DDIT, Dehradun V. M/s. Weatherford Oil Tools (ME) Ltd., Dehradun

ITA 3910/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3705 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SSH AMIT ARORA; VISHAL MISHR ACA
• Keywords: Permanent establishment
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 3910/DEL/2014 ASSESSMENT YEAR: 2010-11 DY. DIRECTOR OF INCOME-TAX VS M/S WEATHERFORD O IL TOOLS (ME) LTD. INTERNATIONAL TAXATION, DEHRADUN. 941, BUILD ING NO.9, SOLITAIRE CORPORATE PARK, 167, GURU HARGOVINDJI MARG, ANDHERI EAST, MUMBAI. (PAN : AAACW1524G) (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. RITU SHARMA RESPONDENT BY: S/SH. AMIT ARORA, CA & VISHAL MISHR A,CA ORDER PER K. NARSIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 23.4.4.2013 IN APPEAL NO.155/CIT(A)-II/13-14 FOR ASSESSMENT YEAR 2010-11 PASSED BY THE LEARNED CIT (A), DEHRADUN (FOR SHORT HEREINAFTER CALLED AS THE LEARNED CIT(A)), THE RE VENUE PREFERRED THIS APPEAL. 2. RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPAN Y INCORPORATED UNDER THE LAWS OF BRITISH VIRGIN ISLANDS HAVING ITS REGISTERE D OFFICE AT P.O. BOX NO.4627, DUBAI, UNITED ARAB EMIRATES. THE INDIAN PROJECT OF FICE SITUATED AT 921, SOLITAIRE CORPORATE PARK, 167 GURU HARGOVINDJI MARG, CHAKALA, ANDHERI EAST, MUMBAI AND IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND F ACILITIES IN CONNECTION WITH EXPLORATION, EXPLOITATION AND PRODUCTION OF MINERAL OIL IN INDIA. FOR THE ASSESSMENT YEAR 2010-11, THE ASSESSEE FILED THEIR R ETURN OF INCOME ON 13.10.2010, DECLARING TAXABLE INCOME OF RS.246,667, 735/- UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION COMPUTED IN T ERMS OF THE PRESUMPTIVE TAX SCHEME OF SECTION 44BB OF THE INCOME-TAX ACT, 1961 (FOR SHORT CALLED THE ACT. HOWEVER, DURING SCRUTINY U/S 143(3)/144C(3)(B) OF TH E ACT, BY ORDER DATED 14.5.2013, THE AO COMPLETED THE ASSESSMENT AT AN IN COME OF RS.489,395,500/- AND IN THAT PROCESS BIFURCATING THE REVENUE RECEIVE D BY THE ASSESSEE UNDER CONTRACT INTO EQUIPMENT RENTAL, SERVICES AND REIMBU RSEMENT AND HOLDING THAT THE REVENUE RECEIVED BY THE ASSESSEE ON ACCOUNT OF P ROVISION OF OILFIELDS EQUIPMENT TO OTHER THAN PSC PARTNERS WAS IN THE NAT URE OF ROYALTY U/S 9(1)(VI) OF THE ACT; I. THE REVENUE RECEIVED BY THE ASSESSEE ON ACCOUNT OF P ROVISION OF ALLEGED SERVICES WAS IN THE NATURE OF FEES FOR TECHNICAL SE RVICES U/S 9(1)(VI) OF THE ACT; II. THE REVENUE RECEIVED BY THE ASSESSEE ON ACCOUNT OF S UPPLY OF CONSUMABLES, SPARES ETC., WAS IN THE NATURE OF FEES FOR TECHNICA L SERVICES U/S 9(1)(VI) OF THE ACT; III. THE RECEIPTS ON ACCOUNT OF SERVICE-TAX AND REIMBURS EMENT OF EXPENSES INCURRED ON MATERIAL RECHARGE TO BE IN THE NATURE O F ROYALTY/FEES FOR TECHNICAL SERVICES U/S 9(1)(VI), 9(1)(VII) OF THE A CT; IV. THE ASSESSE HAD A PERMANENT ESTABLISHMENT IN INDIA THROUGH WHICH THE BUSINESS WAS CARRIED ON IN INDIA AND THAT THE INCOM E AS AFORESAID WAS ATTRIBUTABLE TO SUCH INDIAN PERMANENT ESTABLISHMENT ; V. IN VIEW OF THE FACT THAT THE ASSESSEE HAD A PERMANE NT ESTABLISHMENT, INCOME ON ACCOUNT OF ROYALTY AND FEES FOR TECHNICAL SERVICES WAS REQUIRED TO BE COMPUTED U/S 44DA OF THE ACT; VI. IN THE ABSENCE OF ANY BOOKS OF ACCOUNTS, INCOME OF T HE ASSESSEE WAS TO BE ESTIMATED AT THE PROFIT RATE OF TWENTY FIVE PER CENT . HE ALSO LEVIED INTEREST U/S 234B OF THE ACT AND GRA NTED THE CREDIT OF WITHHOLDING TAXES. 3. IN APPEAL, BY WAY OF IMPUGNED ORDER, LEARNED CIT(A ) DELETED THE ADDITIONS AND IN THAT PROCESS HE PLACED RELIANCE ON THE DECIS IONS REPORTED IN THE CASE OF ONGC VS. CIT, 376 ITR 306 OF THE HONBLE APEX COURT, BJ SERVICES OF UTTARAKHA ND HIGH COURT; OF THE COORDINATE BENCH OF THIS TRIBUNA L IN THE CASE OF PRECISION ENERGY SERVICES LTD. AGGRIEVED BY SUCH FINDINGS OF T HE LEARNED CIT(A), REVENUE PREFERRED THIS APPEAL ON THREE ISSUES. FIRSTLY, WHE THER THE INCOME OF THE ASSESSEE SHALL BE TAXED AS PER THE PROVISIONS OF SECTION 44A B; SECONDLY, WHETHER THE SERVICE-TAX FORMS PART OF RECEIPTS AS PER PROVISION OF SECTION 44B OF THE ACT; AND INTEREST U/S 234B OF THE ACT. 4. HEARD ARGUMENTS OF BOTH SIDES AND PERUSED THE MA TERIAL ON RECORD. LEARNED AR SUBMITTED THAT THE ISSUE RELATES TO THE TREATMENT OF INCOME FROM PSC AND NON PSC CONTRACTS FOR TAXEABILITY AS PER PROVIS IONS OF SECTION 44BB OF THE ACT HAD COME UP FOR CONSIDERATION BEFORE A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NOS.5290/DEL/2010, 419/DEL/2012 AND 6391/DEL/2013 F OR THE ASSTT. YEARS 2007- 08, 2008-09 AND 2009-10 RESPECTIVELY WHEREIN IT HAS BEEN HELD THAT THE INCOME ON ACCOUNT OF PROVISION OF EQUIPMENT AND SERVICES E ARNED BY THE ASSESSEE COMPANY SHALL BE TAXABLE AS PER THE PROVISIONS OF SE CTION 44BB OF THE ACT. HE FURTHER SUBMITTED THAT THE APPEAL PREFERRED BY THE R EVENUE AGAINST THE SAID ORDER WAS DISMISSED BY THE HONBLE UTTARAKHAND HIGH COURT. AT THE VERY THRESHOLD, HE FURTHER SUBMITTED THAT THE HONBLE APEX COURT IN TH E CASE OF ONGC VS. CIT, 376 ITR 306 HELD THAT THE SERVICES IN CONNECTION WITH E XPLORATION AND PRODUCTION OF MINERAL OIL SHALL FALL WITHIN THE PURVIEW OF SECTIO N 44BB AND OUTSIDE THE PURVIEW OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SECTIO N 9(1)(VII) OF THE ACT. HE ALSO BROUGHT IT TO OUR NOTICE THAT IN THE ASSESSMENT ORD ER FOR THE ASSTT. YEAR 2014-15, LEARNED AO HAD ACCEPTED THE TAXABILITY OF REVENUE AS PER PROVISIONS OF SECTION 44BB. LEARNED DR PLACED RELIANCE ON THE ASSESSMENT ORDER. 5. WE HAVE PERUSED THE ORDER DATED 11.7.2014 BY A CO ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.5282 OF 2012 AND BATCH WHEREIN T HE ASSESSEE IS ALSO A PARTY IN ITA NO.5290/DEL/2010. VIDE PARAGRAPH 227 OF THIS O RDER, THE BENCH WHILE DEALING WITH THE ADDITION QUA EQUIPMENT RENTAL, SERVICE CHA RGES AND SALE OF CONSUMABLES AND SERVICES RENDERED BY ASSESSEE IN CONNECTION WITH EXPLORATION/ PROSPECTING/EXTRACTION OF MINERAL OIL HELD THAT THE INCOME ARISING ON ACCOUNT OF ROYALTY/FTS, LETTING OUT OF EQUIPMENT ETC. WAS TO BE TAXED U/S 44BB. APPEAL PREFERRED AGAINST THIS ORDER BY THE REVENUE IN ITA N O.76/14 AND INCOME-TAX APPEAL NO.27/15 WAS DISMISSED BY THE HONBLE UTTARAK HAND HIGH COURT BY ORDER DATED 6.8.15 AND VIDE PARA NO.6(I), THE HONBLE HI GH COURT DECIDED THE ISSUE AGAINST THE REVENUE. SINCE THE ISSUE OF ASSESSMENT OF THE REVENUE FROM PSC AND NON PSC CONTRACTS WAS SUBSTANTIALLY INVOLVED IN ITA NO.5282/2012 AND BATCH AND DECIDED BY THE TRIBUNAL AND ALSO BY THE HONBLE HIGH COURT IN FAVOUR OF THE ASSESSEE, WHILE RESPECTFULLY FOLLOWING THE SAME, WE ANSWER THIS ISSUE THAT THE INCOME ON ACCOUNT OF PROVISION OF EQUIPMENT AND SER VICES EARNED BY THE ASSESSEE COMPANY SHALL BE TAXABLE AS PER THE PROVISIONS OF SE CTION 44BB OF THE ACT. 6. NOW, COMING TO THE SECOND ISSUE RELATING TO THE SERVICE TAX, LEARNED AR PLACED RELIANCE ON THE DECISION OF THE HONBLE JURI SDICTION HIGH COURT IN THE CASE OF CIT VS MITCHELL DRILLING INTERNATIONAL P. LTD. 3 80 ITR 130 IN SUPPORT OF HIS CONTENTION THAT THE SERVICE-TAX BEING STATUTORY LEV Y, SHOULD NOT FORM PART OF GROSS RECEIPTS AS PER PROVISION OF SECTION 44BB OF THE AC T. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF DDIT VS SUNDOWNER OFFSHORE INTERNATIONAL (BERMUDA) LTD. ITA 1067/DEL/2016 FOR A SIMILAR PRINCIPLE. WE FIND THAT THE PRINCIPLE LAID DOWN IN THE ABOVE DECISION SQUARELY APPLIES TO THE FACTS OF THIS CASE ALSO, AS SUCH, WHILE RESPECTFULLY FOLLOWIN G THE SAME, WE ANSWER THE ISSUE THAT THE SERVICE-TAX DOES NOT FORM PART OF THE GROS S RECEIPTS FOR COMPUTATION U/S 44BB OF THE ACT. 7. LASTLY, NOW TURNING TO THE CHARGEABILITY OF INTER EST U/S 234B OF THE ACT, HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS GE P ACKAGED POWER INC, 373 ITR 65 HELD THAT INTEREST U/S 234B WAS NOT CHARGEABLE IN T HE CASE OF A NON-RESIDENT WHOSE ENTIRE INCOME WAS SUBJECT TO TAX DEDUCTION AT SOURCE U/S 195 OF THE ACT. IN VIEW OF THIS BINDING PRECEDENT, WE HOLD THIS ISSUE ALSO IN FAVOUR OF THE ASSESSEE. 8. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THA T ALL THE ISSUES INVOLVED IN THE MATTER ARE COVERED BY THE BINDING DECISIONS IN F AVOUR OF THE ASSESSEE, AS SUCH, THE APPEAL OF THE REVENUE IS DEVOID OF MERIT AND IS LIABLE TO BE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2018 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 29 TH JANUARY, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR