ADIT, Dehradun V. M/s. Dolphin Drilling Pte. Ltd., Dehradun

ITA 174/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2803 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: VISHAL MISRA
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.174/DEL/2013 ASSESSMENT YEAR : 2008-09 ADIT, INTERNATIONAL TAXATION, 13-A, SUBHASH ROAD, AAYAKAR BHAWAN, DEHRADUN. VS. DOLPHIN DRILLING PTE LTD., C/O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN. PAN: AACCD0288Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT ARORA, CA & SHRI VISHAL MISRA, CA DEPARTMENT BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING : 19.03.2018 DATE OF PRONOUNCEMENT : 20.03.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 25.10.2012 IN RELATION TO THE ASSESSMENT YEAR 2008-09. THERE IS A DELAY OF ONE DAY IN PRESENTING THE APPEAL BEFORE THE TRIBUNAL. THE LD. AR ITA NO.174/DEL/2013 2 DID NOT RAISE ANY OBJECTION TO THE CONDONATION OF D ELAY. HENCE, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR HEARING. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE LEASED DRILLSHIP BELFORD DOLPHIN TO M/S DOLPHIN DRILLING LTD. (DDL). RETURN OF INCOME WAS FILED DECLARING BUSINESS INCOME IN TERMS OF SECTION 44BB(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED ` THE ACT). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER (AO) OBSERVED THAT THE ASSESSEE RECEIVED A SUM OF RS.163,51,113/- FROM DDL, WHICH WAS REFLECTED IN THE PROFIT & LOSS ACCOUNT, BUT, NOT TA KEN INTO CONSIDERATION IN THE COMPUTATION OF INCOME. THE ASSESSEE WAS ALSO FO UND TO HAVE AVAILED CREDIT OF TAX DEDUCTED AT SOURCE ON THE ABOVE AMOUN T IN THE RETURN OF INCOME FILED. CONSIDERING THE PROVISIONS OF SECTIO N 199, THE AO HELD THAT THE ASSESSEE COULD LEGALLY CLAIM CREDIT OF TDS ONLY , WHEN THE CORRESPONDING INCOME WAS OFFERED FOR TAXATION DURIN G THE YEAR. ON BEING CALLED UPON TO EXPLAIN THE POSITION, THE ASSESSEE S TATED THAT IT RECEIVED A SUM OF RS.1.63 CRORE FROM DDL ON ACCOUNT OF CREW SA LARY AND RELATED EXPENSES OF EMPLOYEES ACCOUNTED AND ASSIGNED TO DDL . IT WAS ALSO PUT FORTH THAT THE RECEIPT ON ACCOUNT OF PAY ROLL COST WAS IN THE NATURE OF ITA NO.174/DEL/2013 3 REIMBURSEMENT AND DEVOID OF ANY ELEMENT OF PROFIT. SINCE THE ASSESSEE COULD NOT PROVIDE ANY DOCUMENTARY EVIDENCE/SUPPORTI NG DOCUMENT WITH REGARD TO CLAIM THAT THERE WAS NO PROFIT ELEMENT AN D IT WAS A MERE REIMBURSEMENT, THE AO ADDED RS.1.63 CRORE TO THE AS SESSEES TOTAL INCOME. THE LD. CIT(A) OVERTURNED THE ASSESSMENT ORDER ON T HIS POINT BY RECORDING HIS FINDING ONLY IN THREE LINES IN PARA 4.1 BY OBSE RVING THAT THE ADDITION WAS LIKELY TO BE DELETED. THE REVENUE IS AGGRIEVED AGAI NST THE DELETION OF ADDITION. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE CASE OF THE ASSESSEE IS THAT IT, BEING, A NON-RESIDENT EARNING INCOME FROM THE BUSINESS OF EXPLORATION ETC. OF MIN ERAL OILS, IS COVERED BY THE PROVISIONS OF SECTION 44BB. THE AO HAS NOT DIS PUTED THIS CLAIM. TO BE MORE SPECIFIC, THE ASSESSEE COMPUTED ITS INCOME UND ER SUB-SECTION (3) OF SECTION 44BB. IN ORDER TO APPRECIATE THE RIVAL CON TENTIONS ON THE INCLUSION OR OTHERWISE OF THE AMOUNT IN QUESTION IN THE TOTAL INCOME OF THE ASSESSEE, IT IS NECESSARY TO HAVE A LOOK AT THE RELEVANT PROVISI ONS OF SECTION 44BB, WHICH ARE AS UNDER:- ITA NO.174/DEL/2013 4 SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS I N CONNECTION WITH THE BUSINESS OF EXPLORATION, ETC., OF MINERAL OILS. 44BB. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTA INED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A, IN THE CASE OF AN ASSESSEE, BEING A NON- RESIDENT, ENGAGED IN THE BUSINESS OF PROVIDING SERV ICES OR FACILITIES IN CONNECTION WITH, OR SUPPLYING PLANT AND MACHINERY O N HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PROD UCTION OF, MINERAL OILS, A SUM EQUAL TO TEN PER CENT OF THE AGGREGATE OF THE A MOUNTS SPECIFIED IN SUB- SECTION (2) SHALL BE DEEMED TO BE THE PROFITS AND G AINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' : PROVIDED THAT THIS SUB-SECTION SHALL NOT APPLY IN A CASE WHERE THE PROVISIONS OF SECTION 42 OR SECTION 44D OR SECTION 44DA OR SECTION 115A OR SECTION 293A APPLY FOR THE PURPOSES OF COMPUTING PROFITS OR GAINS OR ANY OTHER INCOME REFERRED TO IN THOSE SECTIONS. (2) THE AMOUNTS REFERRED TO IN SUB-SECTION (1) SHAL L BE THE FOLLOWING, NAMELY : (A) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF THE PR OVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT A ND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXT RACTION OR PRODUCTION OF, MINERAL OILS IN INDIA; AND (B) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE PROVISION OF SERV ICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY O N HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PROD UCTION OF, MINERAL OILS OUTSIDE INDIA. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1), AN ASSESSEE MAY CLAIM LOWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN THAT SUB-SECTION, IF HE KEEPS AND MAINTAINS SUCH BO OKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-SECTION (2) O F SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB, AND THEREUPON THE ASSESSING OFF ICER SHALL PROCEED TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF T HE ASSESSEE UNDER SUB- SECTION (3) OF SECTION 143 AND DETERMINE THE SUM PA YABLE BY, OR REFUNDABLE TO, THE ASSESSEE. ITA NO.174/DEL/2013 5 4. A CLOSE LOOK AT SUB-SECTION (1) OF SECTION 44BB REVEALS THAT WHERE A NON-RESIDENT IS ENGAGED IN THE BUSINESS OF PROVIDIN G SERVICES OR FACILITIES IN CONNECTION WITH SUPPLYING PLANT & MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR MINERALS ETC., ITS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE 10% OF TH E AGGREGATE AMOUNTS SPECIFIED IN SUB-SECTION (2). SUB-SECTION (3), WHI CH IS MORE RELEVANT FOR OUR PURPOSE, STARTS WITH A NON-OBSTANTE CLAUSE QUA SUB-SECTION (1) AND PROVIDES THAT THE ASSESSEE SO ENGAGED MAY CLAIM LOWER PROFIT S THAN THE AMOUNT SPECIFIED IN SUB-SECTION (1) OF SECTION 44BB, IF H E MAINTAINS HIS BOOKS OF ACCOUNT WHICH ARE AUDITED AND THE AUDIT REPORT IS F URNISHED. IN SUCH A SITUATION, THE AO SHALL MAKE AN ASSESSMENT OF THE T OTAL INCOME UNDER SUB- SECTION 143(3) OF THE ACT WITH REFERENCE TO THE BOO KS OF ACCOUNT MAINTAINED BY THE ASSESSEE. 5. THE ASSESSEE IN THE INSTANT CASE HAS, ADMIT TEDLY, OPTED FOR THE PROVISIONS OF SUB-SECTION (3). IN SUCH A SITUATION , INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION IS R EQUIRED TO BE COMPUTED WITH REFERENCE TO THE PROVISIONS CONTAINED IN CHAPT ER IV-D OF THE ACT. IN ITA NO.174/DEL/2013 6 OTHER WORDS, ANY REVENUE RECEIPT IS LIABLE TO BE IN CLUDED IN THE TOTAL INCOME AND THE CORRESPONDING REVENUE EXPENSES ARE TO BE AL LOWED AS DEDUCTION FOR COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 6. IN THIS VIEW OF THE MATTER, IT BECOMES EMIN ENT THAT ALL THE REVENUE RECEIPTS OF THE ASSESSEE INCLUDING THE SUM OF RS.1. 63 CRORE RECEIVED FROM DDL ON ACCOUNT OF CREW SALARY AND RELATED EXPENSES OF EMPLOYEES SECONDED AND ASSIGNED TO DDL, WERE REQUIRED TO BE C ONSIDERED IN THE COMPUTATION OF BUSINESS INCOME AND, THEN, THE DEDUC TION FOR ACTUAL EXPENSES WAS TO BE ALLOWED. IT IS OBSERVED FROM TH E FACTS OF THE EXTANT CASE THAT THE ASSESSEE DID NOT INCLUDE RS.1.63 CRORE IN ITS TOTAL INCOME AND CLAIMED BENEFIT OF TDS FROM SUCH RECEIPTS. WE CANN OT COUNTENANCE THIS TYPE OF TREATMENT, WHEN THE ASSESSEE HAS OPTED TO B E GOVERNED BY THE MANDATE OF SECTION 44BB(3) OF THE ACT, BUT ALL THE REVENUE RECEIPTS AND RELATED EXPENSES ARE NOT REFLECTED. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR DE CIDING THIS ISSUE AFRESH. IN SUCH FRESH PROCEEDINGS, THE AO WILL, INTER ALIA , TAKE RS.1.63 CRORE AS REVENUE RECEIPT WITH CORRESPONDING DEDUCTION OF ACT UAL EXPENSES INCURRED ITA NO.174/DEL/2013 7 BY THE ASSESSEE. NEEDLESS TO SAY, THE ASSESSEE WIL L BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.201 8. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 20 TH MARCH, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.