Weatherford Oil Tools ME Ltd., New Delhi V. ADIT (International Taxation), Dehradun

ITA 419/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7593 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 24-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Assessee Lawyers: AMIT ARORA SURAJ NANGIA CAS
• Keywords: Initiation of penalty proceedings
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI H.S.SIDHU, J.M. AND SHRI J.SUDHAKAR REDDY, AM ITA NO: 419 /DEL/20 12 AY : - 200 8 - 09 WEATHERFORD OIL TOOLS ME LTD. VS. ADIT (INTERNATIONAL TAXATION) C/O NANGIA & CO. CAS DEHRADUN SUITE 4A, PLAZA M - 6, JASOLA NEW DELHI PAN: AAACW 1524 G (APPELLANT) (RESPONDENT) APPELLANT BY : S/ SHRI AMIT ARORA, SURAJ NANGIA, CAS RESPONDENT BY : SH. SANJEEV SHARMA, CIT, D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE AO PASSED U/S 143 R.W.S. 144C(13) OF THE ACT ON THE FOLLOWING GROUNDS. BASED UPON THE FACTS OF THE CASE, THE ASSESSEE RESPECTFULLY SUBMITS THE FOLLOWING GROUNDS WHICH ARE WITHOUT PREJUDICE TO AND INDEPENDENT OF EACH OTHER: ADDITION QUA BREAK UP OF REVENUE AGAINST CONSO LIDATED CONTRACT INTO EQUIPMENT RENTAL AND SERVICES: 1. THAT THE AO ERRED ON FACTS AND IN LAW IN HOLDING THAT THE PROVISION OF EQUIPMENT, OPERATING PERSONNEL AND CONSUMABLES UNDER CONSOLIDATED CONTRACTS WERE INDEPENDENT OF EACH OTHER; 2. THAT THE AO ERRED ON FAC TS AND IN LAW IN HOLDING THAT THE CONTRACTUAL REVENUES WERE TO BE BIFURCATED INTO EQUIPMENT RENTAL , SERVICE REVENUE AND CONSUMABLES , 3. THAT THE AO ERRED ON FACTS AND IN LAW IN NOT ACCEPTING THAT THE CONTRACTS EXECUTED BY THE ASSESSEE WERE IN THE NATURE O F MINING OR LIKE PROJECTS AS REFERRED TO IN THE EXPLANATION TO SECTION 9(1)(VII) OF THE IT ACT, 1961. ITA NO. 419/DEL/2012 AY 2008 - 09 WEATHERFORD OIL TOOLS ME LTD., NEW DELHI 2 ADDITION QUA SERVICES IN CONNECTION WITH EXPLORATION/PROSPECTING/EXTRACTION OF MINERAL OIL: 4. THAT THE AO ERRED ON FACTS AND IN LAW IN COMPLETING ASSESSMENT U/S 144C/143(3) OF THE ACT AT AN INCOME OF RS.989,128,960/ - AS AGAINST THE INCOME OF RS.186,959,080/ - RETURNED BY THE APPELLANT. 5. THAT THE AO ERRED ON FACTS AND IN LAW IN ASSESSING REVENUE OF RS.116,554,532/ - ARISING FROM SERVICES RENDERED BY THE APPELLANT TO PSC PARTNERS IN CONNECTION WITH EXPLORATION/PROSPECTING/EXTRACTION OF MINERAL OIL U/S 9(1)(VII) OF THE ACT AS OPPOSED TO S.44BB OF THE ACT. 6. THAT THE AO ERRED ON FACTS AND IN LAW IN ASS ESSING REVENUE OF RS.822,062 ARISING FROM SERVICES RENDERED BY THE APPELLANT TO NON - PSC PARTNERS IN CONNECTION WITH EXPLORATION/PROSPECTING/EXTRACTION OF MINERAL OIL U/S 9(1)(VII) OF THE ACT AS OPPOSED TO S.44BB OF THE ACT. ADDITION QUA HIRING OF EQUIPMENT USED IN CONNECTION WITH EXPLORATION/PROSPECTING/EXTRACTION OF MINERAL OIL 7. THAT THE AO ERRED ON FACTS AND IN LAW IN ASSESSING REVENUE OF RS.765,635,785/ - ARISING FROM LETTING OUT EQUIPMENT, SUED IN CONNECTION WITH THE EXPLORATION/PROSPECTING/EXTRACTIO N OF MINERAL OIL U/S 9(1)(VI) OF THE ACT AS OPPOSED TO S.44BB OF THE ACT. ADDITION QUA INCOME FROM ALLEGED SUPPLY OF GOODS 8. THAT THE AO ERRED ON FACTS AND IN LAW IN HOLDING THAT INCOME OF RS.8,287,487/ - ARISING FROM SUPPLY OF CONSUMABLES WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES / ROYALTY CHARGEABLE TO TAX APPLYING TAX RATE OF 10%, AS OPPOSED TO S.44BB OF THE ACT. INITIATION OF PENALTY PROCEEDINGS 9. THAT THE AO HAS ERRED ON FACTS AND IN LAW IN LEVYING PENALTY U/S 271B ESPECIALLY WHEN THE ENTIRE RECEIPTS OF THE ASSESSEE WAS LIABLE TO BE CHARGEABLE TO TAX U/S 44BB AND THE ASSESSEE WAS NEITHER REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS NOR GET THE SAME AUDITED. L EVY OF INTEREST 10. THAT THE LD.AO/DRP ERRED ON FACTS AND IN LAW IN LEVYING INTEREST U/S 234B OF THE ACT ESPECIALLY WHEN THERE WAS NO LIABILITY ON THE ASSESSEE TO PAY ADVANCE TAX U/S 209(1)(D) OF THE INCOME TAX ACT, 1961. 11. THAT THE LD.AO/DRP ERRED ON FA CTS AND IN LAW IN NOT FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT OF UTTARAKHAND IN THE CASE OF DIT VS. MAERSK CO.LTD. 240 CTR 218 WHEREIN THE HON BLE HIGH COURT HELD THAT INTEREST U/S 234B WAS NOT CHARGEABLE WHERE THE ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. ITA NO. 419/DEL/2012 AY 2008 - 09 WEATHERFORD OIL TOOLS ME LTD., NEW DELHI 3 2. BOTH THE PARTIES ADMIT THAT THE CASE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.6391/DEL/2013 AND C.O.NO. 39/DEL/2013 FOR THE AY 20 09 - 10 OF DELHI H BENCH OF THE TRIBUNAL VIDE ORDER DT. 5 TH SEPTEMBER,2014, WHERE IN THE TRIBUNAL HAS FOLLOWED THE ORDER OF ANOTHER COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE AY 2007 - 08. AT PARA 9 THE TRIBUNAL OBSERVED AS FOLLOWS. 9. IN ITA 5290/DEL/2010 WHICH IS THE APPEAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08, THE TRIBUNAL AT PARA 227 AT PAGE 95 OF THE COMMON ORDER PASSED IN A BATCH OF CASES HELD AS FOLLOWS. 227. GROUND NOS. 1 TO 3 RELATE TO ADDITION QUA EQUIPMENT RENTAL, SERVICE CHARGES AND SALE OF CONSUMABLES AND SERVICES RENDERED BY THE ASSESSEE IN CONNECTION WITH EXPLORATION/PROSPECTING/EXTRACTION OF MINERAL OIL. FOR THE DETAILED REASONS GIVEN IN ITA NO.5283/DEL/2010, WE HOLD THAT THE INCOME ARISING O N ACCOUNT OF ROYALTY/FTS, LETTING OUT OF EQUIPMENT ETC. WAS TO BE TAXED U/S 44BB. ADOPTING THE SAME REASONS, WE ALLOW GROUND NOS. 1 TO 3 IN FAVOUR OF THE ASSESSEE. 10. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AU THORITY AND DISMISS THIS APPEAL BY THE REVENUE. 3. THE LD. CIT, D.R. SHRI SANJEEV SHARMA, DREW THE ATTENTION OF THE BENCH TO THE JUDGEMENT OF HON BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL AS VS. ADIT IN ITA NO.612/2012 JDUGEMENT DT. 9.7.2014 WHE REIN AT PARA 20 IT IS HELD AS FOLLOWS. 20. HAVING STATED THE ABOVE, WE MUST CLARIFY THAT THE INCOME FALLING WITHIN S.115A(1)(B) OF THE ACT WHICH DOES NOT FALL WITHIN THE FOUR CORNERS OF SECTION 44DA(1) OF THE ACT WOULD ALSO NOT BE TAXABLE U/S 44BB(1) OF T HE ACT, THE SAME IS EXCLUDED. ACCORDINGLY, THE AO WOULD SPECIFICALLY HAVE TO DETERMINE (A) WHETHER THE ASSESSEE HAD A PE IN INDIA DURING THE RELEVANT PERIOD; AND (B) IF SO, WHETHER THE CONTRACTS ENTERED INTO BY THE APPELLANT WITH BG AND RIL WERE EFFECTIV ELY CONNECTION WITH THE APPELLANT S PE IN INDIA. IT IS ONLY, IF THE AO FINDS THAT THE SAID TWO CONDITIONS WERE SATISFIED, THAT THE INCOME OF THE ASSESSEE WOULD BE COMPUTED U/S 44BB(1) OF THE ACT. HOWEVER, IF SUCH CONDITIONS ARE NOT SATISFIED THEN THE INC OME TAX PAYABLE BY THE APPELLANT WOULD BE COMPUTED IN ACCORDANCE WITH S.115A(1)(B) OF THE ACT. 4. SHRI AMIT ARORA, T HE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE AO IN THE DRAFT ASSESSMENT ORDER AT PARA 2 HAS GIVEN A FINDING THAT THE ITA NO. 419/DEL/2012 AY 2008 - 09 WEATHERFORD OIL TOOLS ME LTD., NEW DELHI 4 ASSESSEE IS HAV ING A P/E IN INDIA AND THIS HAS BEEN ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME ITSELF. 5. IN VIEW OF THE FACT THAT THE ASSESSEE HAD A P/E IN INDIA AND AS THE INCOME IN QUESTION IS EFFECTIVELY CONNECTED WITH THE ASSESSEE S P.E. IN INDIA, THE INCOME S HOULD BE CONSIDERED U/S 44BB (1) OF THE ACT. 6. IN THE RESULT GROUND NOS. 1 TO 8 ARE ALLOWED. 7. GROUND NO.9 IS PREMATURE AND IS DISMISSED AS SUCH. 8. GROUND NO.10 IS CONSEQUENTIAL IN NATURE. 9 . IN THE RESULT THE AP PEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER ,2014. SD/ - SD/ - ( H.S.SIDHU ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 11 TH NOVEMBER , ,2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR