DDIT, Dehradun V. M/s. Pride Foramer SAS, New Delhi

ITA 1634/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6713 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 27-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA
• Assessee Lawyers: VIDUR PURI
• Keywords: Presumptive income; Double taxation relief; Rule of consistency; Advance ruling
• Section: 143(3); 5(2); 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1405/DEL./2014 (ASSESSMENT YEAR : 2009-10) PRIDE FORAMER SAS, VS. ADDL. DIRECTOR OF INCOME-TA X, C/O S.P. PURI & CO., CAS (INTERNATIONAL TAXATION), 4 / 18, ASAF ALI ROAD, DEHRADUN. NEW DELHI 110 002. (PAN : AACCP1572D) ITA NO.1634/DEL./2014 (ASSESSMENT YEAR : 2009-10) ADDL. DIRECTOR OF INCOME-TAX, VS. PRIDE FORAMER SAS , (INTERNATIONAL TAXATION), C/O S.P. PURI & CO., CA S DEHRADUN. 4 / 18, ASAF ALI ROAD, NEW DELHI 110 002. (PAN : AACCP1572D) ITA NO.2225/DEL./2014 (ASSESSMENT YEAR : 2009-10) ADDL. DIRECTOR OF INCOME-TAX, VS. PRIDE OFFSHORE IN TERNATIONAL LLC, (INTERNATIONAL TAXATION), C/O S.P. PURI & CO., CA S DEHRADUN. 4 / 18, ASAF ALI ROAD, NEW DELHI 110 002. (PAN : AAECP6665P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIDUR PURI, CA REVENUE BY : SHRI ANUJ ARORA, CIT DR DATE OF HEARING : 27.07.2016 DATE OF ORDER : 29.07.2016 ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 2 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE IDENTICAL QUESTION OF FACT AND LAW HAS BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSIO N. 2. THE APPELLANT, PRIDE FORAMER SAS (HEREINAFTER RE FERRED TO AS THE ASSESSEE), BY FILING THE AFORESAID APPEAL BEI NG ITA NO.1405/DEL/2014, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 23.12.2013 PASSED BY DISPUTE RESOLUTION PANEL-II, N EW DELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUND INTER ALI A THAT :- THE LEARNED ASSESSING OFFICER AND HONBLE DRP ERRE D IN LAW AND ON FACTS IN DENYING THE CLAIM OF NON-TAX ABILITY OF THE REIMBURSEMENT OF SERVICE TAX OF RS.13,82,40, 973/- IN COMPUTING INCOME U/S 44BB OF THE ACT. 3. THE APPELLANT, ADDL. DIRECTOR OF INCOME-TAX, INT ERNATIONAL TAXATION, DEHRADUN (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILING THE AFORESAID APPEAL BEING ITA NO.1634/DEL/2 014, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 23.12.2013 PASSE D BY DISPUTE RESOLUTION PANEL-II, NEW DELHI QUA THE ASSESSMENT Y EAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL DRP') H AS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE AN ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 3 AMOUNT OF RS.89,57,794/- RECEIVED BY THE ASSESSEE O N ACCOUNT OF 'EQUIPMENT LOST IN HOLE' FROM GROSS REVE NUES RECEIVED FROM M/S ONGC LIMITED FOR THE PURPOSE OF COMPUTATION OF PROFITS UNDER THE PRESUMPTIVE PROVIS IONS OF SECTION 44BB OF THE INCOME TAX ACT, 1961 ('THE ACT'). 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL C DRP') HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE AN AMOUNT OF RS. 5,09,7941- RECEIVED BY THE ASSESSEE O N ACCOUNT OF 'COMMUNICATION IMMERSAT CHARGES' FROM GROSS RECEIPTS RECEIVED FROM M/S ONGC LIMITED FOR T HE PURPOSE OF COMPUTATION OF PROFITS UNDER THE PRESUMP TIVE PROVISIONS OF SECTION 44BB OF THE ACT. 2.1 WHETHER THE HON'BLE DRP HAS ERRED IN OBSERVING THAT NO FURTHER APPEAL HAS BEEN FILED BY THE DEPART MENT AGAINST THE ORDER OF THE HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002-03 REPORTED IN [(2008 ) 22 SOT 204] WHEREIN THE ABOVE ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE, IGNORING THE FACT THAT THE SAID ORDER WAS NOT ACCEPTED BY THE DEPARTMENT ON MERITS AND APPEAL AGAINST THE SAID ORDER WAS NOT FILED SOLELY ON ACCOUNT OF THE TAX-EFFECT BEING BELOW THE THRESHOLD MONETARY LIMIT PRESCRIBED IN TERMS OF THE INTERNAL INSTRUCTIONS OF THE DEPARTMENT. 2.2 WHETHER THE HON'BLE DRP HAS ERRED IN NOT APPLYING THE RATIO OF THE DECISION IN THE CASE OF M /S BJ SERVICES CO. MIDDLE EAST [2008] 170 TAXMAN 286 (UTTARAKHA D) WHEREIN RECEIPTS ON ACCOUNT OF SUPPLY OF SPARE PARTS HAVE BEEN HELD TO BE INCLUDIB LE AS RECEIPTS U/S 44BB, PARTICULARLY IN VIEW OF THE FACT THAT THE NATURE OF RECEIPTS IN THE AID CASE WAS ESSENTIALLY SIMILAR TO THOSE INVOLVED IN THE PRESENT CASE. 3. WHETHER THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTIO N 44BB ARE A SELF-CONTAINED CODE PROVIDING FOR COMPUTATION OF PROFITS AT A FIXED PERCENTAGE OF GROSS RECEIPTS OF THE ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 4 ASSESSEE AND ALL THE DEDUCTIONS AND EXCLUSIONS FROM INCOME ARE DEEMED TO HAVE BEEN ALLOWED TO THE ASSES SEE. 3.1 WHETHER THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT ONCE THE RECEIPTS ARE OF FERED TO TAX U/S 44BB OF THE ACT WHICH PROVIDES FOR COMPUTAT ION OF PROFITS ON GROSS BASIS, THERE IS NO SCOPE FOR CO MPUTING OR RE-COMPUTING THE PROFITS BY EXCLUDING ANY ELEMEN T OF THE RECEIPTS FROM THE TOTAL TURNOVER AS THE SAME WO ULD AMOUNT TO DEFEATING THE VERY PURPOSE OF PROVIDING F OR A SCHEME OF SIMPLER MODE OF COMPUTATION OF PROFITS U/ S 44BB OF THE ACT AND OBVIATING THE NEED FOR ACCOUNTI NG FOR INDIVIDUAL RECEIPTS AND PAYMENTS ETC. 3.2 WHETHER THE HON'BLE DRP HAS ERRED IN NOT APPLYING/EXTENDING THE RATIO OF THE JUDGMENT OF THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V S. HALLIBURTON OFFSHORE SERVICES INS. (300 ITR 265) TO THE RECEIPTS ON ACCOUNT OF 'EQUIPMENT LOST IN HOLE' AND 'COMMUNICATION IMMERSAT CHARGES.' 4. THE APPELLANT, ADDL. DIRECTOR OF INCOME-TAX, INT ERNATIONAL TAXATION, DEHRADUN (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILING THE AFORESAID APPEAL BEING ITA NO.225/DEL/20 14, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 27.12.2013 PASSE D BY DISPUTE RESOLUTION PANEL-II, NEW DELHI QUA THE ASSESSMENT Y EAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO APPLY T HE DEEMED PROFIT RATE OF 10 % U/S 44BB OF THE INCOME T AX ACT, 1961 (THE ACT') ON THE REVENUES EARNED BY THE ASSESSEE FROM A NON- RESIDENT COMPANY, M/S PRIDE FORAMER (A FRENCH COMPANY), ON ACCOUNT OF PROVISION OF ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 5 OFFSHORE DRILLING RIG ON HIRE FOR EXECUTING CONTRAC TS WITH M/S ONGC. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DR P') HAS ERRED IN HOLDING THAT THE AMOUNT RECEIVED BY TH E ASSESSEE FROM M/S PRIDE FORAMER, ON ACCOUNT OF THE PROVISION OF DRILLING RIG UNDER CHARTER AGREEMENT W AS NOT IN THE NATURE OF ROYALTY AS DEFINED U/S 9(1)(VI) OF THE ACT AND WAS NOT TAXABLE UNDER THE PROVISIONS OF SECTION 44DA R.W.S. 115A OF THE ACT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DR P') HAS ERRED IN HOLDING THAT THE REVENUES EARNED BY TH E ASSESSEE ON ACCOUNT OF PROVISION OF DRILLING RIG ON HIRE TO A NON-RESIDENT COMPANY WERE IN CONNECTION WITH PROSPECTING ETC OF MINERAL OIL AND HENCE ELIGIBLE F OR TREATMENT U/S 44BB OF THE ACT, WITHOUT ADJUDICATING THE ASPECT OF ELIGIBILITY IN TERMS OF SECOND LIMB OF TH E EXCLUSIONARY PROVISO (EXPLANATION TO SECTION 9(1)(V II) OF THE IT ACT, 1961) I.E. 'FOR A PROJECT UNDERTAKEN BY THE RECIPIENT' IN TERMS OF THE PROPOSITION CONFIRMED BY HON'BLE DELHI HIGH COURT IN DIT VS. RIO TINTO TECHNICAL SERVICES [2012-TII-OI-HC-DEL-INTL]. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP ') HAS ERRED IN NOT APPRECIATING THE FACT IN THE PRESE NT CASE THE DRILLING RIG WAS NOT PROVIDED ON HIRE BY THE AS SESSEE DIRECTLY TO AN ENTITY (M/S ONGC) WHICH IS ENGAGED I N PROSPECTING ETC OF MINERAL OIL AND IS DIRECTLY A ME MBER OF THE PRODUCTION SHARING CONTRACT. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN HOLDING THAT NO DISTINCTION CAN BE MADE BE TWEEN RECEIPTS FROM PRODUCTION SHARING PARTICIPANTS (PSC PARTNERS) AND NON-PRODUCTION SHARING PARTICIPANTS ( NON- PSC PARTNERS) AND BETWEEN PLANT AND EQUIPMENT PROVI DED ON HIRE BY FIRST-LEG AND SECOND-LEG VENDORS, IGNORI NG THE FACT THAT THE RECEIPTS FROM SECOND- LEG ARE IN RESP ECT OF ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 6 CONTRACTS WHICH ARE ENTERED INTO WITH COMPANIES NOT DIRECTLY ENGAGED IN OIL PRODUCTION AND EXPLORATION AND, THEREFORE, ARE LIABLE TO TAX U/S 9(1)(VI)/9(L)(VII) READ WITH SECTION 44DA AND NOT SECTION 44BB OF THE IT ACT, 19 61. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ER RED IN ITS INTERPRETATION OF THE LEGISLATIVE INTENT BEH IND THE SCHEME OF TAXATION ENVISAGED IN 9(1)(VI) READ WITH SECTIONS 44DA AND 44BB IGNORING THE DECISIONS IN TH E CASES OF M/S ROLLS ROYCE PVT. LIMITED [2007-TII-03- HC- UKHAND-INTL] AND M/S ONGC AS AGENT OF M/S FORAMER FRANCE [(2008) 299 ITR 438 UTTARAKHAND] . 6.1 THE HON'BLE DRP HAS ERRED IN NOT APPLYING THE RATIO LAID DOWN IN THE CASE OF FORAMER FRANCE (SUPR A), NOT APPRECIATING THE BROAD PROPOSITION LAID DOWN IN THE CASE THAT ONCE THE RECEIPTS ANSWER THE DEFINITION O F ROYALTY OR FTS UNDER THE ACT, THE SAME CEASE TO QUA LIFY FOR TREATMENT U/S 44BB OF THE ACT. 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE HON'BLE DISPUTE RESOLUTION PANEL (' DRP') HAS E RRED IN IGNORING THE DISTINCT SCHEME OF TAXATION OF ROYA LTY / FEES FOR TECHNICAL SERVICES AND DISREGARDING THE INSERTION OF PROVISOS IN SECTION 44BB/44DA/115A AND THE RATIONALE BEHIND THE INTRODUCTION OF SAID CLARI FICATORY PROVISO IN THE FINANCE BILL 2010 IN HOLDING THAT TH E INCOME OF THE ASSESSEE COMPANY WAS COVERED UNDER TH E PROVISIONS OF SECTION 44BB. 8. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP ') HAS ERRED IN NOT APPRECIATING THAT SINCE SECTIONS 44DA/115A ARE SPECIAL PROVISIONS FOR TAXATION OF IN COME IN THE NATURE OF ROYALTIES AND FTS AND IF A SPECIAL PROVISION IS MADE RESPECTING A CERTAIN MATTER THAT MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RU LE OF 'GENERALLIA S PECIALIBUS NON DEROGANT'. 9. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 7 ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 44B B OF THE ACT ARE MORE SPECIAL PROVISIONS WHICH SHALL PRE VAIL OVER THE PROVISIONS OF SECTION 9(1)(VI) READ WITH S ECTIONS 44DA AND IISA OF THE ACT, NOT APPRECIATING THE FACT THAT BOTH SET OF PROVISIONS ARE SPECIAL IN NATURE WHICH OPERATE IN THEIR OWN CLEARLY DEFINED SPHERES AND THEREFORE, ONCE A PARTICULAR RECEIPT OR INCOME TAKES ON THE CHARACTER OF ROYALTY AS DEFINED IN SECTION 9(1 )(VI), IT CANNOT BE CONSIDERED FOR TREATMENT U/S 44BB OF THE ACT. 10. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN HOLDING THAT SECTIONS 44DA AND SECTION 115 A APPLY ONLY TO CASES WHERE THE INCOME BY WAY OF ROYA LTY OR FTS IS EARNED BY A NON-RESIDENT FROM GOVERNMENT OR AN INDIAN ENTITY AND THAT THE PROVISIONS OF SECTION 44DA/11L5A DO NOT APPLY WHERE AN INCOME IS RECEIVED BY A NON-RESIDENT FROM ANOTHER NON-RESIDENT. 11. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP) HAS ERRED IN NOT APPRECIATING THAT PROVISO TO SECTION 4 4BB IS NOT INSERTED 'PER MAJOREM CAUTELAM' BUT EXPLAINS AN D 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 PA YMENTS TAKE THE CHARACTER OF ROYALTY U/S 9(1)(VI) THEY GO OUTSIDE THE PURVIEW OF SECTION 44BB AND HAVE TO BE TAXED AS ROYALTY AT RATES PRESCRIBED FOR ROYALTY INCOME UNDE R THE ACT AND/OR DTAA. 12. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN DIRECTING THE AO TO BRING TO TAX THE PROPO RTIONATE AMOUNT NOT APPRECIATING THE FACT THAT PROVISO TO SE CTION 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 INTO EFFECT IN VIEW OF THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF SEDCO F OREX INTERNATIONAL DRILLING VIS CIT. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 8 13. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME O R BEFORE THE HEARING OF THE APPEAL. BRIEF FACTS OF ITA NOS.1405/DEL/2014 AND 1634/DEL/2 014 5. BRIEFLY STATED THE FACTS NECESSARY TO DECIDE ISS UE IN CONTROVERSY IN THE AFORESAID CROSS APPEALS ARE : T HE ASSESSMENT ORDER UNDER SECTION 143(3) / 144C(13) OF THE INCOME -TAX ACT, 1961 (FOR SHORT THE ACT) WAS PASSED AT TOTAL INCOME OF RS.46,62,77,770/-. THE ASSESSEE HAS EARNED A SUM O F RS.89,57,794/- ON ACCOUNT OF EQUIPMENT LOST IN WELL , RS.5,09,404/- ON ACCOUNT OF IMMERSAT CHARGES, A SUM OF RS.13,82,4 0,973/- ON ACCOUNT OF REIMBURSEMENT OF SERVICE-TAX AND A SUM O F RS.63,62,945/- ON ACCOUNT OF CATERING DURING THE YE AR UNDER ASSESSMENT. ASSESSEE WAS CALLED UPON TO SHOW CAUSE AS TO WHY THE SUM RECEIVED BY ASSESSEE ON ACCOUNT OF REIMBURSEMEN T SHOULD NOT BE INCLUDED IN THE AMOUNTS REFERRED IN SECTION 44BB AND INCLUDED IN THE GROSS RECEIPT TO TAX ACCORDINGLY. FINDING T HE REPLY BY THE ASSESSEE NOT TENABLE, AO CAME TO THE CONCLUSION THA T THE REIMBURSEMENT IS INTRICATELY LINKED TO THE SERVICE/ WORK RENDERED BY THE ASSESSEE AND ARISES DUE TO THE RELATED RECEIPTS AND AS SUCH, IT IS TO BE TREATED AS PART OF TAXABLE GROSS RECEIPTS AND THEREBY ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.45,08,70,660 /-. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 9 6. ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE R ESOLUTION PANEL-II, NEW DELHI WHO HAS PARTLY ACCEPTED THE OBJ ECTIONS RAISED BY THE ASSESSEE AND DIRECTED THE AO TO CORRECT THE FIGURES FOR COMPUTATION STATED TO HAVE BEEN ADDED TWICE. FEELI NG AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE ORDER PASSED BY AO AS WELL AS DRP D ENYING THE CLAIM OF NON-TAXABILITY OF REIMBURSEMENT OF SERVICE TAX OF RS.13,82,40,973/- IN COMPUTING THE INCOME U/S 44BB OF THE ACT AND THE REVENUE ALSO FILED THE APPEAL AGAINST THE O RDER OF THE DRP. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS OF ITA NO.2225/DEL/2014 8. BRIEFLY STATED FACT OF THIS CASE ARE : DRAFT ASS ESSMENT ORDER DATED 10.02.2014 WAS PASSED U/S 143(3) / 144C(13) O F THE ACT ASSESSING THE TOTAL INCOME AT RS.13,71,51,706/-. P URSUANT TO THE SCRUTINY PROCEEDINGS INITIATED AGAINST THE ASSESSEE , NECESSARY DETAILS WERE FILED BY THE ASSESSEE THROUGH SHRI PRA SHANT KOCHAR, CA AND SHRI SUNNY, CA. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 10 9. ASSESSEE COMPANY IS INCORPORATED IN USA AND IS I N THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CO NNECTION WITH THE PROSPECTING, PRODUCTION AND EXTRACTION OF MINERAL O IL. ASSESSEE COMPANY ENTERED INTO A CONTRACT WITH PRIDE FORAMER FOR RENTAL OF OIL DRILLING RIG PRIDE HAWAII ON LEASE FOR OFFSHORE DRILLING OPERATIONS RELATING TO MINERAL OIL IN INDIA AND THE CONTRACT WAS ONLY FOR THE PURPOSE OF HIRING/CHARTER OF OIL DRILLING O FFSHORE RIG PRIDE HAWAII. INCOME HAS BEEN OFFERED ON THE BASIS OF TE RMS AND CONDITIONS OF THE CONTRACT DETAILED IN THE INVOICE BUT NO BOOKS OF ACCOUNT WERE MAINTAINED FOR THIS PURPOSE. ASSESSEE CLAIMED THAT SUCH AGREEMENT ARE TAXABLE U/S 44BB AND NOT TAXABLE AS ROYALTY U/S 9(1)(VI) OF THE ACT OR UNDER INDO US TREATY. FINDI NG THE SUBMISSIONS MADE BY THE ASSESSEE NOT TENABLE, AO CA ME TO THE CONCLUSION THAT THE PAYMENT RECEIVED BY ASSESSEE FR OM LEASING OF OIL DRILLING RIG PRIDE HAWAII IS NOT COVERED UNDE R SECTION 44BB AND TREATED THE RENTAL RECEIPTS OF THE ASSESSEE AS ROYALTY U/S 9(1)(VI) OF THE ACT. AFTER COMPLYING WITH THE DIRECTIONS IS SUED BY DRP VIDE ORDER DATED 27.12.2013, AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.13,17,51,706/-. 10. ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL-II, NEW DELHI WHO HAS CAME TO THE CONCLUSION THAT AMOUNT ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 11 RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION ON ACCOUNT OF HIRE CHARGES OF THE DRILLING RIG BE BROU GHT TO TAX BY APPLYING DEEMED PROFIT RATIO OF 10% U/S 44BB OF THE ACT. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF CHALLENGING THE ORDER PASSED BY DRP. 11. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.1405/DEL/2014 & ITA NO.1634/DEL/2014 12. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNE D ORDER PASSED BY AO/DRP CONTENDED THAT THE ISSUE IN CONTRO VERSY IS COVERED BY THE ORDER PASSED BY ITAT, DELHI BENCH IN ASSESSEES OWN CASE CITED AS PRIDE FORAMER SAS VS. ADDL. COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION (2014) 43 TAXMANN.COM 381 (DELHI TRIB.) . HOWEVER, ON THE OTHER HAND, LD. DR CHALLENGING THE IMPUGNED ORDER QUA EXCLUDING THE AMOUNT OF RS.89,57,794/- RECEIVED BY THE ASSESSEE ON ACCOU NT OF EQUIPMENT LOST IN HOLE FROM GROSS REVENUE RECEIVE D BY THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF PROFIT A ND EXCLUDING AN AMOUNT OF RS.5,09,794/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 12 COMMUNICATION IMMERSAT CHARGES FROM GROSS RECEIPT S RECEIVED FROM M/S. ONGC LTD. FOR THE PURPOSE OF COMPUTATION OF PROFIT UNDER THE PRESUMPTIVE PROVISIONS OF SECTION 44BB OF THE ACT BY THE DRP RELIED UPON THE DRAFT ORDER PASSED BY AO. GROUND NO.1 OF ITA NO.1405/DEL/2014 13. NOW, THE QUESTION ARISES FOR DETERMINATION IN T HIS CASE IS :- AS TO WHETHER REIMBURSEMENT OF SERVICE-TAX AMOUNTI NG TO RS. 13,82,40,973/- IS REQUIRED TO BE EXCLUDED IN COMPUTING THE INCOME U/S 44BB OF THE ACT AS ALLEGED BY THE ASSESSEE. 14. IDENTICAL ISSUE IN ASSESSEES OWN CASE HAS ALRE ADY BEEN DEALT WITH BY THE TRIBUNAL IN CASE CITED AS PRIDE FORAMER SAS VS. ADDL. COMMISSIONER OF INCOME-TAX (SUPRA) QUA AY 2008-09 AND RETURNED THE FINDING IN FAVOUR OF THE ASSESSEE BY R ELYING UPON THE CASE DECIDED BY THE TRIBUNAL IN CASE OF SEDCO FOREX DRILLING INC. 139 ITD 188 . 15. FOR READY REFERENCE, OPERATIVE PART OF THE ORDE R PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE CITED AS PRIDE FORAMER SAS VS. ADDL. COMMISSIONER OF INCOME- TAX (SUPRA) QUA AY 2008-09 IS REPRODUCED AS UNDER :- 11. AS REGARDS GROUND NO.4 REGARDING RECEIPT OF SERVICE TAX ISSUE, THIS ISSUE HAS BEEN EXAMIN ED BY THE TRIBUNAL IN THE CASE OF SEDCO FOREX DRILL ING INC. 139 ITD 188 WHEREIN IT HAS BEEN HELD THAT SERVICE T AX ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 13 BEING A STATUTORY LIABILITY CANNOT FORM PART OF GRO SS RECEIPTS FOR THE PURPOSE OF DEEMED PROFIT U/S 44BB. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE REPRO DUCED BELOW:- AS REGARDS REIMBURSEMENT OF AMOUNT IN RESPECT OF SERVICE TAX, AS POINTED OUT BY THE LD. AR , THE ITAT DELHI BENCH IN THEIR DECISION IN TECHNIP OFFSHORE CONTRACTING BV(SUPRA) CONCLUDED THAT SERVICE TAX COLLECTED BY THE ASSESSEE BEING DIRECTLY IN CONNECTION WITH SERVICES OR FACILITIES OR SUPPLY SPECIFIED U/S 44BB OF THE ACT PROVIDED BY THE ASSESSEE TO ONGC, HAVE TO BE INCLUDED IN THE TOTAL RECEIPTS FOR THE PURPOSE OF DETERMINATION OF PRESUMPTIVE PROFIT U/S 44BB OF THE ACT. IT IS WELL ESTABLISHED THAT SECTION 44BB OF THE ACT IS A SPECIAL PROVISION, TREATING 10 PER CENT OF THE AGGREGATE AMOUNT SPECIFIED IN SUB-S. (2) OF S. 44BB AS DEEMED PROFITS AND GAINS OF SUCH NON-RESIDENT ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WIT H, OR SUPPLYING PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR , OR EXTRACTION OR PRODUCTION OF, MINERAL OILS. THE AMOUNT REFERRED IN SUB-S. (2) OF S. 44BB ARE THE AMOUNTS (A) PAID TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLA NT AND MACHINERY ON HIGHER USED, OR TO BE USED, I N THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTI ON OF, MINERAL OILS IN INDIA, (B) PAYABLE TO THE ASSES SEE (WHETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA, (C) RECEIVED BY THE ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 14 MINERAL OILS OUTSIDE INDIA AND (D) DEEMED TO BE RECEIVED BY THE ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS OUTSIDE INDIA. THE SERVICE TAX IS A STATUTORY LIABILITY LIKE CUSTOM DUTY. HONBLE UTTARAKHAND HIGH COURT IN THEIR DECISION IN SCHLUMBERGER ASIA SERVICES LTD.(SUPRA) CONCLUDED THAT REIMBURSEMENT OF CUSTOM DUTY PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. FOLLOWING THE VIEW IN THIS DECISION, MUMBAI BENCH IN THEIR DECISION IN ISLAMIC REPUBLIC OF IRAN SHIPPING LINES(SUPRA) HELD THAT SERVICE TAX BEING A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMENT OF PROFIT AND ACCORDINGLY, THE SAME COULD NOT BE INCLUDED I N THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME. IN THE LIGHT OF VIEW TAK EN BY THE MUMBAI BENCH, ESPECIALLY WHEN THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US, CONTROVERTING THE AFORESAID FINDINGS OF THE L D. CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VI EW IN THE MATTER NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION, WE ARE OF THE OPINION THA T SERVICE TAX PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. THEREFORE, GROUND NO.3 IN THE APPEAL IS ALLOWED. 12. THEREFORE, FOLLOWING THE ABOVE, WE ALSO H OLD THAT SERVICE TAX RECEIVED BY THE ASSESSEE CAN NOT FORM PART OF GROSS RECEIPTS FOR THE PURPOSE OF CALC ULATION OF DEEMED PROFIT. IN VIEW OF THE ABOVE GROUND NO. 4 IS DECIDED IN FAVOUR OF THE ASSESSEE. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 15 16. LD. DR FOR THE REVENUE HAS NOT PLACED BEFORE US ANY MATERIAL TO DEPART FROM THE VIEW TAKEN BY THE COORDINATE BEN CH IN THE CASE OF CITED AS PRIDE FORAMER SAS VS. ADDL. COMMISSIONER OF INCOME-TAX (SUPRA). SO, FOLLOWING THE ORDER PASSED BY COORDIN ATE BENCH, WE HEREBY HOLD THAT THE SERVICE TAX RECEIVED BY THE ASSESSEE CANNOT BE INCLUDED IN THE GROSS RECEIPT FOR THE PUR POSE OF COMPUTATION OF DEEMED PROFIT. CONSEQUENTLY, THIS G ROUND IS DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NOS.1, 2 & 2.1 OF ITA NO.1634/DEL/2014 17. NOW, THE FIRST QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS:- AS TO WHETHER REIMBURSEMENT OF LOSS OF EQUIPMENT I N THE WELL ARE INCLUDIBLE IN THE GROSS REVENUE RECEIV ED FROM M/S. ONGC LIMITED FOR THE PURPOSE OF COMPUTATION OF PROFITS UNDER THE PRESUMPTIVE PROVIS IONS OF SECTION 44BB OF THE ACT AS ALLEGED BY THE REVENU E? 18. AT THE VERY OUTSET, LD. AR FOR THE ASSESSEE FAI RLY CONCEDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED AGAINST TH E ASSESSEE IN ASSESSEES OWN CASE CITED AS ACIT VS. PRIDE FORAMER FRANCE SAS (SUPRA) QUA AY 2002-03 WHEREIN IT IS CATEGORICALLY DECIDED THAT REIMBURSEMENT OF THE LOSS OF EQUIPMENT IN HOLE /WELL AMOUNTING TO RS.89,57,794/- FORMS THE PART OF GROSS RECEIPTS AND AS SUCH FALLS WITHIN THE PRESUMPTIVE PROVISIONS OF SEC TION 44BB OF THE ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 16 ACT FOR THE PURPOSE OF COMPUTATION OF PROFIT. SO, CONSEQUENTLY GROUND NO.1 IS DETERMINED IN FAVOUR OF THE REVENUE. 19. THE NEXT QUESTION ARISES FOR DETERMINATION IN T HIS CASE IS :- AS TO WHETHER AMOUNT OF RS.5,09,794/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF COMMUNICATION IMMERSAT CHARGES ARE REQUIRED TO BE INCLUDED FOR THE PURPOS E OF COMPUTATION OF PROFIT UNDER THE PRESUMPTIVE PROVISI ON OF SECTION 44BB OF THE ACT AS ALLEGED BY THE REVENU E? 20. THIS ISSUE HAS ALREADY BEEN DEALT WITH BY THE C OORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE CITED AS ACIT VS. PRIDE FORAMER FRANCE SAS (2008) 22 SOT 204 (DELHI ) QUA AY 2002-03 AND DECIDED IN FAVOUR OF THE ASSESSEE BY RETURNING THE FOLLOWING FINDINGS :- 20. NO DOUBT THAT SECTION 44BB IS A CODE IN ITSELF AND IT STARTS WITH NON OBSTANTIVE CLAUSE WHICH EXCLUDES APPLICATION OF SECTIONS 28 TO 41 AND SECTIONS 43 AN D 43A OF THE ACT BUT AT THE SAME TIME, TO ASSESS ANY SUM UNDER THAT SECTION, THE ACTIVITY MUST FALL WITHIN THE ACT IVITY DESCRIBED IN SUB-SECTION (2) OF SECTION 44BB OF THE ACT. SUPPLY OF DRY FRUITS AND RECOVERY OF COMMUNICATION EXPENSES SPECIFICALLY DO NOT FIND MENTIONED IN SUB- SECTION (2) OF SECTION 44BB AS THESE ACTIVITIES HAV E NOTHING TO DO WITH THE ACTIVITY OF PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA OR OUTSIDE INDIA. SO AS IT RELATES TO REIMBURSEMENT OF COST OF EQUIPMENT, THE SAME ALSO DOES NOT FALL WITHIN THE A MBIT OF SECTION (2) OF SECTION 44BB AS THE SAME APPLY ON SUPPLY OF PLANT AND MACHINERY ON HIRE AND THE EQUIP MENT, 75 PER CENT COST OF WHICH IS REIMBURSED, WAS NOT MACHINERY ON HIRE BEING USED IN SUCH ACTIVITY. THER E IS NO MATERIAL ON RECORD TO SHOW THAT THE SAID EQUIPME NT WAS USED ON HIRE EITHER BY THE ASSESSEE OR THE CONT RACTEE. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 17 THEREFORE, THE REIMBURSEMENT PAYMENTS RECEIVED BY T HE ASSESSEE BEING NOT COMING WITHIN THE SCOPE OF SECTI ON 44BB OF THE ACT HAVE RIGHTLY BEEN' HELD TO BE EXCLU DIBLE BY LD. CIT (A). THE CASE LAW RELIED UPON BY LD. DR HAVE NO APPLICATION TO THE FACTS OF PRESENT CASE AS THE NON- SUBSTANTIVE CLAUSE OF SECTION 44BB IS HELD TO BE APPLICABLE ONLY IN RESPECT OF ACTIVITIES REFER TO I N SECTION 44BB(2) OF THE ACT. THE REIMBURSEMENT OF EXPENSES I S ALSO NOT TAXABLE UNDER OTHER PROVISIONS OF THE ACT AS THERE IS NO MATERIAL ON RECORD TO SHOW THAT ANY ELEMENT O F PROFIT WAS EMBEDDED IN THE REIMBURSEMENT RECEIVED B Y THE ASSESSEE. IN ABSENCE OF ELEMENT OF PRO FIT IN T HE AMOUNT RECEIVED BY THE ASSESSEE AS REIMBURSEMENT, N O INCOME CAN BE ASSESSED UNDER OTHER PROVISIONS OF TH E ACT. THEREFORE, WE FIND NO FORCE IN THE ARGUMENTS W HICH HAVE BEEN SUBMITTED BY LD. DR. RATHER IT WILL BE US EFUL TO REFER TO THE FOLLOWING OBSERVATIONS FROM THE DECISI ON OF HON'BLE UTTARANCHAL HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL INC. ( SUPRA) :- 'IN THE PRESENT CASE, A FINDING HAS BEEN RECORDED BY THE ITAT THAT IT WAS NOT IN DISPUTE BEFORE THE TRIBUNAL THAT THE PAYMENT WAS MADE TO THE APPELLANT COMPANY OUTSIDE INDIA AND THE MOBILIZATION FEE AS CLAIMED BY THE ASSESSEE WAS PAID TO THE APPELLANT BY ONGC HAS NO NEXUS WITH THE ACTUAL AMOUNT INCURRED BY THE APPELLANT COMPANY FOR TRANSPORTATION OF DRILLING UNITS OF RIG S TO THE SPECIFIED DRILLING LOCATIONS IN INDIA. HENCE , THE MOBILIZATION FEE IS NOT THE REIMBURSEMENT OF EXPENDITURE. ONGC WAS LIABLE TO PAY A FIXED SUM AS STIPULATED IN THE CONTRACT REGARDLESS OF ACTUAL EXPENDITURE WHICH MAY BE INCURRED BY THE ASSESSEE COMPANY FOR THE PURPOSE. IN VIEW OF THE FICTIONAL TAXING PROVISION CONTAINED UNDER SECTION 44BB, THE ASSESSING OFFICER WAS RIGHT IN ADDING THE AMOUNT OF RS.99,04,000 FOR THE ASSESSMENT YEAR 1986-87 AND AMOUNT WORTH RS.64,64,530 FOR THE ASSESSMENT YEAR 1987-88 RECEIVED BY THE ASSESSEE TOWARDS MOBILIZATION CHARGES FOR THE PURPOSE OF IMPOSING INCOME-TAX AND CIT(A) AND ITAT WERE ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 18 ALSO RIGHT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER.' [EMPHASIS SUPPLIED] 21. FROM THE ABOVE OBSERVATIONS IT IS CLEAR THAT MOBILIZATION FEE WAS NOT CONSIDERED REIMBURSEMENT O N THE GROUND THAT THIS WAS NOT IN THE NATURE OF REIMBURSEMENT; THEREFORE, THE SAME COULD NOT BE BRO UGHT TO TAX UNDER THE PROVISIONS OF SECTION 44BB OF THE ACT. THEIR LORDSHIPS IN THE SAID CASE HAVE CONSIDERED SE CTION 44BB, SECTION 4, SECTION 5(2) AND SECTION 9 AND SEC TION 98 ALSO AND AFTER ANALYZING OF THESE SECTIONS IT HA S BEEN CONCLUDED THAT MOBILIZATION FEES WAS TO BE CONSIDER ED UNDER SECTION 44BB ON THE GROUND THAT ONGC WAS LIAB LE TO PAY A FIXED SUM, AS STIPULATED IN THE CONTRACT R EGARDLESS OF ACTUAL EXPENDITURE WHICH MAY BE INCURRED BY ASSE SSEE COMPANY FOR THE PURPOSE. IT IS, THEREFORE, THE MOBI LIZATION FEE WAS CONSIDERED LIABLE FOR TAXATION UNDER SECTIO N 44BB. IN THE PRESENT CASE, PAYMENTS RECEIVED BY THE ASSESSEE WERE NOT A FIXED SUM AS STIPULATED IN THE CONTRACT. IT WAS BASED ON ACTUAL EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE FOR THAT VERY PURPOSE . THERE WAS NO ELEMENT OF PROFIT. THEREFORE ALSO PROV ISIONS OF SECTION 44BB COULD NOT BE APPLIED FOR PRESENT CA SE. 21. LD. DR HAS NOT BROUGHT ON RECORD ANY MATERIAL T O DEPART FROM THE FINDINGS RETURNED BY THE COORDINATE BENCH IN ASSESSEES OWN CASE CITED AS ACIT VS. PRIDE FORAMER FRANCE SAS QUA AY 2002-03 AND AS SUCH, WE HOLD THAT REIMBURSEMENT OF COMMUNICATION IMMERSAT CHARGES AMOUNTING TO RS.5,09 ,794/- ARE NOT IN THE NATURE OF REIMBURSEMENT AND AS SUCH ARE NOT LIABLE TO BE TAXED UNDER THE PROVISIONS CONTAINED U/S 44BB OF TH E ACT. 22. REMAINING GROUNDS NO.2.2, 3, 3.1 & 3.2 ARE GENE RAL IN NATURE AND AS SUCH NEED NO DISCUSSION. ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 19 GROUND NOS.1 TO 13 OF ITA NO.2225/DEL/2014 23. IDENTICAL ISSUE AS TO WHETHER ASSESSEE IS ELIGI BLE FOR BENEFIT OF SECTION 44BB OF THE ACT AND IS ENTITLED TO TREAT THE PAYMENT RECEIVED BY THE ASSESSEE FROM LEASING OF OIL DRILLI NG RIG AS ROYALTY; THAT THERE IS NO DISTINCTION BETWEEN RECEIPT FROM P RODUCTION SHARING PARTICIPANTS (PSC PARTNERS) AND NON-PRODUCTION SHAR ING PARTICIPANTS (NON-PSC PARTNERS) AND BETWEEN PLANT A ND EQUIPMENT PROFIT ON HIRE BY FIRST LEG AND SECOND LEG VENDORS AND THE RECEIPT FROM SECOND LEG ARE NOT LIABLE TO TAX U/S 9(1)(VI) AND 9(1)(VII) READ WITH SECTION 44DA AND NOT SECTION 44BB OF THE ACT H AVE ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNA L IN ASSESSEES OWN CASE CITED AS PRIDE OFFSHORE INTERNATIONAL LLC VS. ADDL.DIT, INTERNATIONAL TAXATION, DEHRADUN IN ITA NO.5406/DEL/2012 QUA AY 2008-09 DATED 22.05.2015 IN FAVOUR OF THE ASSESSEE. 24. OPERATIVE PART OF THE FINDINGS RETURNED BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS PRIDE OFFSHORE INTERNATIONAL LLC VS. ADDL.DIT, INTERNATIONAL TAXAT ION (SUPRA) ARE REPRODUCED AS UNDER FOR READY REFERENCE :- 13. BESIDES, THE LD. DRP IN THE CASE OF ASSESSEE I TSELF FOR THE ASSTT. YEAR 2009-10 FOLLOWING DECISIONS OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MICOPER I S.P.A. MILANO (SUPRA), THE HON'BLE AUTHORITY OF ADV ANCE ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 20 RULING IN THE CASE OF WAVEFIELD INSEIS ASA (SUPRA) AND BOURBON OFFSHORE ASIA PTE LTD., IN RE [2011] 337 IT R 122/200 TAXMAN 408112 TAXMANN.COM 232 (AAR- NEW DELHI), HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF OHM LTD. (SUPRA) AS WELL AS THE DECISION OF AUTHORI TY FOR ADVANCE RULING IN THE CASE OF SPECTRUM GEO LTD., IN RE [2012]209 TAXMAN 397/346 ITR 422/25 TAXMANN.COM 77 (AAR - NEW DELHI) HAS COME TO THE CONCLUSION THAT T HE AMOUNTS RECEIVED BY THE ASSESSEE DURING THE YEAR UN DER CONSIDERATION ON ACCOUNT OF HIRE CHARGES OF THE DRI LLING RIG SHOULD BE BROUGHT TO TAX BY APPLYING THE DEEMED PROFIT RATIO OF 10% U/S 44BB OF THE ACT. THE LD. DR P HAS ACCORDINGLY DIRECTED THE AO TO DECIDE THE ISSUE AS SUCH WHILE ALLOWING THE OBJECTION RAISED BY THE ASS ESSEE. THE LEARNED CIT(DR) HAS REPRODUCED THE RELEVANT PAR A NO. 12 OF THE DECISION OF THE HON'BLE AUTHORITY OF ADVANCE RULING IN THE CASE OF SPECTRUM GEO LTD. (SU PRA) AS UNDER :- '12. THE INQUIRY NOW IS WHETHER THE INCOME DERIVED BY THE APPLICANT FROM PERFORMING ITS CONTRACT WITH THE UAE COMPANY WOULD BE ASSESSABLE TO TAX AS, FEES FOR TECHNICAL SERVICES UNDER SECTION 440, 44DA, OR 115A OF THE ACT. ADMITTEDLY, THE INCOME DERIVED BY THE APPLICANT IS FROM A UAE COMPANY AND NOT FROM THE GOVERNMENT OR AN INDIA CONCERN. IN OTHER WORDS, INCOME DERIVED BY THE APPLICANT IS FROM A NON- RESIDENT COMPANY OF FOREIGN COMPANY. ON THE WORDING OF THESE SECTIONS, THE INCOME CANNOT BE BROUGHT WITHIN THEIR PURVIEW, BECAUSE THEY ONLY SPEAK OF INCOME BY WAY OF FEES FOR TECHNICAL SERVICES RECEIVED FROM GOVERNMENT OR AN INDIAN CONCERN. ON THIS SHORT GROUND, THE CONTENTION OF THE REVENUE THAT THE INCOME DERIVED BY THE APPLICANT IS INDEPENDENTLY ASSESSABLE UNDER SECTION 115A OR 44DA OF THE ACT, HAS TO BE REJECTED. SINCE, INCOME DERIVED BY THE APPLICANT, IS FROM AN ACTIVITY IN CONNECTION WITH THE PROSPECTING FOR MINERAL OILS AND FROM A FOREIGN COMPANY, THE APPLICANT WOULD BE ENTITLED TO CLAIM TO BE ASSESSED UNDER SECTION 44BB(1) OF THE ACT. THE RULING; ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 21 THEREFORE, ON QUESTION NO 3 IS THAT THE INCOME DERIVED BY THE APPLICANT ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 44 BB (1) OF THE ACT.' (EMPHASIS SUPPLIED). 14. AS DISCUSSED ABOVE, THE HON'BLE DELHI BENCH OF THE ITAT IN THE CASE OF LOUIS DREYFUS ARMATEURES SA S (SUPRA) HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE HAS OBSERVED THAT IF THE LEGISLATURE INTEN TION AS CONTENDED BY THE REVENUE WAS TO RESTRICT THE BENEFI T OF SEC. 44BB OF THE ACT ONLY TO THE MAIN CONTRACTOR OR ONGC THEN THE WORDS AFTER 'THE ASSESSEE ENGAGED IN THE BUSINESS OF SUPPLYING PLANTS AND MACHINERY ON HIRE' OR 'PROVIDING SERVICES OR FACILITIES' OUGHT TO HAVE BE EN OMITTED. HENCE, WHERE THE PROVISION DOES NOT CREATE ANY DISCRIMINATION BETWEEN THE PERSON WHO ACTUALLY DOES THE ACTIVITY OF PROSPECTING FOR OR EXTRACTION OR PRODUC TION, AND THE PERSON WHO SUPPLIES THE PLANTS AND MACHINER Y, THE NARROW INTERPRETATION OF THE PROVISIONS IS THUS NOT PERMITTED. IT HAS BEEN HELD THAT THE BASIC CONDITIO N TO BE SATISFIED IN THE SAID PROVISION IS THAT THE PLANT O R MACHINERY SUPPLIED OR LENTED ON HIRE BY THE ASSESSE E, A NON-RESIDENT SHOULD BE USED IN THE PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS OR WHERE EQUIPMENT HAS BEEN SUPPLIED, SUCH EQUIPMENT SHOULD HAVE BEEN USED FOR THE PURPOSES OF PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS. THE ITA T THUS CAME TO THE CONCLUSION THAT THE FETTER ASSUMED BY T HE AUTHORITIES BELOW WHILE INTERPRETING THE PROVISIONS OF SEC. 44BB OF THE ACT ARE MANIFESTLY ABSENT AND THERE IS NOTHING IN THE SAID PROVISIONS SO AS TO DISENTITLED A SUB- CONTRACTOR FROM INVOKING THE SAID PROVISIONS. THE I TA T THUS DID NOT FIND ANY FAULT IN THE CLAIM OF THE ASS ESSEE THAT REVENUE RECEIVED UNDER THE CHARTERED AGREEMENT S WITH CGG FOR PROVIDING TWO SEISMIC SURVEY VESSELS A RE IN CONSIDERATION WITH PROSPECTING FOR EXTRACTION OR PRODUCTION OF MINERAL OILS AND, THEREFORE, TAXABLE UNDER SEC. 44BB OF THE ACT. 15. WE, HOWEVER, FIND THAT THE DECISION DATED 09.07.2014 OF HON'BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL AS (SUPRA) HAS NOT BEEN CITED BEFOR E ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 22 THE ITAT IN THE CASE OF LOUIS DREYFUS ARMATEURES SA S (SUPRA). HON'BLE DELHI HIGH COURT IN THE CASE OF PG S GEOPHYSICAL AS (SUPRA) VIDE PARA NO. 20 OF THE JUDG MENT HAS BEEN PLEASED TO HOLD THAT THE RECEIPT OF THE AS SESSEE CAN BE TAXED UNDER SEC. 44BB OF THE INCOME-TAX ACT, 1961 ONLY (I) IF THE ASSESSEE HAS A PE IN INDIA DUR ING THE RELEVANT PERIOD AND (II) THE CONTRACT ENTERED INTO BY THE ASSESSEE IN INDIA WAS EFFECTIVELY CONNECTED WITH TH AT PE IN INDIA. IN THE PRESENT CASE BEFORE US, THE ASSESS ING OFFICER AT PAGE NO.4 PARA NO.5 HAD HIMSELF NOTED TH AT THE ASSESSEE HAD GOT PE IN INDIA, THUS, FIRST CONDITION OF GETTING BENEFIT UNDER SEC. 44BB OF THE ACT AS LAID DOWN BY THE HON'BLE HIGH COURT IN THE ABOVE CITED CASE I S FULFILLED. SO FAR AS THE SECOND CONDITION THAT THE CONTRACT ENTERED INTO BY THE ASSESSEE IN INDIA WAS EFFECTIVE LY CONNECTED WITH THAT PE IN INDIA IS CONCERNED, THE D ISPUTE IN THIS REGARD REMAINED THAT THE ASSESSEE BEING SUB - CONTRACTOR AS PER THE AUTHORITIES BELOW WAS NOT ELI GIBLE FOR THE BENEFIT OF SECTION 4BB OF THE ACT. THE DELH I BENCH OF THE ITA T IN THE CASE OF LOUIS DREYFUS ARMATEURES SAS (SUPRA) AFTER DISCUSSING THE ISSUE I N DETAIL HAS HELD THAT THE PROVISION DOES NOT CREATE ANY DISCRIMINATION BETWEEN THE PERSONS WHO ACTUALLY DOE S THE ACTIVITY OF PROSPECTING FOR OR EXTRACTION OR PRODUC TION AND THE PERSON WHO SUPPLIES THE PLANTS AND MACHINERY, T HE ARROW INTERPRETATION OF THE PROVISIONS IS THUS NOT PERMITTED. IT HAS BEEN HELD THAT THE BASIC CONDITIO N TO BE SATISFIED IN THE SAID PROVISION IS THAT THE PLANT O R MACHINERY SUPPLIED OR LENTED ON HIRE BY THE ASSESSE E, A NON-RESIDENT SHOULD BE USED IN THE PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL OR WHERE EQUIPMENT HAS BEEN SUPPLIED, SUCH EQUIPMENT SHOULD HAVE BEEN USED FOR THE PURPOSE OF PROSPECTING FOR O R EXTRACTION OR PRODUCTION OF MINERAL OIL. THUS, WE F IND THAT THERE IS NO DISPUTE THAT THE CONTRACT ENTERED INTO BY THE ASSESSEE IN INDIA WAS EFFECTIVELY CONNECTED WITH TH AT PE IN INDIA AND THE DISPUTE AS TO WHETHER LETTING OUT DRILLING RIG, SERVICES AND FACILITIES BY THE ASSESSEE IN CON NECTION WITH PROSPECTING PRODUCTION AND EXTRACTION OF MINER AL OIL UNDER THE CONTRACT WITH PRIDE FORAMER AS ACCEPTED B Y ONGC IS A SUB-CONTRACT AND HENCE THE ASSESSEE IS NO T ENTITLED TO HAVE BENEFIT OF TAXABILITY UNDER SEC. 4 4BB OF ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 23 THE ACT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE ITA T IN THE CASE OF LOUIS DREYFUS ARMATEURES SAS (SUPRA). SINCE BOTH THE CONDITIONS AS POINTED OUT BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL AS (SUPRA) HAV E BEEN FULFILLED IN THE PRESENT CASE, WE ARE OF THE V IEW THAT THE ASSESSEE IS VERY MUCH ELIGIBLE FOR THE BENEFIT AVAILABLE UNDER SEC. 44BB OF THE ACT TOWARDS THE HI RE CHARGES OF THE DRILLING RIG BY APPLYING THE DEEMED PROFIT RATIO OF 10% UNDER THE SAID PROVISIONS. IT IS HELD ACCORDINGLY WITH DIRECTION TO THE ASSESSING OFFICER TO COMPUTE THE TAX AS SUCH BY ALLOWING THE BENEFIT OF THE PROVISIONS LAID DOWN UNDER SEC. 44B OF THE ACT. GRO UND NO.1 IS ACCORDINGLY ALLOWED. 25. LD. DR FOR THE REVENUE HAS NOT BROUGHT ON RECOR D ANY MATERIAL TO DEPART FROM THE VIEW TAKEN BY THE COORD INATE BENCH IN ASSESSEES OWN CASE CITED AS PRIDE OFFSHORE INTERNATIONAL LLC VS. ADDL.DIT, INTERNATIONAL TAXATION (SUPRA) QUA AY 2008-09. EVEN OTHERWISE IN THE IDENTICAL FACTS AND CIRCUMSTA NCES RULE OF CONSISTENCY IS ALSO APPLICABLE. 26. SO, BY FOLLOWING THE FINDINGS RETURNED BY THE C OORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE CITED AS PRIDE OFFSHORE INTERNATIONAL LLC VS. ADDL.DIT, INTERNATIO NAL TAXATION (SUPRA), GROUNDS RAISED BY THE REVENUE BY WAY OF PR ESENT APPEAL ARE NOT SUSTAINABLE AND THE FINDINGS RETURNE D BY THE DRP DIRECTING THE AO TO APPLY THE DEEMED PROFIT RATE OF 10% U/S 44BB OF THE ACT ON THE REVENUE EARNED BY THE ASSESSEE FR OM A NON- RESIDENT COMPANY, M/S PRIDE FORAMER ON ACCOUNT OF P ROVISION OF ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 24 OFFSHORE DRILLING RIG ON HIRE FOR EXECUTING CONTRAC TS WITH M/S. ONGC; AND TREATING THE AMOUNT RECEIVED BY THE ASSES SEE FROM M/S. PRIDE FORAMER ON ACCOUNT OF THE PROVISIONS OF DRILL ING RIG UNDER CHARTER AGREEMENT NOT IN THE NATURE OF ROYALTY AS D EFINED U/S 9(1)(VI) OF THE ACT AND NOT TAXABLE UNDER THE PROVI SIONS CONTAINED U/S 44DA READ WITH SECTION 115A OF THE ACT AND THAT DRP HAS RIGHTLY NOT APPLIED THE DISTINCT SCHEME OF TAXATION OF ROYALTY/FEE FOR TECHNICAL SERVICES WHILE ENTERING THE PROVISIONS CO NTAINED U/S 44BB / 44DA / 115A, HENCE APPEAL FILED BY THE REVEN UE IS HEREBY DISMISSED. 27. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, APPEA L BEARING ITA NO.1405/DEL/2014 FILED BY THE ASSESSEE IS HEREB Y ALLOWED, APPEAL BEARING ITA NO.1634/DEL/2014 FILED BY THE RE VENUE IS PARTLY ALLOWED AND APPEAL BEARING ITA NO.2225/DEL/2 014 FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF JULY, 2016. SD/- SD/- (J.S. REDDY) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF JULY, 2016 TS ITA NO.1405/DEL./2014 ITA NO.1634/DEL./2014 ITA NO.2225/DEL./2014 25 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.