WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD, MUMBAI V. DCIT (IT) 4(3)(2), MUMBAI

ITA 3524/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5036 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 15-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.3524/MUM/2017 ASSESSMENT YEAR: 2010-11 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD. C/O-NANGIA & COMPANY 1101, TOWER B, PENINSULA BUSINESS PARK, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI-400013 VS DCIT(INTERNATIONAL TAXATION)- 4(3)(2) FORMERLY KNOWN AS AD.CIT(IT)-2(2), ROOM NO.1728, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021 ( /ASSESSEE) ( / REVENUE) PAN. NO. AAACW7377F ' #$% / DATE OF HEARING : 10/10/2018 $% / DATE OF ORDER: 10/10/2018 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 23/02/2017 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, / ASSESSEE BY SHRI KISHAN KUMAR MUNDHRA / REVENUE BY CHAUDHARY ARUN KUMAR SINGH- DR ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 2 HOLDING THAT PROPORTIONATE AMOUNT RECEIVED BY THE A SSESSEE FOR MOBILIZATION/DEMOBILIZATION OF THE RIG, OUTSIDE INDIAN TERRITORIAL WATER, IS TO BE INCLUDED IN THE GROSS R ECEIPT FOR THE PURPOSES OF DETERMINATION OF INCOME UNDER SECTION 4 4BB OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AS O PPOSED TO THE CLAIM OF THE ASSESSEE THAT THE SAME DOES NOT CO NSTITUTE INCOME CHARGEABLE TO TAX IN INDIA, AS PER SECTION 5 R.W.S. 9 OF THE INCOME TAX ACT. 2. AT THE OUTSET, THE LD. DR, CHAUDHARY ARUN KUMAR SINGH, CONTENDED THAT THE ISSUE IN HAND IS CO VERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNA L FOR ASSESSMENT YEAR 2009-10 (ITA NO.495/MUM/2017), ORDE R DATED 20/06/2018. THIS FACTUAL MATRIX WAS CLAIMED T O BE CORRECT BY SHRI KISHAN KUMAR MUNDRA, LD. COUNSEL FO R THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 20/0 6/2018 FOR READY REFERENCE AND ANALYSIS:- ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 3 THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 20.10.2016 PASSED BY THE LEARNED CIT(A)-59, MUMBAI AND IT PERTAINS TO A.Y. 2009-10. 2. THE ASSESSEE IS A NON-RESIDENT COMPANY INCORPORA TED UNDER THE LAWS OF BRITISH VIRGIN ISLANDS. IT IS ENGAGED IN THE BUSINE SS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH EXCAVATION OR PRODUCT ION OF NATURAL OIL. THE ASSESSEE OFFERED ITS INCOME UNDER SECTION 44BB(1) O F THE INCOME TAX ACT (HEREINAFTER THE ACT). 3. THE ISSUE URGED IN THE APPEAL OF THE ASSESSEE IS WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE FOR MOBILISATION/DEMOBILIS ATION OF VESSELS AND EQUIPMENTS OUTSIDE INDIAN TERRITORIAL WATERS IS REQ UIRED TO BE INCLUDED IN THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING TOTAL INCOME UNDER SECTION 44BB OF THE ACT. THE AO AS WELL AS THE CIT(A) INCLU DED THE MOBILISATION/DEMOBILISATION RECEIPTS AS PART OF GRO SS RECEIPT. 4. AT THE TIME HEARING THE LEARNED A.R. FAIRLY SUBM ITTED THAT IDENTICAL ISSUE WAS CONSIDERED BY HON'BLE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL INC (CIVIL APPEAL NO. 4906 OF 2010) A ND VIDE ITS ORDER DATED 30.10.2017, THE HONBLE APEX COURT HAS HELD THAT TH E RECEIPTS RELATED TO MOBILISATION/ DEMOBILISATION OF VESSELS OUTSIDE IND IAN TERRITORIAL WATERS IS REQUIRED TO BE INCLUDED IN THE GROSS RECEIPT FOR TH E PURPOSE OF DETERMINING THE TOTAL INCOME UNDER SECTION 44BB OF THE ACT. 5. WE HAVE HEARD THE LEARNED D.R. AND PERUSED THE R ECORD. SINCE THE ISSUE URGED HEREIN HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HON'BLE SUPREME COURT IN THE CASE CITED ABOVE, WE CONFIRM THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE. 6. WE SHALL NOW TAKE UP THE APPEAL FILED BY REVENUE . THE SOLITARY ISSUE URGED THEREIN IS WHETHER THE SERVICE TAX COLLECTED BY THE ASSESSEE SHALL FORM PART OF GROSS RECEIPTS FOR COMPUTING INCOME UNDER S ECTION 44BB OF THE ACT. 7. THE LEARNED A.R. SUBMITTED THAT THE HON'BLE DELH I HIGH COURT IN THE CASE OF MITCHELL DRILLING INTERNATIONAL (P) LTD. 380 ITR 130 (DEL) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT SERVICE TAX COLLECTED BY THE ASSESSEE WAS NOT TO BE INCLUDED IN THE GROSS RE CEIPTS IN TERMS OF SECTION 44BB OF THE ACT. HE SUBMITTED THAT THE LEARNED CIT( A) HAS FOLLOWED THE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT I N THE CASE REFERRED ABOVE. 8. ON THE CONTRARY, THE LEARNED D.R. SUBMITTED THAT THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD IN THE CASE OF CHINA SHIPPING CONTAINER LINES (HONG KONG) (2013) TIL-1621-ITAT, MUM-INTL) HAS HELD THAT THE SERVICE TAX COLLECTED FROM DISTRIBUTORS SHALL BE INCLUDED IN GR OSS RECEIPTS. 9. IN THE REJOINDER THE LEARNED A.R. SUBMITTED THAT THE MUMBA I BENCHES OF TRIBUNAL HAS FOLLOWED THE DECISION RENDERED BY THE HON'BLE D ELHI HIGH COURT (REFERRED SUPRA) IN THE CASES OF OCEANEERING INTERN ATIONAL GMBH (ITA NO. 1023/MUM/2014 DATED 06.11.2015 AND JET DRILLING (S) PTE LTD. IN ITA NO. 6439/MUM/2014 DATED 07.07.2016. 10. WE HAVE HEARD T HE RIVAL SUBMISSIONS ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 4 ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICED TH AT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MITCHELL DRILLING INTERNATIONAL (P) LTD. (SUPRA) IN HOLDING THAT SERVICE TAX COLLECTED BY THE ASSESSEE CANNOT FORM PART OF GROSS RECEIPTS. 11. ON THE CONTRARY, REVENUE HAS PLACED RELIANCE ON THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CHINA SHIPPING CONTAINER LINES (SUPRA). THE LEARNED A.R. HAS, ON T HE CONTRARY, POINTED OUT THAT THE COORDINATE BENCHES OF THE TRIBUNAL HAVE FO LLOWED THE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT IN OTHER C ASES (REFERRED ABOVE) AND HAVE HELD THAT THE SERVICE TAX SHALL NOT FORM P ART OF GROSS RECEIPTS. SINCE THE HIGH COURT IS SUPERIOR TO THE TRIBUNAL, T HE INFERIOR COURT SHOULD BOW TO THE WISDOM OF SUPERIOR COURT. ACCORDINGLY, T HE DECISION RENDERED BY THE HIGH COURT SHOULD BE PREFERRED OVER THE DECI SION RENDERED BY THE TRIBUNAL. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE AO IN FOLLOWING THE DECISION RENDERED BY THE HON'BLE D ELHI HIGH COURT. THEREFORE WE AFFIRM THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE. 12. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E AS WELL AS REVENUE ARE DISMISSED. 2.2. WE ALSO NOTE THAT THE HON'BLE APEX COURT IN T HE CASE OF SEDCO FOREX INTERNATIONAL INC. VS CIT (CIVI L APPEAL NO.4906 OF 2010 ETC.), ORDER DATED 30/10/2017 ON ID ENTICAL ISSUE OF SCOPE AND INTERPRETATION OF SECTION 44BB O F THE ACT, WHERE THE ASSESSEE IS A NON-RESIDENT AND SPECIFICAL LY ENGAGED IN THE BUSINESS OF EXPLORATION ETC OF MINER AL OIL, SPECIAL MECHANISM IS PROVIDED IN SECTION 44BB OF TH E ACT FOR COMPUTATION OF PROFIT & GAINS ON WHICH TAX IS CHARG ED. SECTION 44BB OF THE ACT IS REPRODUCED HEREUNDER:- (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAI NED 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 SERVICES OR FACILITIES IN CONNECTION WITH, OR SUPPLYING PLANT A ND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXT RACTION OR PRODUCTION OF, MINERAL OILS, A SUM EQUAL TO TEN PER CENT OF TH E AGGREGATE OF THE ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 5 AMOUNTS SPECIFIED IN SUB-SECTION (2) SHALL BE DEEME D TO BE THE PROFITS AND GAINS 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 WH ERE THE PROVISIONS OF SECTION 42 OR SECTION 44D OR SECTION 44DA OR SECTION 115A OR SECTION 293A APPLY FOR THE PURPOSES OF COMP UTING PROFITS OR GAINS OR ANY OTHER INCOME REFERRED TO IN THOSE SECT IONS. (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 PLA NT AND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, O R EXTRACTION 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 P RODUCTION 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 BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-SECTION ( 2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUDIT AS REQUIRED UNDER SECTION 44AB, AND THEREUPON THE ASSESSING OFFICER SHALL PROCEED TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE UNDER SUB-SECTION (3) OF SECTI ON 143 AND DETERMINE THE SUM PAYABLE BY, OR REFUNDABLE TO, THE ASSESSEE. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( I ) 'PLANT' INCLUDES SHIPS, AIRCRAFT, VEHICLES, DRIL LING UNITS, SCIENTIFIC APPARATUS AND EQUIPMENT, USED FOR THE PURPOSES OF T HE SAID BUSINESS; ( II ) 'MINERAL OIL' INCLUDES PETROLEUM AND NATURAL GAS . 2.3. IF THE AFORESAID SPECIAL PROVISION FOR COMPU TING PROFIT & GAINS IS ANALYZED, ITS PURPOSE WAS EXPLAIN ED BY THE CIRCULAR NO.495 DATED 22/09/1987, NAMELY, TO SIMPLI FY THE COMPUTATION OF TAXABLE INCOME. HOWEVER, THE LEGISL ATION PROVIDED A SIMPLE FORMULA TREATING THE AMOUNTS PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) AND THE AMOUNT RECEIVED ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 6 OR DEEMED TO BE RECEIVED IN INDIA AS MENTIONED IN S UB- SECTION (2) OF SECTION 44BB OF THE ACT AS DEEMED PR OFIT & GAINS. OUR VIEW FURTHER FIND SUPPORTS FROM THE DECI SION IN SEDCO FOREX INTERNATIONAL INC. VS CIT (2005) 279 IT R 1, 8 (UTTRAKHAND), DIT VS JINDAL DRILLING & INDUSTRIES L TD. (2010) 320 ITR 104, 106 (DEL.), DIT VS OHM LTD. (2013) 352 ITR 406 (DEL.), GLOBAL INDUSTRIES ASIA PACIFIC PTE. LTD .(2012) 343 ITR 253(AAR). SECTION 44BB OF THE ACT IS A SPECIAL PROVISION FOR COMPUTING PROFIT & GAINS IN CONNECTION WITH THE BUSINESS OIL EXPLORATION. THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION FROM HON'BLE APEX COURT AND CONSIDERING TH E DECISION OF THE COORDINATE BENCH, THE APPEAL OF THE ASSESSEE IS DISMISSED, AS AGREED BY LD. COUNSEL FOR THE ASSE SSEE ALSO. FINALLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN TH E PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 10/10/2018. SD/- SD/- ( RA MIT KOCHA R ) (JOGINDER SINGH) ! ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER ' # MUMBAI; ' DATED : 10/10/2018 ITA NO.3524/MUM/2017 WEATHERFORD DRILLING INTERNATIONAL (BVI) LTD.. 7 F{X~{T? P.S/. . . $#%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. // ' 0 ( )* ) / THE CIT, MUMBAI. 4. // ' 0 / CIT(A)- , MUMBAI 5. 2 3- , /)*%)4 , ' # / DR, ITAT, MUMBAI 6. 56# / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI