ADIT, Dehradun V. M/s. Smith International Inc., Dehradun

ITA 1375/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77786 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Keywords: Question of law

Judgement Text

ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.1375/DEL/2012 ASSESSMENT YEAR : 2006-07 ADIT, VS SMITH INTERNATIONAL INC. INTERNATIONAL TAXATION, C/O NANGIA & CO., 13A-SUBHASH ROAD, 75/7, RAJPUR ROAD, AAYAKAR BHAWAN, DEHRADUN. DEHRADUN-248001 (PAN: AAHCS3 148R) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJEEV SHARMA, CIT D R RESPONDENT BY : SHRI AMIT ARORA O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE CIT(A)-II, DEHRADUN DATED 10.01.2012 IN APPE AL NO. 488/DDN/ 2008-09 FOR AY 2006-07. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- 1.WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAD ERRED IN HOLDING THAT THE AMOUNT OF REIMBURSEMENT(S) ON ACCOUNT OF CUSTOM DUTY AND OTHER REIMBURSEMENTS WERE NOT INCLUDIBLE IN THE GROSS RECEIPTS FOR THE PURPOSE OF COMPUTING ASSESSEE'S INCOME UNDER THE PROVISIONS OF SECTION 4488 OF THE INCOME TAX ACT, 1061 BY IGNORING THE DECISION OF HON'BLE UTTARAKHAND HIGH COURT IN THE ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 2 2 CASE OF CIT VS. HALLIBURTON OFFSHORE SERVICES INC. (300 ITR 265). 2. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNT OF REIMBURSEMENTS ON ACCOUNT OF CUSTOM DUTY AND OTHER REIMBURSEMENTS WERE NOT INCLUDIBLE IN THE GROSS RECEIPTS FOR THE PURPOSE OF COMPUTING ASSESSEE'S INCOME UNDER THE PROVISIONS OF SECTION 44BB OF THE INCOME TAX ACT, 1961 WHEN THE RATIONALE FOR INCLUSION OF BOTH I.E. SERVICE TAX AND CUSTOM D UTY ARE ON ALL FOURS NAMELY PAYMENT TO THE ASSESSEE OR PAYABLE TO THE ASSESSEE ON ACCOUNT OF SERVICE AND FACILITIES IN CONNECTION WITH THE EXTRACTION OR PRODUCTION OF MINERAL OILS U/ 44BB. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN RELYING UPON THE DECISION IN THE CASE OF DIT VS SCHLUMBERGER ASIA SERVICES (186 TAXMAN 436) (UK) WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. GROUND N0. 1, 2 & 3 3. APROPOS THESE GROUNDS, WE HAVE HEARD ARGUMENTS O F BOTH THE SIDES AND CAREFULLY PERUSED THE RECORD, INTER ALIA DECISION OF HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF DIT VS SCHLUMBERGER ASIA SERVICES ASIA SERVICES LTD. REPOR TED AS (2009) 317 ITR 156 (UTTARAKHAND) . THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SOLE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF DIT VS SCH LUMBERGER ASIA ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 3 3 SERVICES LTD.(SUPRA). LD. DR FAIRLY ACCEPTED THAT THE ISSUE OF REIMBURSEMENT OF THE CUSTOM DUTY PAID BY THE ASSESS EE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECI SION OF HONBLE HIGH COURT OF UTTARAKHAND. 4. IN THE PRESENT CASE, FROM BARE READING OF THE IM PUGNED ORDER, WE OBSERVE THAT THE CIT(A) HAS GRANTED RELIEF FOR T HE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSIONS:- 3. THE FIRST TWO GROUNDS ARE ON THE ISSUE OF TAXING THE REVENUES REPRESENTING REIMBURSEMENT OF EXPENDITURE ON ACCOUNT OF ENGAGEMENT OF SERVICES OF HELICOPTER. THE LD AR HAS FILED DETAILED BREAKUP OF THE IMPUGNED AMOUNT OF RS 90,84,691(AS FILED BEFORE LD AO) AS UNDER: (I) RS 87,84,468 ON ACCOUNT OF REIMBURSEMENT OF CUSTOMS DUTY; AND (II) RS 3,00,223 ON ACCOUNT OF OTHER REIMBURSEME NTS. 3.1 THE LD AR HAS RELIED UPON THE CASE OF DIT VS SCHLUMBERGER ASIA SERVICES LTD [186 TAXMAN 436(UK)] FOR SEEKING RELIEF ON THE AMOUNT MENTIONED AT (I) ABOVE. THIS ISSUE MAY BE DISCUSSED IN THE LI GHT OF VARIOUS DECISIONS OF THE HON'BLE JURISDICTIONAL HIG H COURT. 3.2 IT IS SEEN THAT THE LD. AO RELIED ON THE CASE OF HALLIBURTON OFFSHORE SERVICES REPORTED IN 300 JTR 265 (UK) TO TAX THE REIMBURSEMENTS U/S 44BB OF THE ACT. THE CASE OF HALLIBURTON OFFSHORE (SUPRA) HAS B EEN THE SUBJECT MATTER OF ANALYSIS AND REVIEW IN THE CA SE OF DIT VS. SCHLUMBERGER ASIA SERVICES LTD. REPORTED IN 186 TAXMAN 436 (UK). IN THIS CASE IT HAS BEEN HELD ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 4 4 THAT CUSTOMS DUTY, BEING A STATUTORY LEVY, CANNOT F ORM PART OF RECEIPTS OF ASSESSEE FOR DETERMINING HIS IN COME U/S 44BB OF THE ACT. THE OTHER FINDINGS IN THE CASE OF HALLIBURTON OFFSHORE HAVE NOT BEEN DISTINGUISHED OR DIFFERED WITH. CONSIDERING THE EXPRESS FINDING OF T HE HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE OF TAXABILITY OF REIMBURSEMENT OF CUSTOMS DUTY, THE AMOUNT OF RS.87,84,468 IS HELD TO BE OUTSIDE THE PURVIEW OF TAXATION U/S 44BB OF THE ACT. 5. FROM CAREFUL READING OF DECISION OF HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF DIT VS SCHLUMBERGER ASIA SERVICES LTD.(SUPRA), WE NOTE THAT THE ISSUE OF REIMBURSEMEN T OF CUSTOM DUTY PAID BY THE ASSESSEE HAS BEEN DECIDED AGAINST THE R EVENUE AND IN FAVOUR OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 6. ATTENTION OF THIS COURT IS ALSO DRAWN TO THE PRINCIPLE OF LAW LAID DOWN BY THIS COURT IN CIT VS. HALLIBURTON OFFSHORE SERVICES INC. (2007) 213 CTR (UTTARAKHAND) 547 : (2008) 169 TAXMAN 138 (UTTARAKHAND), SEDCO FOREX INTERNATIONAL INC. VS. C IT (2008) 214 CTR (UTTARAKHAND) 192 : (2008) 170 TAXMAN 459 (UTTARAKHAND), CIT VS. B.J. SERVICES CO. MIDDLE EAST (2007) 213 CTR (UTTARAKHAND) 545 : (2008) 170 TAXMAN 286 (UTTARAKHAND), CIT VS. TRANS OCEAN OFFSHORE INC. (2008) 173 TAXMAN 429 (UTTARAKHAND), CIT VS. ENSO MARITIME LTD. (2009) 24 DTR (UTTARAKHAND) 221 : (2009) 181 TAXMAN 46 (UTTARAKHAND), AND CIT VS. RBF RIG CORPORATION (2009) 24 DTR (UTTARAKHAND) 224 : (2009) 313 ITR 369 (UTTARAKHAND). RELYING ON THESE CASES, IT IS CONTENDED ON BEHALF OF THE APPELLANT/REVENUE THAT A LL KINDS OF AMOUNT ARE TO BE INCLUDED FOR THE PURPOSES OF CALCULATING AMOUNT ON WHICH 10 PER CENT PROFITS UND ER SUB-S. (1) OF S. 44BB OF THE ACT. PERUSAL OF THE AF ORESAID ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 5 5 CASE LAWS, SHOWS THAT THESE RELATE TO FREIGHT AND TRANSPORTATION CHARGES, MOBILISATION CHARGES, SUPPL Y OF SPARE PARTS, CATERING CHARGES AND FUEL CHARGES. NONE OF THESE CASES REFER TO THE REIMBURSEMENT OF T HE CUSTOMS DUTY TO THE ASSESSEE. 7. LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT FOR IMPORT OF THE MACHINERY OR EQUIPMENT, LIABILITY TO PAY THE CUSTOMS DUTY WAS ON THE OIL AN D NATURAL GAS CORPORATION (FOR SHORT ONGC), WHO HAS HIRED THE SERVICES OF THE ASSESSEE IN CONTRACT. IT IS FURTHER SUBMITTED THAT THERE CANNOT BE ELEMENT OF PROFIT IN REIMBURSEMENT OF THE CUSTOMS DUTY, PAID B Y THE ASSESSEE. AS SUCH, IT IS CONTENDED ON BEHALF OF THE RESPONDENT/ASSESSEE THAT CIT(A) AND TRIBUNAL, HAVE RIGHTLY HELD THAT SAID AMOUNT, RECEIVED BY THE ASSE SSEE IS TO BE EXCLUDED IN COMPUTING PROFITS UNDER S. 44B B OF THE ACT. 8. HAVING CONSIDERED SUBMISSIONS OF LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT REIMBURSEMENT TOWARDS THE CUSTOMS DUTY, PAID BY THE ASSESSEE, BEING STATUTORY IN NATURE, CANNOT FORM PA RT OF AMOUNT FOR THE PURPOSES OF DEEMED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. THEREFORE, WE DO NOT FIND ANY SUFFICIENT REASON TO INTERFERE WITH THE IMPUGNED ORDERS, PASSED BY THE TRIBUNAL, WHICH HAS AFFIRMED THE VIEW TAKEN BY THE CIT(A). QUESTION OF LAW STANDS ANSWERED ACCORDINGLY. 6. IN VIEW OF ABOVE, WE OBSERVE THAT THE CIT(A) HAS GRANTED RELIEF FOR THE ASSESSEE BY RELYING UPON THE DECISION OF HO NBLE UTTARAKHAND HIGH COURT IN THE CASE OF DIT VS SCHLUMBERGER ASIA SERVICES LTD.(SUPRA) AND ON A SPECIFIC QUERY FROM THE BENCH, LD. DR FAIRLY ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 6 6 ACCEPTED THAT THE DECISION OF HONBLE HIGH COURT OF UTTARAKHAND IS SQUARELY APPLICABLE TO THE PRESENT CASE ON THE ISSU E OF REIMBURSEMENT OF CUSTOM DUTY. 7. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD T HAT THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLL OWING DECISION OF HONBLE HIGH COURT OF UTTARAKHAND (SUPRA) WHEREIN I T HAS BEEN HELD THAT THE REIMBURSEMENT TOWARDS CUSTOM DUTY PAID BY THE ASSESSEE, BEING STATUTORY IN NATURE CANNOT FORM PART OF AMOUN T FOR THE PURPOSE OF DEEMED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. ACCORDINGLY, GROUND NO. 1, 2 AND 3 OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. 8. IN THE RESULT, RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE HIGH COURT OF UTTARAKHAND (SUPRA), THE APPEAL OF THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH JULY 2 014. SD/- SD/- (S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 18TH JULY 2014 GS ITA NO. 1375/DEL/2012 ASSTT.YEAR: 2006-07 7 7 COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER 5. ASSTT. REGISTRAR