL SORTS OF RECEIPTS INCLUDING CAPITAL RECEIPTS ARE REQUIRED TO BE TAKEN INTO ACCOUNT FOR COMPUTING ASSESSEES INCOME U/S 44BB OF THE ACT. WE, THEREFORE, FIND FORCE IN THE CONTENTION ADVANCE D ON BEHALF OF THE ASSESSEE. THE ASSESSEE IS FURTHER JUSTIFIED IN SUPPORTING HIS CLAIM ON THE BASIS OF DECISION OF HONBLE SUPREME C OURT IN THE CASE OF UOI VS GOSALIA SHIPPING P.LTD. (1978) 113 I TR 307. IT IS RELEVANT TO MENTION THAT EVEN ONGC DID NOT TREAT AB OVE RECEIPTS AS RECEIPTS FOR SERVICES PROVIDED BY THE ASSESSEE A ND DID NOT DEDUCT TAX AT SOURCE FROM RECEIPTS WHILE MAKING PAY MENT TO THE ASSESSEE. 9. IN THE VIEW OF ABOVE CLEAR CUT FINDING OF THE IT AT AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF T HE CONSIDERED OPINION THAT THIS QUESTION HAS ALREADY B EEN CONCLUDED BY THE FINDING OF FACT AND NO SUCH QUESTI ON OF LAW ARISES TO BE ANSWERED IN THIS APPEAL. WE ARE IN FU LL AGREEMENT WITH THE FINDINGS RECORDED BY THE ITAT IN THIS REGA RD, WHICH DO NOT CALL FOR ANY INTERFERENCE BY THIS COURT. 8. ACCORDINGLY IN THE AFORE MENTIONED PECULIAR FACT S AND CIRCUMSTANCES CONSIDERING THE LEGAL POSITION IN THE ABSENCE OF RELEVANT DETAILED DISCUSSION IT IS NECESSARY TO VERIFY THE F ACTS AT THE STAGE OF THE A.O. ACCORDINGLY THE A.O. IS DIRECTED TO VERIFY WH ETHER THE A.O.S ADDITION CONSISTS OF ADDITION ON ACCOUNT OF CUSTOMS DUTY REIMBURSEMENT AND RECEIPT OF AMOUNT AS CAPITAL RECEIPT FROM ONGC AND INSURANCE COMPANY TOWARDS COMPENSATION FOR DESTRUCTION OF RI G OWNED BY ONGC. IN THE EVENTUALITY THE ADDITION STOOD MADE ON ACCOU NT OF THE ABOVE TWO ITA 108 8/DEL/2011 PAGE 8 OF 8 A.Y. : 2005-06 M/S SCHUMBERGER ASIA SERVICES LTD . REASONS THE POSITION IS SETTLED IN ASSESSEES FAVOU R BY VIRTUE OF JUDGEMENTS OF THE JURISDICTIONAL HIGH COURT IN ASS ESSEES OWN CASE. 9. ACCORDINGLY FOR THE DETAILED REASONS GIVEN HEREI N ABOVE THE ISSUE IS RESTORED FOR VERIFICATION ON FACTS TO THE A.O. IN THE LINE WITH THE JUDGEMENTS OF THE JURISDICTIONAL HIGH COURT IN ASSE SSEES OWN CASE. 10. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH APRIL, 2012. SD/- SD/- (S.V. MEHROTRA) (DIVA SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBE R DATED 19TH APRIL, 2012 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //