Van Oord Offshore BV, New Delhi V. DDIT, Dehradun

ITA 1439/DEL/2010

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3056 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RATAN KAPOOR
• Assessee Lawyers: VISHAL MISHRA CAS
• Keywords: Capital asset; Business income; Double taxation relief; Deemed to accrue or arise in india; Permanent establishment
• Section: 143(3); 234B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES BENCH D NEW DELHI BEFORE SRI G.D.AGRAWAL, HON BLE PRESIDENT AND SMT. BEENA A PILLAI, J UDICIAL M EMBER ITA NO. 1439 /DEL/201 0 A.Y. 20 0 6 - 07 VAN OORD OFFSHORE BV VS. DDIT C/O VAISH ASSOCIATES(ADVOCATES) INTERNATIONAL TAXATION FLAT NO.5 - 7, 10, HAILEY ROAD DEHRADUN NEW DELHI 110 001 PAN: AACCV1545N (APPELLANT) (RESPONDENT) A PPELLANT BY: SRI SHAILESH KUMAR, ADV. SH . AMIT ARORA AND SH. VISHAL MISHRA, CAS . RESPONDENT BY: SRI RATAN KAPOOR, SR.DR DATE OF HEARING: 18.0 1 . 201 8 DATE OF PRONOUNCEMENT : 2 6 . 0 3 . 1 8 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 16/12/09 PASSED BY LD. CIT (A) - 1 , DEHRADUN FOR ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING GROUNDS OF APPEAL: GROUNDS 1. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) [(CIT(A)] ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN HOLDING THAT INCO M E ARISING TO THE APPELLANT FROM EXECUTION OF POST - TRENCHING PROJECT WAS TAXABLE IN INDIA. 2 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER HOLDING THAT THE APPELLANT HAD A FIXED PLA CE PER MANENT ESTABLISHMENT (PE) IN INDIA IN TERMS OF ARTICLE 5(1) OF THE INDO - NETHERLANDS DTAA ( 'THE TREATY'). 3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HO L DING THAT THE PRO V ISION OF ARTICLE 5(2)(I) O F THE TREATY WHICH PROVIDES THE THRESHOLD PERIOD OF 183 DAYS, BEYOND WHICH THE ACTIVITY SHOULD CONTINUE IN INDIA, IN ORDER TO CONSTITUTE CONSTRUCTION PE UNDER, WAS NOT RELEVANT FOR DETERMINING WHETHER THE APPELLANT HAD A PE IN INDIA, IN VIEW OF THE APPELLANT HAVING FIXED PLACE PE IN IN DIA IN TERMS OF ARTICLE 5(1) OF THE TREATY. 3.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PROVISIONS OF ARTICLE 5( 1) OF THE TREATY WERE NOT APPLICABLE IN THE FACTS OF THE APPELLANT'S CASE AND THAT THE PROVISIONS OF ARTICLE 5(2)(I) OF THE TREATY, BEING SPECIAL PROVISIONS RELATING TO CONSTRUCTION PE WOULD PREVAIL OVER THE GENERAL PROVISIONS OF ARTICLE 5( 1 ). 4. WITHOUT PREJUDICE THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ATTR IBUTING 25% OF THE GROSS REVENUES RELATING TO THE POST TRENCHING PROJECT, AS THE PROFITS ATTRIBUTABLE TO THE ALLEGED PE OF THE APPELLANT IN INDIA AND IN NOT APPLYING THE PROVISIONS OF SECTION 44BB OF THE INCOME TAX ACT, 1961 ('THE ACT') WHEREIN UNDER 10% O F GROSS REVENUES IS DEEMED TO BE INCOME LIABLE TO TAX IN INDIA. 5. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF INTEREST UNDER SECTIONS 234B AND 234 D OF THE ACT DISREGARDING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT V. S EDCO FOREX : 264 ITR 320. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND, OR VARY THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: THE A SSESSEE COMPANY IS INCORPORATED UNDER THE LAWS OF THE NETHER LAND S AND HAD FILED ITS RETURN OF INCOME ON 24/10/06 DECLARING TOTAL INCOME AT NIL. THE CASE WAS SELECTED FOR SCRUTINY AND 3 NOTICE UNDER SECTION 143 (2) OF THE INCOME TAX ACT, 1961 (THE ACT) WAS ISSUED TO ASSESSEE. SUBSEQUENTLY NOTICE UNDER SECTION 14 3 (1) WAS ISSUED ALONG WITH QUESTIONNAIRE. IN RESPONSE TO THE STATUTORY NOTICES REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD. AO AND THE CASE WAS DISCUSSED WITH HIM. 2.1. LD. AO OBSERVED THAT ASSESSEE HAD CLAIMED TO BE ASSESSED UNDER THE PROVISIONS OF DTAA WITH NETHERLANDS. IT WAS OBSERVED THAT ASSESSEE HAD NOT OFFERED REVENUES FROM CONTRACT DATED 2 1 /04/05 EXECUTED WITH HY UNDAI H EAVY I NDUSTRIES IN RESPECT OF POST - TRENCHING OF PIPELINES USING MASS FLOW EXCAVATION TECHNIQUE. IT WAS SUBMITTED BY ASSESSEE THAT INCOME EARNED FROM THE ABOVE CONTRACT WAS NOT LIABLE TO TAX IN INDIA ON ACCOUNT OF THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND NETHERLAND S . THE MAIN CLAIM OF ASSESSEE IS THE CONTRACT CONTINUED ONLY FOR ONE MONTH AND, THEREFORE, IT DOES NOT CROSS THE DURATION TEST PROVIDED UNDER ARTICLE 5 OF DTAA. IT WAS FURTHER STATED THAT IT IS A CON CONTRACT AND HENCE FALLS UNDER ARTICLE 7 OF DTAA. HOWEVER, LD. A.O. HELD THAT BECAUSE THE VESSEL WAS AVAILABLE AT THE DISPOSAL OF ASSESSEE, IT RESULTED INTO FIXED PLACE P.E. AND, THEREFORE, INCOME WAS ASSESSED U/S 143(3) OF THE ACT. 2.2. ON APPEAL LD.CIT(A) REJECTED THE CLAIM OF ASSESSEE BY PLACING RELIANCE UPO N THE DECISION OF THIS T RIBUNA L IN THE CASE OF FURGO ENGINEERS P.V. VS. ACIT REPORTED IN (2009) 122 TTJ 655. 4 3. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3.1. LD. C OUNSEL SUBMITTED THAT SIMILAR ACTIVITY AS CARRIED ON BY ASSESSEE WAS CONSIDERED BY HON BLE UTTARAKHAND HIGH COURT IN CASE OF CIT VS BK I/HAM V.O.F C/O. ARTHUR ANDERSON AND COMPANY, REPORTED IN (2011) 245 CTR 140 . IT WAS SUBMITTED THAT BEFORE HON BLE UTTARAKHAND HIGH COURT , SCOPE OF WORK UNDER THE CONTRACT WAS CONSTRUCTION AND INSTALLATION PROJECT IN RESPECT OF DREDGING A TRENCH FOR DELAYING THE PIPELINE AND BACK FI L LING OF THE TRENCH AFTER THE PIPELINE HAD BEEN LAID. HE SUBMITTED THAT HON BLE COURT CONSIDERED DTAA BETWEEN INDIA AND N E THERLANDS . LD.COUNSEL SUBMITTED THAT FACTS IN CASE OF FURGO ENGINEERS B.V. VS. ACIT (SUPRA) WERE DIFFERENT AND ARE DISTINGUISHABLE WITH THE FACTS IN CASE OF PRESENT ASSESSEE , AS IT INVOLVED I N GEOTECHNICAL INVESTIGATION IN GULF OF KHAMBAT, FOR WHICH ASSESSEE H AD MOBILISED ITS OWN EQUIPMENT WHICH LASTED FOR 41 DAYS. LD.COUNSEL SUBMITTED THAT THIS TRIBUNAL TOOK A VIEW THAT, ACTIVITIES CARRIED ON BY ASSESSEE THEREIN COULD NOT BE CATEGORISED UNDER ANY OF THE ACTIVITIES UNDER A RTICLE 5 PARAGRAPH 2 (A ) TO (I) OF I NDIA - NETHERLAND DTAA. 3.2. LD. C OUNSEL REFERRED TO A RTICLE 5 OF DTAA, PARTICULARLY PARAGRAPH 2 (I), UNDER WHICH PE INCLUDES AN INSTALLATION OR STRUCTURE USED FOR EXPLOITATION OF NATURAL RESOURCES , PROVIDED THAT ACTIVITIES CONTINUE FOR MORE THAN 183 DAY S. FURTHER , REFERENCE WAS MADE TO PARAGRAPH 3 OF A RTICLE 5, UNDER WHICH A BUILDING SITE OR 5 CONSTRUCTION, INSTALLATION OR ASSEMBLY PROJECT CONSTITUTES A PE ONLY WHERE SUCH SITE OR PROJECT CONTINUES FOR A PERIOD OF MORE THAN 6 MONTHS. IN THE CONTEXT OF THESE PROVISIONS, LD. C OUNSEL POINTED OUT THAT EVEN IF CUMULATIVE DAYS FOR THE PROJECT ARE TAKEN INTO ACCOUNT, PRESENT ASSESSEE WORKED IN INDIA FOR A PERIOD OF 42 DAYS ONLY WHICH IS FAR BELOW 183 DAYS AS STIPULATED UN DER PARAGRAPH 2 (I) AND PARAGRAPH 3 OF ARTICLE 5. THUS IT WAS ARGUED THAT AS ASSESS EE DID NOT SATISFY THE DURATION TEST, IT CANNOT BE HELD TO HAVE PE IN INDIA . 3.3. LD. CIT DR ON THE CONTRARY SUBMITTED THAT ACTIVITY CARRIED ON BY ASSESSEE FALLS UNDER A RTICLE 5 PARAGRAPH 1 OF THE DTAA. HE SUBMITTED THAT SCOPE OF WORK OF ASSESSEE IS LEVELLING OF SEABED BENEATH THE PIPELINE THAT IS ALREADY INSTALLED. HE SUBMITTED THAT THE ACTIVITY DOES NOT FALL WITHIN THE AMBIT OF CONSTRUCTION ACTIVITY AS PER P ARAGRAPH 3 OF A RTICLE 5 OF DTAA. HE SUBMITTED THAT THESE ARE TECHNICAL SERVICES RENDERED BY ASSESSEE AND PAYMENT S RECEIVED IN VIEW OF RENDERING OF SUCH SERVICES WOULD BE TREATED AS FEES FOR TECHNICAL SERVICES . LD. CIT, DR PLACED RELIANCE UPON THE CONTRACT AND S UBMITTED THAT PAGE 12 OF THE CONTRACT BETWEEN ASSESSEE AND H Y UNDAI H EAVY I NDUSTRIES CO LTD. THE RELEVANT EXTRACT OF CLAUSES RELIED UPON BY LD. CIT DR ARE REPRODUCED HEREUN DER FOR THE SAKE OF CONVENIENCE. REPRODUCE PAGE 12 OF AGREEMENT 6 LD.C IT DR SUBMITTED THAT ASSESSEE IS PROVIDING SERVICES OF SUPERVISION AND MONITORING THE PROCESS TO KEEP TRACK ON THE INSTALLED PIPELINES. LD.CIT DR SUBMITTED THAT SCOPE OF WORK MENTIONED IN THE CONTRACT IS CLEAR AND ASSESSEE H AS NOT RENDERED ANY SERVICE RELATING TO THE CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT , AS MENTIONED IN THE EXCLUSION TO CLAUSE OF EXPLANATION 2 TO SECTION 9 (1) (VII). HE SUBMITTED THAT ASSESSEE'S SCOPE OF WORK IS COVERED UNDER 'FEES FOR TECHNICAL SERVICES' AND ALL THE RECEIP TS EMANATING FROM THE CONTRACT UNDER CONSIDERATION ARE TO BE TAXED IN INDIA. 3. 4 . IN REJOINDER , LD.COUNSEL SUBMITTED THAT EVEN IF ASSESSEE IS HELD TO BE TAXABLE IN INDIA, IT WOULD BE AS PER THE SPECIFIC PROVISIONS OF SECTION 44 BB OF THE A CT WHICH ARE PROVISION S FOR COMPUTING PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION EXCEPT OF MINERAL OILS. LD.COUNSEL SUBMITTED THAT ASSESSEE IS HELD TO BE RENDERING SERVICES IN RELATION TO OIL EXPLORATION, THE RECEIPTS WOULD BE TAXABLE UNDE R SECTION 44BB. HE SUBMITTED THAT SPECIFIC SERVICES CONTEMPLATED UNDER SECTION 44BB WILL PREVAIL OVER ALL OTHER PROVISIONS DEALING WITH R OYALTY/FTS. LD. COUNSEL PLACED RELIANCE UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF OIL & NATURAL GAS C ORPN. LTD. V. CIT REPORTED IN 376 ITR 306 WHEREIN IT HAS BEEN HELD THAT , IF THE PITH AND SUBSTANCE OF THE CONTRACTS/AGREEMENTS IS INEXTRICABLY LINKED OR CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OIL, THE PAYMENTS RECEIVED BY NON - RES IDENT ASSESSEES OR FOREIGN COMPANIES UNDER 7 SUCH CONTRACTS ARE MORE APPROPRIATELY ASSESSABLE UNDER THE SPECIFIC PROVISIONS OF SECTION 44 BB AND NOT UNDER THE GENERAL PROVISIONS OF THE ACT. 3.5. THE LD. COUNSEL SUBMITTED THAT THE SCOPE OF THE WORK INCLUDE POST - TRENCHING OF PIPELINES AND BURIAL/LOWERING OF SUCH PIPELINES BELOW THE NATURAL SEABED LEVEL. THE ABOVE SERVICES ARE RELATED TO ACTIVITY OF PROSPECTING FOR, OR EXPLORATION OF MINERAL OILS, WH ICH ARE COVERED UNDER THE PROVISIONS OF SECTION 44 BB OF THE A CT. 3.6. MOREOVER, THE TEST OF 'MAKE AVAILABLE' IS NOT SATISFIED AS SERVICE RECIPIENT COULD NOT DERIVE AN Y ENDURING BENEFIT AND UTILISE THE KNOWLEDGE OR KNOW HOW ON ITS OWN IN FUTURE WITH OUT THE AID OF ASSESSEE FOR CARRYING OUT IDENTICAL /SIMILAR ACTIVITIES. HE SUBMITTED THAT T HERE IS NO TRANSFER OF ANY TECHNICAL KNOWLEDGE AND SKILL , SO AS TO ENABLE SERVICE RECIPIENT TO PERFORM SIMILAR ACTIVITIES IN FUTURE ON ITS OWN. IT WAS SUBMITTED T HAT THEREFORE THE PAYMENT COULD NOT BE TAXED AS FEES FOR TECHNICAL SERVICES . 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4.1. ASSESSEE BEFORE US IS THE TAX RESIDENT OF NETHERLANDS AND HAS BE EN REQUESTED BY H Y UNDAI HEAVY INDUSTRIES CO. LTD. (INCORPORATED IN KOREA) TO EXECUTE POST - TRENCHING OF THE PIPELINES USING MASS FLOW EXCAVATION TECHNIQUES. AN A GREEMENT HAS BEEN ENTERED INTO BETWEEN HUNDAI HEAVY INDUSTRIES CO. LTD. AND ONGC, TO LAY NEW OIL AND GAS PIPELINES FROM MUMBAI HIGH TO URAN. AGREED TIME PERIOD BETWEEN ASSESSEE AND H Y UNDAI HEAVY INDUSTRIES CO. LTD. FOR 8 COMPLETION OF THE SCOPE OF WORK IS 5 TO 6 WEEKS WHICH HAS BEEN MORE SPECIFICALLY MENTIONED IN SCHEDULE 3 OF THE CONTRACT. ARTICLE 5 PERMANENT ESTABLISHMENT 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM 'PERMANENT ESTABLISHMENT' MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF THE ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. 2. THE TERM 'PERMANENT ESTABLISHMENT' INCLUDES E SPECIALLY : ( A ) A PLACE OF MANAGEMENT ; ( B ) A BRANCH ; ( C ) AN OFFICE ; ( D ) A FACTORY ; ( E ) A WORKSHOP ; ( F ) A MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTHER PLACE OF EXTRACTION OF NATURAL RESOURCES ; ( G ) A WAREHOUSE IN RELATION TO A PERSON PROVIDING STORAGE FACILITIES FOR OTHERS ; ( H ) A PREMISES USED AS A SALES OUTLET ; ( I ) AN INSTALLATION OR STRUCTURE USED FOR THE EXPLORATION OF NATURAL RESOURCES PROVIDED THAT THE ACTIVITIES CONTINUE FOR MORE THAN 183 DAYS. 3. A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR ASSEMBLY PROJECT CONSTITUTES A PERMANENT ESTABLISHMENT ONLY WHERE SUCH SITE OR PROJECT CONTINUES FOR A PERIOD OF MORE THAN SIX MONTHS. 4.3. AS PER OECD COMMENTARY, ARTICLE 5 PARAGRAPH 2 IS A NON - EXHAUSTIVE LIST OF PERMANE NT ESTABLISHMENT. THUS AS PER OECD COMMENTARY, AN ESTABLISHMENT MAY BE CONSIDERED TO HAVE A PERMANENT ESTABLISHMENT IN THE SOURCE COUNTRY AS PER PARAGRAPH 2 OF ARTICLE 5 ONLY IF IT SATISFIES THE PRECONDITION OF CONSTITUTING A PERMANENT ESTABLISHMENT AS PER PARAGRAPH 1 OF ARTICLE 5. 9 4.4. THUS WE AGREE WITH THE SUBMISSIONS ADVANCED BY LD. C OUNSEL AS WELL AS LD. CIT DR THAT THE ACTIVITY CARRIED ON BY ASSESSEE DO NOT FALL WITHIN THE AMBIT OF A RTICLE 5 PARAGRAPH 2 AND THEREFORE IT CANNOT BE SAID THAT ASSESSEE HA D A P ERMANENT E STABLISHMENT IN INDIA. 4.5. WE THUS ALLOW GROUND NO. 2 AND 3 IN FAVOUR OF ASSESSEE . 5. GROUND NO.4 THE WORK TO BE CARRIED OUT BY ASSESSEE ON BEHALF OF HYUNDAI HEAVY INDUSTRIES CO. LTD. ARE AS UNDER. SCH.I DETAILED SCOPE OF WORK: POST TRENCHING OF THE 28 GAS AND 30 OIL PIPLELINE BY MASS FLOW EXCAVATION ON A DAY RATE BASIS, TO LOWER THE INSTALLED PIPELINES ON A REASONABLE ENDEAVOURS BASIS. THE LOWERING REQUIRED IS SUCH TO ACHIEVE THE TOP 1.0 M BELOW THE NATURAL SEABED LEVEL. THE SECTIONS TO BE POST TRENCHED ARE BETWEEN KP 180 TO K P O. WATER DEPTH VARIES FROM APPROXIMATELY 15 M AT KP 180 TO APPROXIMATELY 80M AT KP O. CONTRACTOR HAS INDICATED THAT THE VAN OORD SCOPE SHALL BE BETWEEN KP O TP KP 80, HOWEVER THE SAME MAY BE EXTENDED BY CONTRACTOR. METHOD STATEMENT MASS FLOW EXCAVATION (MFE) IS A KNOWN METHOD OF VAN OORD OFFSHORE TO POST TRENCH AND LOWER PIPELINES IN NON - COHESIVE SEABED MATERIALS. THE SEABED MATERIALS ARE ERODED BY A LARGE VOLUME OF WATER AT A RELATIVE LOW PRESSURE. PART OF THE ERODED MATERIAL WILL BE BLOWN OUTSIDE THE TRENCH, PART WILL REMAIN WITHIN THE TRENCH PERIMETER AND WILL SETTLE IN THE TRENCH, LEAVING A SMOOTH TRENCH BOTTOM PROFILE. 10 POST - TRENCHING IN VERY SOFT TO SOFT MATERIALS (COHESIVE) REQUIRES A SLIGHTLY D IFFERENT METHOD. THE MATERIAL HAS TO BE JETTED BY A CONCENTRATED FLOW AT HIGHER WATER VELOCITIES, TO REMOVE THE COHESIVE MATERIAL UNDER THE PIPELINES. IN ORDER TO CREATE THE REQUIRED WATER FLOW AND VELOCITY, TOGETHER WITH A SAFE STAND - OF DISTANCE OF THE JET NOZZLE, A HIGH CAPACITY PUMPING SYSTEM IS REQUIRED. FURTHERMORE, IN ORDER TO EXECUTE THIS PRECISION WATER JEITING IN A CONTROLLED WAY, SOPHISTICATED DYNAMIC POSITIONING (DP)/DYNAMIC TRACKING (DT) CAPABILITIES OF THE OPERATING VESSEL ARE REQUIRED. THIR DLY, THE PROPOSED VESSEL HAS TO BE CAPABLE OF WORKING ON WATERDEPTH RANGING FROM 15 TO 80 M DEEP. FOLLOWING THE ABOVE, THE MOST SUITABLE VESSEL WITHIN THE VAN OORD FLEET IS THE HAM 318, PROVIDING EXCELLENT DP/DT CAPABILITIES TOGETHER WITH MAXIMUM PUMP POWE R AVAILABLE. PARTS ARE AVAILABLE TO EXTEND THE EXISTING SUCTION PIPES TO REQUIRED LENGTH. THE PROPOSED MFE DREDGER HAM 318 WILL BE EQUIPPED WITH A SEABAT SONAR, TO MONITOR THE MFE PROCESSES, TO KEEP TRACK ON THE INSTALLED PIPLELINE (REALTIME WITH RESPECT TO THE JET NOZZLE) AND TO SURVEY THE POST TRENCHED AREAS AFTER EACH TRACK. POST TRENCHED INTERMEDIATE SURVEYS WILL BE DISCUSSED BETWEEN CONTRACTORS AND VAN OORDS REPRESENTATIVES DURING THE OPERATIONS. AFTER COMPLETION OF THE WORKS, VAN OORD WILL PROVIDE A FINAL SURVEY REPORT (6 COPIES) TO CONTRACTOR. CLAUSE 9 OF AGREEMENT READS AS UNDER. RATES AND PRICES: THE RATES AND PRICES APPLICABLE TO THE WORKS ARE SET OUT IN SCHEDULE 4 AND ARE INCLUSIVE OF THE COST OF ALL TAXES PAYABLE IN INDIA (4.182%) BUT EXCLUDES ALL OTHER LEVIES LIKE, IMPORT AND EXPORT PERMITS WHICH IF APPLICABLE AND/OR DUE SHALL BE PAID DIRECT BY THE CONTRACTOR TO THE 11 LEVYING ENTITY, OR IN THE EVENT THAT VAN OORD PAYS ANY SUCH AMOUNTS THEN SUCH AMOUNTS SHALL BE REIMBURSED BY THE CONTRACTOR TO VAN OORD ON A COST BASIS. SCHEDULE 3 PROGRAMME PREPARE HAM 318 AND INSTALL LONG PIPE AND JET NOZZLE : COMMENCING 18 TH APRIL 2005 COMMENCING SAIL DUBAI TO MUMBAI : 28 TH APRIL 2005 ESTIMATED ARRIVAL IN MUMBAI (WEATHER PERMITTING): 1 ST MAY 2005 INDICATIVE PERIOD FOR COMPLETION OF WORKS: 5 - 6 WEEKS INCLUDING: 4 DAYS IDLE IN PORT FOR IMPORT CLEARANCES APPROX 20 DAYS WORKING IN MFE MODE 5 DAYS STANDBY AT SEA 2 DAYS IDLE IN PORT AWAITING EXPORT CLEARANCES 4 DAYS DEMOBILIZATION MUMBAI TO DUBAI HOURS OF WORKING : 168 HOURS/WEEK, 52 WEEKS/YEAR PAYMENTS WILL BE CALCULATED ON ACTUAL DAYS IDLE, WORKING, STANDBY AND TRANSIT, FRACTION OF THE DAY RATE SHALL BE PAID PRO - RATA. THE COMPLETION DATE SHALL BE THE DAY FOLLOWING THE EXPIRY OF THE PERIOD FOR COMPLETION OF THE WORKS OR SUCH EXTENDED PERIOD AS PROVIDED IN THIS AGREEMENT. FROM THE ABOVE IT IS DISCERNIBLE THAT THE PAYMENTS GIVEN BY HUNDAI TO ASSESSEE ARE : MOBILIZATION/DEMOBILIZATION ADVANCES, ANY 12 CUSTOM DUTY BORN BY ASSESSEE DURING THE IDLE DAYS ON PORT FOR IMPORT. IT IS OBSERVED THAT HON BLE SUPREME COURT IN CASE OF SEDCO FOREX INTERNATIONAL INC. VS. CIT, MEERUT, REPORTED IN (2017) 87 TAXMANN.COM 29 HAS OBSERVED AS UNDER. 40. SECTION 9 ENUMERATES THE INCOME WHICH IS DEEMED TO ACCRUE OR ARISE IN INDIA. THERE ARE TWO BROAD CATEGORIES OF TAXABILITY OF INCOME PROVIDED UNDER TH IS SECTION, I.E., BUSINESS INCOME AND INCOME FROM INTEREST OR ROYALTY OR FEES FOR TECHNICAL SERVICES (FTS). 41. SECTION 9(1)(I) PROVIDES THAT INCOME IS TO BE DEEMED TO HAVE ACCRUED OR ARISING IN INDIA IF THE INCOME IS ACCRUING DIRECTLY OR INDIRECTLY THROUGH ANY BUSINESS CONNECTION IN INDIA OR FROM ANY PROPERTY IN INDIA OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA OR ANY CAPITAL ASSET SITUATED IN INDIA (REFERRED AS BUSINESS INCOME). EXPLANATION 1(A) TO SECTION 9(1)(I) OF THE ACT PROVIDES AN EXCLUSION IN THE CASE OF OPERATIONS WHICH ARE NOT CARRIED OUT IN INDIA. THE EXPLANATION PROVIDES THAT THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY THAT PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIO NS CARRIED OUT IN INDIA. THUS, BUSINESS INCOME EARNED BY NON - RESIDENT IS CHARGEABLE TO TAX IN INDIA ONLY TO THE EXTENT REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA. 42. IT IS, HOWEVER, PERTINENT TO POINT OUT THAT SECTION 44BB(2) MAKES CER TAIN RECEIPTS AS 'DEEMED INCOME' FOR THE PURPOSES OF TAXATION IN THE SAID PROVISION. THEREFORE, AID OF THIS PROVISION IS TO BE NECESSARILY TAKEN TO DETERMINE WHETHER A PARTICULAR AMOUNT WILL BE 'INCOME' WITHIN THE MEANING OF SECTION 5 OF THE ACT. LIKEWISE, SECTION 44BB(2) ALSO ACTS AS GUIDE TO DETERMINE WHETHER A PARTICULAR INCOME IS ATTRIBUTED AS INCOME OCCURRED IN INDIA. SECTION 44BB OF THE ACT PROVIDES FOR SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS. HOWEVER, THAT WOULD NOT MEAN THAT IF THE INCOME IS TO BE COMPUTED UNDER THIS PROVISION, WE HAVE TO GIVE A GO - BY TO SECTIONS 5 AND 9 OF THE ACT. TO THIS EXTENT, REMARKS OF THE HIGH COURT MAY NOT BE CORRECT. . 13 47. SECTION 44BB STARTS WITH NON - OBSTANTE CLAUSE, AND THE FORMULA CONTAINED THEREIN FOR COMPU TATION OF INCOME IS TO BE APPLIED IRRESPECTIVE OF THE PROVISIONS OF SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A OF THE ACT. IT IS NOT IN DISPUTE THAT ASSESSEES WERE ASSESSED UNDER THE SAID PROVISION WHICH IS APPLICABLE IN THE INSTANT CASE. FOR ASSESSMENT UND ER THIS PROVISION, A SUM EQUAL TO 10% OF THE AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB - SECTION (2) SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF THE BUSINESS OR PROFESSION'. SUB - SECTION (2) MENTIONS TWO KINDS OF AMOUNTS WHICH SHALL BE DEEMED AS PROFITS AND GAINS OF THE BUSINESS CHARGEABLE TO TAX IN INDIA. SUB - CLAUSE (A) THEREOF RELATES TO AMOUNT PAID OR PAYABLE TO THE ASSESSEE OR ANY PERSON ON HIS BEHALF ON ACCOUNT OF PROVISION OF SERVICE S AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED, OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA. THUS, ALL AMOUNTS PERTAINING TO THE AFORESAID ACTIVITY WHICH ARE RECEIVED ON AC COUNT OF PROVISIONS OF SERVICES AND FACILITIES IN CONNECTION WITH THE SAID FACILITY ARE TREATED AS PROFITS AND GAINS OF THE BUSINESS. THIS CLAUSE CLARIFIES THAT THE AMOUNT SO PAID SHALL BE TAXABLE WHETHER THESE ARE RECEIVED IN INDIA OR OUTSIDE INDIA. CLAUS E (B) DEALS WITH AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA IN CONNECTION WITH SUCH SERVICES AND FACILITIES AS STIPULATED THEREIN. THUS, WHEREAS CLAUSE (A) MENTIONS THE AMOUNT WHICH IS PAID OR PAYABLE, CLAUSE (B) DEALS WITH THE AMOUNTS WHICH ARE REC EIVED OR DEEMED TO BE RECEIVED IN INDIA. IN RESPECT OF AMOUNT PAID OR PAYABLE UNDER CLAUSE (A) OF SUB - SECTION (2), IT IS IMMATERIAL WHETHER THESE ARE PAID IN INDIA OR OUTSIDE INDIA. ON THE OTHER HAND, AMOUNT RECEIVED OR DEEMED TO BE RECEIVED HAVE TO BE IN INDIA. 48. FROM THE BARE READING OF THE CLAUSES, AMOUNT PAID UNDER THE AFORESAID CONTRACTS AS MOBILISATION FEE ON ACCOUNT OF PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH THE EXTRACTION ETC. OF MINERAL OIL IN INDIA AND AGAINST THE SUPPLY OF PLANT AND MACHINERY ON HIRE USED FOR SUCH EXTRACTION, CLAUSE (A) STANDS ATTRACTED. THUS, THIS PROVISION CONTAINED IN SECTION 44BB HAS TO BE READ IN CONJUNCTION WITH SECTIONS 5 AND 9 OF THE ACT AND SECTIONS 5 AND 9 OF THE ACT CANNOT BE READ IN ISOLATION. THE AFO RESAID AMOUNT PAID TO THE ASSESSEES AS MOBILISATION FEE IS TREATED AS PROFITS AND GAINS OF BUSINESS AND, THEREFORE, IT WOULD BE 'INCOME' AS PER SECTION 5. THIS 14 PROVISION ALSO TREATS THIS INCOME AS EARNED IN INDIA, FICTIONALLY, THEREBY SATISFYING THE TEST O F SECTION 9 OF THE ACT AS WELL. 49. THE TRIBUNAL HAS RIGHTLY COMMENTED THAT SECTION 44BB OF THE ACT IS A SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION OF MINERAL OILS. ITS PURPOSE WAS EXPLAINED BY THE DEPA RTMENT VIDE ITS CIRCULAR NO. 495 DATED SEPTEMBER 22, 1987, NAMELY, TO SIMPLIFY THE COMPUTATION OF TAXABLE INCOME AS NUMBER OF COMPLICATIONS WERE INVOLVED FOR THOSE ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY O F PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL ETC. INSTEAD OF GOING INTO THE INTEGRITIES OF SUCH COMPUTATION AS PER THE NORMAL PROVISIONS CONTAINED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A OF THE ACT, THE LEGISLATURE HAS SIMPLIFIED THE PROCEDURE BY PROVIDING THAT TAX SHALL BE PAID @10% OF THE 'AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB - SECTION (2)' AND THOSE AMOUNTS ARE 'DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TA X...'. IT IS A MATTER OF RECORD THAT WHEN INCOME IS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', RATE OF TAX PAYABLE ON THE SAID INCOME IS MUCH HIGHER. HOWEVER, THE LEGISLATURE PROVIDED A SIMPLE FORMULA, NAMELY, TREATING THE AMOUN TS PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) AND AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AS MENTIONED IN SUB - SECTION (2) OF SECTION 44BB AS THE DEEMED PROFITS AND GAINS. THEREAFTER, ON SUCH DEEMED PROFITS AND GAINS (TREATING THE SAME AS INCOME ), A CONCESSIONAL FLAT RATE OF 10% IS CHARGED TO TAX. IN THESE CIRCUMSTANCES, THE AO IS SUPPOSED TO APPLY THE PROVISIONS OF SECTION 44BB OF THE ACT, IN ORDER TO FIND OUT AS TO WHETHER A PARTICULAR AMOUNT IS DEEMED INCOME OR NOT. WHEN IT IS FOUND THAT THE A MOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA), OR AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA IS COVERED BY SUB - SECTION (2) OF SECTION 44BB OF THE ACT, BY FICTION CREATED UNDER SECTION 44BB OF THE ACT, IT BECOMES 'INCOME' UNDER SECTIONS 5 AND 9 OF THE ACT AS WELL. 5.2. I N THE RESULT , WE DIRECT LD. AO TO RECOMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE AS PER PROVISIONS OF SECTION 44 BB OF THE 15 ACT, WHEREIN 10% OF THE GROSS REVENUE IS DEEMED TO BE INCOME LIABLE TO BE TAXABLE IN INDIA. 6. GROUND NO.5 T HIS GROUND IS IN RESPECT OF LEVY OF INTEREST UNDER SECTION 234B AND 23 4 D OF THE A CT . 6.1. AFTER EXTENSIVELY DEALING WITH THE IDENTICAL ISSUE, THE COURT GAVE THE FOLLOWING REASONS FOR HOLDING THAT THE LIABILITY OF THE ASSESSEE TO PAY INTEREST WOULD NOT ARISE UNDER CERTAIN CIRCUMSTANCES , AS UNDER: THE JUDGMENT OF THE UTTARANCHAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX AND ANR. VS. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. 264 ITR 320 . 17. ALTHOUGH WE AGREE WITH THE CONCLUSIONS OF THE TRIBUNAL, WE PREFER TO GIVE OUR OWN REASONS IN SUPPORT OF OUR CONCLUSION THAT ON THE FACTS AND CIR CUMSTANCES OF THIS CASE, LEVY OF INTEREST UNDER SECTION 234B ON THE ASSESSEE IS NOT JUSTIFIED. FIRSTLY, THE DECISIONS OF THE TRIBUNAL ON THE INTERPRETATION OF THE CONTRACTS REGARDING ON PERIOD AND OFF PERIOD SALARY WERE CONFLICTING. ULTIMATELY, THE LEGISLA TURE HAS STEPPED INTO CLARIFY THE POSITION BY THE FINANCE ACT OF 1999. IN THIS CONNECTION, IT IS IMPORTANT TO NOTE THAT SECTION 234B IMPOSES INTEREST, WHICH IS COMPENSATORY IN NATURE AND NOT AS A PENALTY (SEE UNION 16 HOME PRODUCTS LTD, V. [1995]215ITR 758, 7 66 (KARN)). SECONDLY, ALTHOUGH SECTION 191 OF THE ACT IS NOT OVERRIDDEN BY SECTIONS 192, 208 AND 209(1)(A)(D) OF THE ACT, THE SCHEME OF SECTIONS 208 AND 209 OF THE ACT INDICATES THAT IN ORDER TO COMPUTE ADVANCE TAX THE ASSESSEE HAS TO, INTER ALIA, ESTIMATE HIS CURRENT INCOME AND CALCULATE THE TAX ON SUCH INCOME BY APPLYING THE RATES IN FORCE. THAT UNDER SECTION 209(1)(D) THE INCOME - TAX CALCULATED IS TO BE REDUCED BY THE AMOUNT OF TAX WHICH WOULD BE DEDUCTIBLE AT SOURCE OR COLLECTIBLE AT SOURCE, WHICH IN THI S CASE HAS NOT BEEN DONE BY THE EMPLOYER COMPANY ACCORDING TO THE LAW PREVAILING FOR WHICH THE ASSESSEE CANNOT BE FAULTED. AS STATED ABOVE AT THE RELEVANT TIME THERE WERE CONFLICTING DECISIONS OF ITA NO.491/2008 AND CONNECTED MATTERS PAGE 8 OF 17 THE TRIBU NAL. A BONA FIDE DISPUTE WAS PENDING. THE ASSESSEE HAD TO ESTIMATE HIS CURRENT INCOME. THE WORDS USED UNDER SECTION 209(1)(A) MAKE THE ASSESSEE ESTIMATE HIS CURRENT INCOME AND SINCE A BONA FIDE DISPUTE WAS PENDING, IMPOSITION OF INTEREST UNDER SECTION 234B WAS NOT JUSTIFIED WITHOUT HEARING AND WITHOUT REASONS. ACCORDINGLY, WE ANSWER THIS QUESTION IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 6.2. THIS JUDGMENT WAS FOLLOWED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF D IRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VS. NGC NETWORK ASIA LLC 222CTR (BOM) 86. HON BLE BOMBAY HIGH COURT ALSO TOOK NOTE OF THE JUDGMENT BY HON BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, TAMIL NADU - I, MADRAS VS. MADRAS FERTI LIZERS LTD. 149 ITR 703 , WHICH TOOK SIMILAR VIEW. THE FOLLOWING OBSERVATIONS OF THE MADRAS HIGH COURT ARE ALSO WORTH 17 QUOTING: - IF THE TAX DEDUCTIBLE AT SOURCE HAS NOT BEEN DEDUCTED AND PAID OVER TO THE DEPARTMENT, THEN THE BANKS WHOSE DUTY IT IS TO M AKE DEDUCTION CAN BE TREATED AS THE ASSESSEE IN DEFAULT UNDER THE PROVISIONS OF S. 201 OF THE ACT. INTEREST ALSO CAN BE COLLECTED ALONG WITH THE AMOUNTS WHICH THEY OUGHT TO HAVE DEDUCTED BUT WHICH THEY DID NOT DEDUCT UNDER S. 201(1A). THEREFORE, UNDER THE PROVISIONS OF S. 201, THAT PORTION OF THE TAX WHICH HAS NOT BEEN DEDUCTED AND PAID OVER TO THE DEPARTMENT WILL HAVE TO BE PAID WITH INTEREST BY THE BANKS WHICH ARE UNDER A DUTY TO MAKE THE DEDUCTION AT THE SOURCE. WE HAVE THUS TO KEEP IN MIND S. 201(1A) OF THE ACT WHILE CONSTRUING S. 215 OF THE ACT WHICH DEALS WITH THE INTEREST PAYABLE BY THE ASSESSEE IN RESPECT OF THE TAX ASSESSED ON HIM. SECTION 215(1) OF THE ACT PROCEEDS AS FOLLOWS : '215. INTEREST PAYABLE BY ASSESSEE : - (1) WHERE, IN ANY FINANCIAL YEAR, AS ASSESSEE HAS PAID ADVANCE TAX UNDER SECTION 212 ON THE BASIS OF HIS OWN ESTIMATE AND THE ADVANCE TAX SO PAID IS LESS THAN SEVENTY - FIVE PER CENT. OF THE ASSESSED TAX, SIMPLE INTEREST AT THE RATE OF TWELVE PER CENT. PER ANNUM FROM THE 1ST DAY OF APRIL NE XT FOLLOWING THE SAID FINANCIAL YEAR UP TO THE DATE OF THE REGULAR ASSESSMENT SHALL BE PAYABLE BY THE ASSESSEE UPON THE AMOUNT BY WHICH THE ADVANCE TAX SO PAID FALLS SHORT OF THE ASSESSED TAX.' 5. THIS SECTION PROVIDES THAT WHEN THE ADVANCE TAX PAID IS LE SS THAN SEVENTY - FIVE PER CENT. OF THE ASSESSED TAX, SIMPLE INTEREST AT THE RATE OF 12 PER CENT. PER ANNUM SHALL BE LEVIED FROM THE 1ST DAY OF APRIL NEXT FOLLOWING THE SAID FINANCIAL YEAR UP TO THE DATE OF THE REGULAR 18 ASSESSMENT, ON THE AMOUNT BY WHICH THE ADVANCE TAX FALLS SHORT OF THE ASSESSED TAX. THE 'ASSESSED TAX' HAS BEEN DEFINED IN S. 215(5) OF THE ACT, AS MEANING THE TAX DETERMINED ON THE BASIS OF THE REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTIBLE IN ACCORDANCE WITH THE PROVISIONS OF S S. 192 TO 194, S. 194A, ETC. AS PER THIS DEFINITION, 'ASSESSED TAX' REPRESENTS THE TAX DETERMINED BY REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTIBLE IN ACCORDANCE WITH THE PROVISIONS OF S. 194A OF THE ACT. THEREFORE, THE EXPRESSION 'ASSESSED TAX' USED IN S. 215(1) OF THE ACT HAS TO BE UNDERSTOOD AS THE TAX FINALLY ASSESSED AS REDUCED BY THE AMOUNT OF TAX DEDUCTIBLE IN ACCORDANCE WITH THE PROVISIONS OF S. 194A OF THE ACT. AS ALREADY STATED, THAT TAX IS DEDUCTIBLE AT SOURCE ON THE INTEREST INCOM E UNDER S. 194A OF THE ACT CANNOT BE DISPUTED. SO LONG AS S. 215 OF THE ACT PERMITS THE LEVY OF INTEREST ONLY ON THE DIFFERENCE BETWEEN THE ASSESSED TAX AND ADVANCE TAX ACTUALLY PAID, WE HAVE TO TAKE NOTE OF THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE UNDER S. 194A OF THE ACT, AND THIS HAS BEEN SPECIFICALLY PROVIDED IN SUB - S. (5) OF S. 215 OF THE ACT. IT IS SIGNIFICANT TO NOTE THAT NORMALLY ADVANCE TAX IS PAID EITHER ON THE BASIS OF THE PREVIOUS YEAR'S ASSESSMENT OR ON THE BASIS OF THE ESTIMATE GIVEN BY THE ASSE SSEE LONG BEFORE THE FINAL ASSESSMENT AND AT THAT STAGE, THERE IS NO QUESTION OF ACTUAL DEDUCTION OF THE TAX AT SOURCE IN RESPECT OF THE INTEREST INCOME AND THE DEDUCTION AT SOURCE TAKES PLACE PRACTICALLY AT THE END OF THE YEAR WHEN THE INTEREST IS PAID AN D IT IS FOR THIS REASON THE STATUTE IN SUB - S. (5) OF THE ACT USES THE EXPRESSION 'DEDUCTIBLE' INSTEAD OF 'DEDUCTED'. THEREFORE, CONSTRUING SUB - S. (5), IT IS NOT POSSIBLE TO UNDERSTAND THE 19 EXPRESSION 'DEDUCTIBLE' OCCURRING THEREIN AS POSSIBLE TO UNDERSTAND THE EXPRESSION 'DEDUCTIBLE' OCCURRING THEREIN AS 'DEDUCTED'. 6. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE APPEARS TO BE RIGHT IN HIS SUBMISSION THAT IN CASES WHERE THE TAX IS DEDUCTIBLE AT SOURCE, THAT WILL HAVE TO BE EXCLUDED FROM CONSIDERATION WHILE THE ESTIMATE OF THE INCOME FOR THE PAYMENT OF ADVANCE TAX IS SUBMITTED. RELIANCE IS PLACED BY THE LEARNED COUNSEL ON THE LANGUAGE USED IN S. 190(1) WHICH IS AS FOLLOWS : '190. (1) NOTWITHSTANDING THAT THE REGULAR ASSESSMENT IN RESPECT OF ANY INCOME IS TO BE MADE IN A LATER ASSESSMENT YEAR, THE TAX ON SUCH INCOME SHALL BE PAYABLE BY DEDUCTION AT SOURCE OR BY ADVANCE PAYMENT, AS THE CASE MAY BE, IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER.' 7. THAT SECTION SEEMS TO PROVIDE THAT THE TAX IN RESPECT OF A REGULAR ASSESSMENT IS PAYABLE EITHER BY DEDUCTION AT SOURCE OR BY ADVANCE PAYMENT, AS THE CASE MAY BE, IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII. THUS, THE DEDUCTION OF TAX AT SOURCE AND PAYMENT OF ADVANCE TAX HAVE BEEN TREATED AS TWO ALTERNATIVE MODES OF PAYMENT IN ADVANCE. HENCE, WHERE THE STATUTE PROVIDES FOR DEDUCTION OF TAX AT SOURCE IN RESPECT OF A PARTICULAR INCOME, THE CONCERNED ASSESSEE NEED NOT PAY ANY ADVANCE TAX IN RELATION TO THE SAID INCOME. IN THIS, CASE, IT IS NOT IN DISPUTE THAT IN RESPECT OF THE INTEREST INCOME, DEDUCTION OF TAX AT SOURCE IS CONTEMPLATE UNDER S. 194A OF THE ACT. HOWEVER, THE DEDUCTION AT SOURCE HAS NOT BEEN EFFECTED BY THE BANKS WHICH PAID THE INTEREST TO THE ASSESSEE WHICH THEY SHOULD HAVE DONE AS PER THE PROVISIO NS OF THE ACT. FOR THE DEFAULT OF COMPLIANCE WITH S. 194A THE BANK CAN BE BROUGHT UNDER S. 201 AS AN ASSESSEE IN DEFAULT. SECTION 20 201(1A) SPECIFICALLY PROVIDES THAT IF A PERSON OR AUTHORITY WHO IS BOUND TO MAKE A DEDUCTION OF TAX AT SOURCE AS CONTEMPLATED BY THE STATUTE DOES NOT DEDUCT OR AFTER DEDUCTING FAILS TO PAY THE TAX, THEN SUCH A PERSON OR AUTHORITY IS LIABLE TO PAY SIMPLE INTEREST ON THE AMOUNT OF TAX NOT DEDUCTED FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH THE SAID TAX WAS ACTUALLY PAID. THUS, IN RESPECT OF INTEREST INCOME ON WHICH DEDUCTION OF TAX AT SOURCE SHOULD HAVE BEEN MADE, THE LIABILITY TO PAY INTEREST IS FASTENED ON THE PERSON OR AUTHORITY WHO FAILED TO MAKE DEDUCTION AS REQUIRED UNDER S. 194A. THEREFORE, IN RESPECT OF THE TAX PAYABLE ON THE SAID INTEREST INCOME, THE ASSESSEE ALSO CANNOT BE TAKEN TO BE LIABLE TO PAY INTEREST. OTHERWISE, IT WILL MEAN THAT THERE ARE TWO PERSONS UNDER THE ACT TO PAY INTEREST ON TAX ON THE SAME INCOME. THE LEGISLATURE WOULD NOT HAVE CONT EMPLATED SUCH A SITUATION WHERE IN RESPECT OF THE TAX ON INTEREST INCOME, TWO PERSONS ARE LIABLE TO PAY INTEREST FOR THE DELAYED PAYMENT OF TAX. WE ARE, THEREFORE, INCLINED TO HOLD THAT WHATEVER THERE IS A POSSIBILITY OF A DEDUCTION OF TAX AT SOURCE, THE P ERSON WHO HAD FAILED TO DEDUCT TAX AT SOURCE IS LIABLE TO PAY INTEREST AND NOT THE ASSESSEE, AS OTHERWISE, THERE WILL BE CHARGING OF INTEREST TWICE ON THE PAYMENT OF TAX IN RELATION TO THE SAME INCOME. SUCH AN INTERPRETATION SHOULD NORMALLY BE AVOIDED. IN THIS CASE, THEREFORE, THE TRIBUNAL APPEARS TO BE RIGHT IN HOLDING THAT IN TERMS OF S. 215 INTEREST COULD NOT BE LEVIED ON THE ASSESSEE ON THE TAX WHICH IS DEDUCTIBLE AT SOURCE. WE ANSWER THE SAID QUESTIONS REFERRED TO US IN THE AFFIRMATIVE AND AGAINST THE REVENUE. THE REVENUE WILL PAY THE COSTS OF THE ASSESSEE. 21 6.3. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE ARE OF THE CONSIDERED VIEW THAT INTEREST UNDER SECTION 234 B, & D CANNOT BE LEVIED ON ASSESSEE. FURTHER IT IS OBSERVED THAT THE INDIAN COUNTERPART HAS ALREADY DEDUCTED TAX AT SOURCE BEFORE MAKING PAYMENT TO ASSESSEE. ACCORDINGLY WE DIRECT LD.AO TO GRANT APPROPRIATE RELIEF IF ANY AS PER LAW. 6.4. ACCORDINGLY THIS GROUND RAISED THE ASSESSEE STANDS ALLOWED. 7. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED AS DISCUSSED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 T H M A R C H , 2018. S D / - S D / - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DATED: 2 6 T H M A R C H , 2018. *MV 22 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI