EMGS Project Office, Mumbai V. DDIT, Dehradun

ITA 306/DEL/2012

• Counselvise Citation: 30620114 RSA 2012
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: SALIL KAPOOR SANAT KAPOOR; VIKAS JAIN S
• Keywords: Double taxation relief; Deemed to accrue or arise in india; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND A.D. JAIN, JUDICIAL MEMBER ITA NO.306/DEL/2012 ASSESSMENT YEAR : 2006-07 EMGS PROJECT OFFICE, 332, AMBAJI SADAN, NANDA PATKAR ROAD, VILE PARLE (EAST), MUMBAI. PAN : AABCE5291K VS. DDIT, INTERNATIONAL TAXATION, 13-A, SUBHASH ROAD, DEHRADUN. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI SALIL KAPOOR, SANAT KAPOOR AND VIKAS JAIN, ADVOCATES REVENUE BY : SHRI BHIM SINGH, SR.DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 01.11.2011 PASSED BY T HE CIT (A)-II, DEHRADUN. THE GRIEVANCE OF THE ASSESSEE IN THIS CASE IS THAT THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ORDER PASSED BY TH E ASSESSING OFFICER WITH RESPECT TO TAXABILITY OF MOBILIZATION R EVENUE ATTRIBUTABLE TO THE OPERATION OF THE VESSEL BEYOND 200 NAUTICAL MILES FROM THE INDIAN COSTLINE. 2. THE FACTS AS AVAILABLE FROM THE CONCERNED ORDERS ARE THAT THE ASSESSEE (EMGS FOR SHORT) IS A NON-RESIDENT COMPANY SHOWI NG REVENUES FROM A CONTRACT DATED 30.12.2005 WITH ONGC. IT OFFERED ITS REVENUES U/S 44BB (1) OF THE IT ACT TO ASSESS, UNDER THE SAID CONTRACT, ITA NO.306/DEL/2012 2 UNDERTOOK FOR OFFSHORE ACTIVITIES IN THE NATURE OF S EISMIC DATA ACQUISITION (I.E., SEA BED LOGGING/ELECTRO-MAGNETIC I MAGING), PROCESSING AND INTERPRETATION, FOR WHICH ACTIVITIES, THE VESSEL S ASHA WAS USED, IN CONNECTION WITH PROSPECTING OF OIL AND NATURAL GAS. THE ASSESSEE, FOR MANAGING THE SAID CONTRACT, HAD ESTABLISHED A PROJECT OFFICE IN INDIA. THE ASSESSEE TOOK THE STAND BEFORE THE ASSESSING OFFICER THA T MOBILIZATION REVENUE ATTRIBUTABLE TO THE OPERATION OF THE VESSEL BEYOND 200 NAUTICAL MILES FROM THE INDIAN COSTLINE WAS NOT L IABLE TO TAX IN INDIA, AS PER THE PROVISIONS OF THE ACT AND ALSO ACCORD ING TO THE DTAA BETWEEN INDIA AND NORWAY, THE COUNTRY IN WHICH THE ASSESSEE COMPANY IS INCORPORATED. 3. THE ASSESSING OFFICER, HOWEVER, REFUSED TO ACCEPT THE AFORESAID STAND TAKEN BY THE ASSESSEE. SHE HELD THAT THE MOBILIZA TION FEE RECEIVED BY THE ASSESSEE UNDER THE CONTRACT WAS TO BE I NCLUDED AS RECEIPTS FOR COMPUTING TAXABLE INCOME U/S 4BB OF THE ACT, AT 10% ON A DEEMED PROFIT BASIS. SHE PLACED RELIANCE ON SEDCO F OREX INTERNATIONAL INC. VS. CIT, 299 ITR 238 (UTTARAKHA ND). 4. THE LD. CIT (A), BY VIRTUE OF THE IMPUGNED ORDER , CONFIRMED THE AFORESAID ACTION OF THE ASSESSING OFFICER. 5. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE U S. 6. CHALLENGING THE IMPUGNED ORDER, THE LD. COUNSEL F OR THE ASSESSEE HAS CONTENDED, AS ALSO SUPPORTED BY THE SYNOPSIS FILED, T HAT MOBILIZATION FEE IS THE AMOUNT PAID TO A CONTRACTOR LIKE THE ASSESSEE COMPANY, BY ITS CUSTOMERS, FOR MOVEMENT OF MATERIAL AND EQUIPMENTS FROM ONE OPERATING AREA TO ANOTHER; THAT WHEN A VESSE L IS MOBILIZED FROM OUTSIDE INDIA, A SUBSTANTIAL PORTION OF THE OPER ATIONS ARE PERFORMED OUTSIDE INDIA; THAT IN THE PRESENT CASE THE VESSEL SASHA ITA NO.306/DEL/2012 3 OPERATED OUTSIDE THE TERRITORIAL JURISDICTION OF INDI A AND SO, NO INCOME WITH REGARD TO THE MOBILIZATION CHARGES HAS EITHER AC CRUED OR CAN BE DEEMED TO HAVE ACCRUED IN INDIA, AS IS ALSO CLEAR FRO M THE ENGINEERS CERTIFICATE AND THE DETAILS OF MOBILIZATION REVENUE, WHICH WERE FILED BEFORE THE AUTHORITIES BELOW (FILED AS ANNEXURES A AND B TO THE SYNOPSIS BEFORE US); THAT SEDCO FOREX (SUPRA) HAS WRO NGLY BEEN APPLIED, SINCE IN THAT CASE THE MOBILIZATION WAS FROM OUTSIDE INDIA TO INSIDE INDIA; THAT AS PER THE INDO-NORWAY DTAA, BUSINESS PRO FITS FOR FOREIGN ENTERPRISE WOULD BE TAXABLE IN INDIA ONLY WH ERE THE ENTERPRISE HAS A PERMANENT ESTABLISHMENT IN INDIA, AND THAT TOO O NLY TO THE EXTENT OF SUCH PROFITS ARE ATTRIBUTABLE TO THE PE; TH AT IN THE PRESENT CASE, NO PROFITS ARE ATTRIBUTABLE TO THE ASSESSEES PROJEC T OFFICE, SINCE THE PROJECT OFFICE OF THE ASSESSEE DID NOT HAVE ANY ROL E TO PLAY IN THE MOBILIZATION OF THE VESSEL; THAT AS HELD IN SAIPEM S. P.A VS. DCIT 88 ITD 213 (TM) (DEL), WHERE THE MOBILIZATION CHARGES P ERTAINED TO THE ACTIVITIES UNDERTAKEN OUTSIDE INDIA, THEY DO NOT ACCR UE OR ARISE IN INDIA OR DEEMED TO ACCRUE OR ARISE IN INDIA AND SO THEY ARE NOT TAXABLE IN INDIA; THAT THE MOBILIZATION CHARGES DO NOT FORM PAR T OF TOTAL INCOME AS DEFINED U/S 5 (2) OF THE ACT; THAT SECTION 44BB (2) OF THE ACT ALSO DOES NOT INCLUDE THE MOBILIZATION CHARGES; THAT THERE BEI NG NO ECONOMIC OR TERRITORIAL NEXUS OF THE MOBILIZATION IN INDIAN WATE RS IN INDIA EVEN OTHERWISE THE MOBILIZATION CHARGES ARE NOT TAXABLE IN INDIA. 7. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG R ELIANCE ON THE ASSESSMENT ORDER, CONTENDING THAT SEDCO FOREX (SUPRA) IS DIRECTLY APPLICABLE SQUARELY TO THE FACTS OF THE PRESENT CASE AN D IT HAS RIGHTLY BEEN APPLIED BY THE AUTHORITIES BELOW; THAT THE ASSESSEE IS TRYING TO MAKE FUTILE ATTEMPT TO BRING OUT ITS CASE FROM THE PU RVIEW OF SEDCO FOREX, EVEN THOUGH THE ASSESSEE HAS FAILED MISERABLY SHOW AS TO HOW HIS CASE IS ANY DIFFERENT FROM THAT IN SEDCO FOREX ( SUPRA). ITA NO.306/DEL/2012 4 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERI AL AVAILABLE ON RECORD. IN SEDCO FOREX (SUPRA), IT W AS HELD THAT THE PAYMENT MADE TO THE ASSESSEE WAS MADE OUTSIDE INDIA AND T HE MOBILIZATION CHARGES PAID TO THE ASSESSEE HAD NO NEXUS W ITH THE ACTUAL AMOUNT INCURRED BY THE ASSESSEE FOR TRANSPORTATION OF DR ILLING UNITS OF RIGS TO THESE SPECIFIED DRILLING LOCATIONS IN INDIA; TH AT THUS, THE MOBILIZATION CHARGES WERE RE-IMBURSEMENT OF EXPENDITU RE; THAT THE PAYER WAS LIABLE TO PAY A FIXED SUM AS STIPULATED IN TH E CONTRACT, REGARDLESS OF THE ACTUAL EXPENDITURE WHICH MIGHT BE I NCURRED BY THE ASSESSEE FOR THE PURPOSE; THAT IN VIEW OF THE FICTIONAL TAXING PROVISION CONTAINED IN SECTION 44BB OF THE IT ACT, THE ASSESSING OFFICER WAS RIGHT IN ADDING THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS MO BILIZATION CHARGES FOR THE PURPOSE OF IMPOSING INCOME-TAX; AND T HAT THE LD. COMMISSIONER (APPEALS) AND THE TRIBUNAL WERE ALSO RIGHT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER. 9. IN THE PRESENT CASE, THE ASSESSING OFFICER MADE THE AD DITION BY OBSERVING AS FOLLOWS:- THE PLEA OF THE ASSESSEE IS NOT TENABLE IN VIEW OF THE DECISION OF HONBLE HIGH COURT OF UTTARAKHAND IN THE CASE OF M/ S SEDCO FOREX INTERNATIONAL INC. WHEREIN IT HAS BEEN HELD THAT THE REVENUES ON ACCOUNT OF MOBILIZATION ARE REQUIRED TO BE BROUGHT TO TAX IN INDIA. 10. THE LD. CIT (A) CONFIRMED THE ASSESSING OFFICERS AC TION BY MAKING THE FOLLOWING OBSERVATIONS:- 3. THE FIRST GROUND CHALLENGES THE TAXING OF MOBILIZA TION REVENUE. IT IS SEEN THAT THE LD. A.O. RELIED ON THE CASE OF SEDCO FOREX INTL. INC. REPORTED IN 170 TAXMAN 459 (UK) TO TAX THE MOBILIZATION REVENUES U/S 44BB OF THE ACT. THE LD. AR HAS STRONGLY CONTESTED THE A.O.S ACTION THROUGH AVERMENTS W HICH ARE A REITERATION OF WHAT WAS STATED BEFORE THE LD. A.O . (AS RECORDED ON PAGES 2, 3 AND 4 OF THE IMPUGNED ORDER). FOR THE SAKE OF BREVITY, THE SAME ARE NOT REPEATED HERE. ITA NO.306/DEL/2012 5 3.1 THE CASE OF SEDCO FOREX (SUPRA) HAS BEEN THE SU BJECT MATTER OF ANALYSIS AND REVIEW IN THE CASE OF DIT VS. SCHLUMBERGER ASIA SERVICES LTD. REPORTED IN 186 TAXMA N 436 (UK). IN THIS CASE IT HAS BEEN HELD THAT CUSTOMS DUTY, BE ING A STATUTORY LEVY, CANNOT FORM PART OF RECEIPTS OF ASSESSEE FOR DETERMINING HIS INCOME U/S 44BB OF THE ACT. THE OTHER FINDINGS IN THE CASE OF SEDCO FOREX HAVE NOT BEEN DISTINGUISHED OR DIFFERED WITH. CONSIDERING THE EXPRESS FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE OF TAXABILITY OF MOBILIZATION REVENUES, THIS GROUND OF THE APPELLANT DESERVES TO BE DISMISSED. 11. A READING OF SEDCO FOREX (SUPRA), MAKES IT CLEA R THAT REVENUES ON ACCOUNT OF MOBILIZATION ARE TO BE BROUGHT TO TAX IN INDIA. SEDCO FOREX (SUPRA) HAS BEEN RENDERED BY THE HONBLE UTTA RAKHAND HIGH COURT, WHICH HAPPENS TO BE THE JURISDICTIONAL HIGH CO URT IN THE PRESENT CASE. SEDCO FOREX (SUPRA), THEREFORE, IS SQUARELY A PPLICABLE TO THIS CASE. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. SEDCO FOREX (SUPRA), AS SUCH, IS BINDING ON US. BOTH THE AUTHORITIES BELOW HAVE CONCURRENTLY FOLLOWED THIS DECISION WHILE DECIDING AGAINST THE ASSESSEE. THAT BEING SO, FINDING NO ERROR THEREIN, THE ORDER UNDER APPEAL, PASSED BY THE LD. CIT (A) CONFIRMING THAT OF THE ASSESSING OFFICER, IS HEREBY UPHELD. 12. AS SUCH, FINDING NO FORCE THEREIN, THE GRIEVANCE SOUGHT TO BE RAISED BEFORE US BY THE ASSESSEE IS REJECTED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.09.20 12. SD/- SD- [G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 21.09.2012. ITA NO.306/DEL/2012 6 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES