DDIT, Dehradun V. Louis Dreyfus Armateures SAS, Noida

ITA 1424/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5922 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Assessee Lawyers: HEMLATA RANGA; ABHINAV JHAMBA
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.1424/DEL/2014 ASSESSMENT YEAR: 2006-07 DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), DEHRADUN VS. LOUIS DREYFUS ARMATEURES SASN (LDA), C/O SRBC & ASSOCIATES, 4 TH & 5 TH FLOOR, PLOT NO.2B, TOWER 2, SECTOR-126, NOIDA. TAN/PAN: AAACJ 2734R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.K. DHALL, CIT-DR RESPONDENT BY: SHRI ABHINAV JHAMBA & MS. HEMLATA RANGA, ADV. DATE OF HEARING: 14 06 2018 DATE OF PRONOUNCEMENT: 21 06 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE FINAL ASSESSMENT ORDER DATED 06.01.2014 , PASSED IN PURSUANCE OF DIRECTION GIVEN BY THE LEARN ED DRP- II, NEW DELHI VIDE ORDER DATED 26.12.2013. IN VARIO US GROUNDS OF APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS: GROUNDS OF APPEAL 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE HONBLE I.T.A. NO.1424/DEL/2014 2 DISPUTE RESOLUTION PANEL (DRP) HAS ERRED IN DIREC TING THE ASSESSING OFFICER TO APPLY THE DEEMED PROFIT RATE O F 10% U/S 44BB OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE REVEN UES EARNED BY THE ASSESSEE FROM A NON-RESIDENT COMPANY, M/S CGG M ARINE (CGG), ON ACCOUNT OF PROVISION OF SEISMIC SURVEY VESSELS ON HIRE FOR EXECUTING CONTRACTS WITH M/S ONGC. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE HONBLE DRP HAS ERRED IN HOLDING THAT THE AMOUNT RE CEIVED BY THE ASSESSEE FROM M/S CGG, A FRENCH COMPANY, ON ACCOUNT OF THE PROVISION OF SEISMIC SURVEY VESSELS UNDER GLOBAL TI ME CHARTER CONTRACTS WAS NOT IN THE NATURE OF ROYALTY AS DEFIN ED U/S 9(1)(VI) OF THE ACT AND WAS NOT TAXABLE UNDER THE PROVISIONS OF SEC 44DA R.W.S. 115A OF THE ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE REVENUES EARNED BY THE ASSESSEE ON ACCOUNT OF PROVISION OF SEISMIC VESSELS ON HIRE TO A NON-RESIDENT COMPANY WERE IN CONNECTION WITH PROSPE CTING ETC OF MINERAL OIL AND HENCE ELIGIBLE FOR TREATMENT U/S 44 BB OF THE ACT, WITHOUT ADJUDICATING THE ASPECT OF ELIGIBILITY IN T ERMS OF SECOND LIMB OF THE EXCLUSIONARY PROVISO (EXPLANATION TO SE CTION 9(L)(VII) OF THE I T ACT, 1961) I.E. 'FOR A PROJECT UNDERTAKEN B Y THE RECIPIENT' IN TERMS OF THE PROPOSITION CONFIRMED BY HONBLE DELHI HIGH COURT IN DIT V RIO TINTO TECHNICAL SERVICES [2012-TII-01-HC- DEL-INTL]. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FACT IN THE PRESENT CASE THE SEISMIC VESSELS WERE NOT PROVIDED ON HIRE BY THE ASSESSEE DIRECTLY TO AN ENTITY (M/S ONGC) WHICH IS ENGAGED I N PROSPECTING ETC OF MINERAL OIL AND IS DIRECTLY A MEMBER OF THE PRODUCTION SHARING CONTRACT. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE I.T.A. NO.1424/DEL/2014 3 HONBLE DRP HAS ERRED IN HOLDING THAT NO DISTINCTIO N CAN BE MADE BETWEEN RECEIPTS FROM PRODUCTION SHARING PARTICIPAN TS (PSC PARTNERS) AND NON-PRODUCTION SHARING PARTICIPANTS (NON-PSC PARTNERS') AND BETWEEN PLANT & EQUIPMENT PROVIDED O N HIRE BY FIRST- LEG AND SECOND-LEG VENDORS, IGNORING THE FACT THAT THE RECEIPTS FROM SECOND-LEG ARE IN RESPECT OF CONTRACTS WHICH ARE EN TERED INTO WITH COMPANIES NOT DIRECTLY ENGAGED IN OIL PRODUCTION AN D EXPLORATION AND, THEREFORE, ARE LIABLE TO TAX U/S 9( 1 )(VI)/9( 1)(VII) READ WITH SECTION 44DA AND NOT SECTION 44BB OF THE IT ACT, 19 61. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE DRP HAS ERRED IN ITS INTERPRETATION OF THE LEGISLATIVE INTENT BEHIND THE SCHEME OF TAXATION ENVISAGED IN 9(L)(VI) READ WITH SECTIONS 44DA AND 44BB , IGNORING THE DECISIONS IN THE CASES OF M/S ROLLS ROYCE PVT. LTD [2007-T1I-03-HC-UKHAND-INTL ] AND M/S ONGC AS AGENT OF M/S FORAMER FRANCE [(2008) 299 ITR 438 UTTARAKHAND] 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HONBLE DRP HAS ERRED IN IGNORING THE DISTINCT SCHE ME OF TAXATION OF ROYALTY& FEE FOR TECHNICAL SERVICES AND DISREGARDIN G THE INSERTION OF PROVISOS IN SECTION 44BB/44DA/ 115A AND THE RATI ONALE BEHIND THE INTRODUCTION OF SAID CLARIFICATORY PROVISOS IN THE FINANCE BILL 2010 IN HOLDING THAT THE INCOME OF THE ASSESSEE COM PANY WAS COVERED UNDER THE PROVISIONS OF SECTION 44BB. 8. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THAT SINC E SECTIONS 44DA/115A ARE SPECIAL PROVISIONS FOR TAXATION OF IN COME IN THE NATURE OF ROYALTIES AND FTS AND IF A SPECIAL PROVIS ION IS MADE RESPECTING A CERTAIN MATTER THAT MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RULE OF 'GENERALLIASPECIALIBUS NON DEROGANT'. 9. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE I.T.A. NO.1424/DEL/2014 4 HONBLE DRP HAS ERRED IN HOLDING THAT THE PROVISION S OF SECTION 44BB OF THE ACT ARE MORE SPECIAL PROVISIONS WHICH S HALL PREVAIL OVER THE PROVISIONS OF SECTION 9(L)(VI) READ WITH S ECTIONS 44DA AND 115A OF THE ACT, NOT APPRECIATING THE FACT THAT BOT H SET OF PROVISIONS ARE SPECIAL IN NATURE WHICH OPERATE IN THEIR OWN CL EARLY DEFINED SPHERES AND THEREFORE, ONCE A PARTICULAR RECEIPT OR INCOME TAKES ON THE CHARACTER OF ROYALTY AS DEFINED IN SECTION 9(L) (VI), IT CANNOT BE CONSIDERED FOR TREATMENT U/S 44BB OF THE ACT. 10. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HONBLE DRP HAS ERRED IN HOLDING THAT SECTIONS 44DA AND SEC TION 115A APPLY ONLY TO CASES WHERE THE INCOME BY WAY OF ROYA LTY OR FTS IS EARNED BY A NON-RESIDENT FROM GOVERNMENT OR AN INDI AN ENTITY AND WHERE AN INCOME IS RECEIVED BY A NON-RESIDENT FROM ANOTHER NON- RESIDENT, THE PROVISIONS OF SECTION 44DA/115A DO NO T APPLY. 11. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HONBLE DRP HAS ERRED IN NOT APPRECIATING THAT PROVISO TO S ECTION 44BB IS NOT INSERTED 'PER MAJOREMCAUTELAM' BUT EXPLAINS AND CLARIFIES THE MAIN PROVISION AS THE TERMS SERVICES OR FACILITIES USED THEREIN ARE NOT DEFINED AND THE TWO TERMS USED ARE TOO GENERAL IN NATURE AND THUS ONCE THE PAYMENTS TAKE THE CHARACTER OF ROYALT Y U/S 9(L)(VI), THEY GO OUTSIDE THE PURVIEW OF SECTION 44BB AND HAV E TO BE TAXED AS ROYALTY AT RATES PRESCRIBED FOR ROYALTY INCOME U NDER THE ACT AND /OR DTAA. 12. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HONBLE DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT PRO VISO TO SECTION 44DA BROUGHT ABOUT BY THE FINANCE ACT2011 WAS ONLY CLARIFICATORY IN NATURE AND ITS APPLICATION HAS TO BE READ INTO T HE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVI SION CAME INTO EFFECT IN VIEW OF THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING V/S CIT. I.T.A. NO.1424/DEL/2014 5 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 VIDE ITA NO.5184/DEL/2010 ORDER DATED 17.02.2015. APART FROM THAT HE HAS ALSO SUBMITTED T HAT NOW THIS STAND SET AT REST BY THE JUDGMENT OF HON'B LE SUPREME COURT IN THE CASE OF ONGC LTD. VS. CIT & AN R. 3. LEARNED DEPARTMENT REPRESENTATIVE TOO ADMITTED T HAT THIS ISSUE STANDS COVERED BY THE DECISION OF THE TR IBUNAL AS WELL AS BY THE HON'BLE SUPREME COURT. 4. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE LAWS OF FRANCE AND HAS EARNED REVENUES FROM PROVIDI NG SEISMIC SURVEY VESSELS ON HIRE TO M/S. CGG MARINE, A FRENCH COMPANY, UNDER A GLOBAL TIME CHARTER CONTRAC TS FOR USE IN SEISMIC DATA ACQUISITION AND ON BOARD PROCES SING FOR PROSPECTING, EXTRACTION AND PRODUCTION OF MINERAL O ILS IN TERMS OF CONTRACT WITH ONGC. THE ASSESSEE HAS OFFER ED THE GROSS REVENUE OF RS.15,81,38,210/- EARNED FROM HIRE OF THE ABOVE VESSELS FOR TAXATION IN ITS RETURN OF INCOME AFTER APPLYING THE DEEMED PROFIT RATE OF 10% U/S.44BB OF THE ACT. THE ASSESSING OFFICER HAS DENIED THE APPLICABILITY OF SECTION 44BB IN THE DRAFT ASSESSMENT ORDER ON THE GROUND TH AT ASSESSEE HAD SUPPLIED THE VESSEL TO M/S. CGG MARINE WHICH WAS NOT A PARTY TO THE PRODUCTION SHARING CON TRACT I.T.A. NO.1424/DEL/2014 6 WITH ONGC, INSTEAD HE TREATED THE ENTIRE RECEIPT AS ROYALTY. LEARNED DRP HELD THAT THE ASSESSEE IS PROVIDING SER VICES OR FACILITIES IN CONNECTION WITH OR SUPPLYING PLANT AN D MACHINERY ON HIRE USE OR TO BE USED IN THE PROSPECT ING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS. THERE IS NO PROVISION U/S.44BB TO SUPPORT THE ASSESSING OFFICER S INTERPRETATION OF THE SO CALLED SECOND LEG CONTRAC T SO AS TO DENY THE APPLICABILITY OF THE SECTION TO THE ASSESS EE. ONLY REQUIREMENT OF THE SECTION IS PLANT AND MACHINERY I S GIVEN ON HIRE IS USED OR TO BE USED IN THE PROSPECTING /EXTRACTION/PRODUCTION OF MINERAL OIL. THUS THE LEA RNED DRP UPHELD THE APPLICABILITY OF SECTION 44BB. 5. WE FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 2007-08 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HELD THAT PROVISION OF S ECTION 44BB WOULD BE APPLICABLE. NOW THIS ISSUE STANDS SET TLED BY THE HON'BLE SUPREME COURT IN THE CASE OF ONGC VS. C IT (SUPRA), WHEREIN THE HON'BLE APEX COURT AFTER ANALY ZING THE VARIOUS KINDS OF CONTRACTS BY DIFFERENT FOREIGN COM PANIES WITH WHOM ONGC EXECUTED VARIOUS CONTRACTS FOR SERVI CES TO BE RENDERED IN CONNECTION WITH PROSPECTING, EXTRACT ION OR PRODUCTION OF MINERAL OIL BY ONGC AND AFTER DETAIL ANALYSIS AND DISCUSSION, THE HON'BLE APEX COURT HELD THAT AN Y ACTIVITY RELATING TO EXPLORATION, PROSPECTING, EXTR ACTION, PRODUCTION OF MINERAL OIL WOULD BE COVERED U/S.44BB . THEY HAVE ALSO TAKEN NOTE INTO ACCOUNT VARIOUS KINDS OF WORKS I.T.A. NO.1424/DEL/2014 7 WHICH HAS BEEN SET OUT IN DETAIL IN THE JUDGMENT. H ERE ALSO THE SUPPLYING OF VESSELS FOR THE SAID PURPOSES IS I NEXTRICABLY CONNECTED WITH THE PROSPECTING, PRODUCTION OF MINER AL OIL AND THEREFORE, THE ORDER OF THE LEARNED DRP IS IN CONSONANCE WITH THE JUDGMENT OF THE HON'BLE SUPREME COURT, ACCORDINGLY, THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2018. SD/- [G.D. AGRAWAL] SD/- [AMIT SHUKLA] PRESIDENT JUDICIAL MEMBER DATED: 21 ST JUNE, 2018