DDIT, New Delhi V. M/s. Egis BCEOM Intl. S.A., Faridabad

ITA 422/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7115 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Presumptive income; Business income; Double taxation relief; Deemed to accrue or arise in india; Permanent establishment; Advance ruling; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.O.P.KANT, ACCOUNTANT MEMBER I.T.A .NO.-422/DEL /2014 (ASSESSMENT YEAR-2008- 09) DDIT, CIRCLE-3(2), NEW DELHI (APPELLANT) VS EGIS BCEOM INTL. S.A., 12/6. SAFFORN SQUARE, DELHI MATHURA ROAD, FARIDABAD-121003 PAN-AABCB7760L (RESPONDENT) APPELLANT BY MS. RAKHI VIMAL, SR.DR RESPONDENT BY NONE ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AS SAILING THE CORRECTNESS OF THE ORDER DATED 14.11.2013 OF CIT(A) -XXIX, NEW DELHI PERTAINING TO 2008-09 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SERVICE TAX WAS NOT THE PART OF THE GROSS RECEIPTS TO BE TAXED U/S 44D R.W.S 115A OF THE INCOME TAX ACT, 1961. 2. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY OR ALTE R ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 2. NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING AND NOTICE SENT TO THE ADDRESS HAS COME BACK UNSERVED. ACCORDINGLY IT WAS CONSIDERED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-PARTE QUA THE ASSESSEE RESPONDENT ON MERIT. DATE OF HEARING 06 . 01 .201 6 DATE OF PRONOUNCEMENT 08.02.2016 I.T.A .NO.-422/DEL/2014 PAGE 2 OF 10 3. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE COMPANY INCORPORATED IN FRANCE AND IS IN THE BUSINESS OF PROVIDING CONSULTI NG, ADVISORY AND SUPERVISION SERVICES IN THE FIELD OF ROAD INFRASTRUCTURE PROJEC TS. DURING THE YEAR, THE ASSESSEE AS PER RECORD WAS WORKING ON 29 PROJECTS A LL OVER INDIA. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE RETURNED AN INCOME OF RS.5,69,72,993/- WHICH WAS SUBSEQUENTLY REVISED BY FILING A REVISED RETURN DECLARING A TOTAL INCOME OF RS.7,95,38,692/-. THE CASE WAS SELECTED FOR SCRUTINY AFTER ISSUANCE OF NOTICE 143(2). IN THE SCRUTINY ASSESSMENT THE A SSESSEE WAS REQUIRED TO FURNISH THE DETAILS IN RESPECT OF THE SERVICE TAX C OLLECTED IN RELATION TO PROJECTS WHERE THE INCOME WAS BEING OFFERED TO TAX ON GROSS BASIS U/S 44D R.W.S. 115A OF THE INCOME TAX ACT, 1961. THE ASSESSEE WAS SHOW C AUSED TO EXPLAIN WHY IT SHOULD NOT BE ADDED TO THE GROSS RECEIPTS OFFERED FOR TAXATION. THE ASSESSEE IN REPLY SUBMITTED THAT THE AMOUNT OF SERVICE TAX DOES NOT HAVE ELEMENT OF INCOME. THE FOLLOWING DETAILS WERE FURNISHED:- NAME OF THE PROJECT AMOUNT OF SERVICE TAX JPKG RS. 3,61,943/- NH 2 RS.17,18,784/- KSHIP RS. 2,14,778/- TOTAL RS.22,95,505/- 4. THE ASSESSEES CONTENTION WAS NOT ACCEPTED BY TH E AO AND THE SAID AMOUNT WAS ADDED TO THE TAXABLE INCOME OF THE ASSES SEE. THE ASSESSEE CARRIED OUT THE ISSUE IN APPEAL BEFORE THE CIT(A) WHO ADDRE SSED THE BACKGROUND OF THE ISSUED IN THE FOLLOWING MANNER:- 3.0 BACKGROUND: 3.1. THE APPELLANT IS A NON-RESIDENT COMPANY INCOR PORATED UNDER LAWS OF FRANCE AND IS ENGAGED IN THE BUSINESS OF PR OVIDING CONSULTANCY, ADVISORY AND SUPERVISION IN FIELD OF R OAD INFRASTRUCTURE PROJECTS TO GOVERNMENT COMPANIES LIKE NATIONAL HIGH WAY AUTHORITY OF INDIA AND OTHER RELATED GOVERNMENT DEPARTMENTS. I.T.A .NO.-422/DEL/2014 PAGE 3 OF 10 3.2 FOR THE SUBJECT AY, THE APPELLANT FILED ITS RET URN OF INCOME ON 30.09.2008 DECLARING A TOTAL INCOME OF RS. 5,69,72, 993/-. THE RETURN WAS REVISED ON 04.11.2008 WHEREIN A TOTAL INCOME OF RS. 7,95,38,692/- WAS DECLARED. DURING THE COURSE OF AS SESSMENT PROCEEDINGS U/S 143(3), THE AO FOUND THAT THE APPEL LANT HAS COLLECTED SERVICE TAX TO THE TUNE OF RS. 22,95,505/- FROM THE PARTIES FROM WHOM FTS HAVE BEEN RECEIVED. THE AO SUBJECTED THIS SERVI CE TAX TO TAX ON GROSS BASIS CONSIDERING IT A PART OF GROSS RECEIPT IN THE NATURE OF FTS. THE AO TOOK THE POSITION THAT WHEN AN ITEM OF INCOM E IS TO BE TAXED ON GROSS BASIS, IT IS THE GROSS RECEIPT THAT HAD TO BE TAXED. THERE IS NO SCOPE FOR REDUCING THE AMOUNT OF SERVICE TAX FROM G ROSS VALUE OF SERVICES. THE AO RELIED UPON SIEM OFFSHORE INC. (AA R NO. 875 OF 2010) AND ITAT DELHI'S RULING IN CASE OF TECHNIP OFFSHORE CONTRACTING BV (ITA NO. 4613/DEL/07). THE APPELLANT HAS CHALLENGED THIS ACTION OF THE AO IN PRESENT APPEAL. 4.1. THE ASSESSEES SUBMISSION MADE BEFORE HIM WERE SUMMED UP VIDE PARA 4.1 & 4.2 IN THE FOLLOWING MANNER:- 4.0 APPELLANT'S CASE: 4.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY TH EN CIT(A) FOR A.Y. 2007-08 VIDE-ORDER 4ATED 29.07.2011 IN ASSESSEE'S O WN CASE AND HON'BLE ITAT, DELHI VIDE ITS ORDER DATED 18.12.2012 ,HAS CONFIRMED THE RELIEF GRANTED BY THEN CIT(A). THE APPELLANT HA S SUBMITTED THAT FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS IN THE PRECEDING A.Y. 2007-08. 4.2. THE APPELLANT HAS SUBMITTED THAT AS PER SERVIC E TAX LAW, THE SERVICE TAX IS PAYABLE BY THE RECIPIENT OF THE SERV ICE. BUT RESPONSIBILITY OF ITS COLLECTION AND DEPOSIT IS IMP OSED ON RENDERER OF THE SERVICE FOR THE CONVENIENCE OF ITS COLLECTION. THEREFORE, UNDER STATUTORY REQUIREMENT, THE APPELLANT COLLECTED SERV ICE TAX FROM ITS CLIENTS AND DEPOSITED THE SAME TO THE RESPECTIVE AU THORITIES. THERE IS NO ELEMENT OF INCOME COMPRISED IN THE SERVICE TAX C OLLECTED AND, THEREFORE. IT CANNOT BE AGGREGATED WITH FTS FOR TAX ATION ON GROSS BASIS. IN NO CASE, SERVICE TAX CAN BE THE AMOUNT OW NED BY THE APPELLANT EVEN THOUGH IT IS THE SEPARATELY MENTIONE D IN THE INVOICES RAISED BY THE APPELLANT. THE AMOUNT IS PAYABLE TO T HE GOVERNMENT UNDER STATUTE AND THE APPELLANT HAS NO LIEN ON THIS AMOUNT. THE APPELLANT HAS RELIED UPON FOLLOWING RULINGS: (I) ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS. DCIT (II) ACIT VS. LOUIS BERGER INTERNATIONAL INC. 40 SOT 370 (HYD.) 4.3. I HAVE DULY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. IT HAS BEEN NOTED THAT ON THE SIMILAR ISSUE, THEN CIT( A) HAS ADJUDICATED THAT SERVICE TAX IS NOT INCLUDIBLE IN GROSS RECEIPT OF FTS AND HENCE NOT SUBJECT TO TAX ON GROSS BASIS. THE RELIEF GRANTED B Y CIT(A) HAS BEEN CONFIRMED BY HON'BLE DELHI ITAT VIDE ORDER DATED 18 .12.2012. SINCE FACTS OF THE CASE IN PRESENT APPEAL ARE IDENTICAL T O THOSE IN PRECEDING ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE DECISIO N RENDERED BY I.T.A .NO.-422/DEL/2014 PAGE 4 OF 10 HON'BLE DELHI ITAT IN ASSESSEE'S OWN CASE, I HOLD T HAT THE APPELLANT DESERVES TO SUCCEED. ACCORDINGLY, THE AO IS DIRECTE D TO COMPUTE TAX LIABILITY OF THE APPELLANT BY EXCLUDING THE AMOUNT OF SERVICE TAX RECEIVED BY IT FROM ITS CLIENTS AFTER VERIFYING THA T SUM HAS BEEN PAID TO THE GOVERNMENT A/C. 4.2. CONSIDERING WHICH THE CIT(A) FOLLOWING THE PAS T PRECEDENT ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL. 6. LD. SR. DR PERUSING THE COPY OF THE ORDER DATED 18.12.2012 IN ITA NO.4793/DEL/2011 PASSED BY THE ITAT IN THE IMMEDIAT ELY PRECEDING ASSESSMENT YEAR RELIED UPON THE ASSESSMENT ORDER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS AND CIRCUMSTANCE S IN THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS AS CONSIDE RED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THESE FACTS HAVE BEEN TA KEN INTO CONSIDERATION BY THE CIT(A) IN THE ORDER UNDER CHALLENGE:- 4. APPELLANTS CASE 4.1. DURING THE COURSE OF APPELLANT PROCEEDINGS, THE APPELLANT SUBMITTED THAT SIMILAR ISSUE HAS BEEN DECIDED BY TH EN CIT(A) FOR A.Y. 2007-08 VIDE ORDER DATED 29.07.2011 IN ASSESSEES O WN CASE AND HONBLE ITAT, DELHI VIDE ITS ORDER DATED 18.12.2012 HAS CONFIRMED THE RELIEF GRANTED BY THEN CIT(A). THE APPELLANT H AS SUBMITTED THAT FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS IN THE PRECEDING A.Y.2007-08. 4.2. THE APPELLANT HAS SUBMITTED THAT AS PER SERVIC E TAX LAW, THE SERVICE TAX IS PAYABLE BY THE RECIPIENT OF THE SERV ICE. BUT RESPONSIBILITY OF ITS COLLECTION AND DEPOSIT IS IMP OSED ON RENDERER OF THE SERVICE FOR THE CONVENIENCE OF ITS COLLECTION. THEREFORE, UNDER STATUTORY REQUIREMENT, THE APPELLANT COLLECTED SERV ICE TAX FROM ITS CLIENTS AND DEPOSITED THE SAME TO THE RESPECTIVE AU THORITIES. THERE IS NO ELEMENT OF INCOME COMPRISED IN THE SERVICE TAX C OLLECTED AND, THEREFORE. IT CANNOT BE AGGREGATED WITH FTS FOR TAX ATION ON GROSS BASIS. IN NO CASE, SERVICE TAX CAN BE THE AMOUNT OW NED BY THE APPELLANT EVEN THOUGH IT IS THE SEPARATELY MENTIONE D IN THE INVOICES RAISED BY THE APPELLANT. THE AMOUNT IS PAYABLE TO T HE GOVERNMENT UNDER STATUTE AND THE APPELLANT HAS NO LIEN ON THIS AMOUNT. THE APPELLANT HAS RELIED UPON FOLLOWING RULINGS: (I) ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS. DCIT I.T.A .NO.-422/DEL/2014 PAGE 5 OF 10 (II) ACIT VS. LOUIS BERGER INTERNATIONAL INC. 40 SOT 370 (HYD.) 8. ON GOING THROUGH THE ORDER DATED 18.12.2012, WE FIND THAT THE SIMILARITY FACTS AND POSITION OF LAW IS ESTABLISHED AS IN THE PRECEDING ASSESSMENT YEAR ALSO AS THE AO HEREIN ALSO HAS RELIED UPON THE DECISION OF THE DELHI BENCH OF THE ITAT IN THE CASE OF TECHNIP OFFSHORE CONTRACTING BV [2009] 29 SOT 33 (DEL.) AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT IN PARA 2.2 OF THE ORDER OF THE CO- ORDINATE BENCH. FOR READY-REFERENCE, WE EXTRACTED H EREIN THE FACTS AS UNDER:- 2. FACTS OF THE CASE INDICATE THAT THE ASSESSEE IS A COMPANY HAVING A PERMANENT ESTABLISHMENT IN INDIA. DURING THE YEAR UNDER APPEAL, THE ASSESSEE WAS INVOLVED IN PROVIDING TECHNICAL CO NSULTANCY SERVICES IN THE INFRASTRUCTURE SECTOR. THE CLIENTS OF THE AS SESSEE WERE MAINLY GOVERNMENT ORGANIZATIONS, SUCH AS NATIONAL HIGHWAY AUTHORITY OF INDIA AND STATE GOVERNMENTS ETC. THE INCOME DERIVED BY THE ASSESSEE IS TAXABLE U/S 44D (PROJECTS ENTERED INTO OR BEFORE MARCH 31, 2003) AND U/S 44D (IN RESPECT OF CONTRACTS ENTE RED INTO AFTER 31.3.2003) READ WITH SECTION 115A OF THE ACT, I.E., AT THE RATE OF 20% OF GROSS RECEIPTS. DURING THE YEAR, THE ASSESSEE R ECEIVED AN AMOUNT OF RS.13,73,58,441/- FROM ITS VARIOUS CLIENTS AS FE E FOR TECHNICAL SERVICES INCLUDING AN AMOUNT OF RS.60,95,094/- WHIC H WAS COLLECTED BY IT FROM ITS CLIENTS TOWARDS THE SERVICE TAX. WHI LE COMPUTING ITS TAX LIABILITY, THE ASSESSEE EXCLUDED THE AMOUNT OF SERV ICE TAX COLLECTED BY IT FROM ITS CLIENTS AND PAID TAXES AT THE RATE OF 2 0% ON THE NET AMOUNTS. 2.1 SIMILARLY, THE ASSESSEE DID NOT INCLUDE AN AMOU NT OF RS.70,013/- BEING AMOUNT OF SERVICE TAX COLLECTED BY IT ON ACCO UNT OF FEE FOR TECHNICAL SERVICES (OTHER THAN THE BUSINESS INCOME TAXABLE IN THE HANDS OF PE) RECEIVED WHICH WERE OFFERED TO TAX @ 1 0% UNDER ARTICLE 13 OF INDO FRENCH DTAA. 2.2 THE ASSESSING OFFICER REJECTED THE CONTENTION O F THE ASSESSEE THAT THE SERVICE TAX DID NOT HAVE ANY ELEMENT OF INCOME, I.E., IT WAS NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND, THERE FORE, DID NOT PARTAKE THE CHARACTER OF INCOME. THE ASSESSING OFFICER REFE RRED TO THE PROVISIONS CLAUSE (B) OF SECTION 44D OF THE ACT, I. E., NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE IS ALLOWABL E IN COMPUTING THE INCOME BY WAY OF ROYALTY OR FEES FOR TECHNICAL SERV ICES, AND HELD THAT INCOME INCLUDE THE AMOUNT OF SERVICE TAX COLLECTED BY IT FROM THE CLIENTS AND TAX WAS PAYABLE ON THE GROSS RECEIPTS. THE ASSESSING OFFICER RELIED UPON THE JUDGMENT OF HONBLE ITAT IN THE CASE OF TECHNIP OFFSHORE CONTRACTING BV (2009) 29 SOT 33 (D EL.). (EMPHASIS PROVIDED) I.T.A .NO.-422/DEL/2014 PAGE 6 OF 10 8.1. IT IS FURTHER SEEN IN PARA 4 THAT RELIANCE WAS PLACED UPON DDIT VS M/S MITCHELL DRILLING INTERNATIONAL PTE. LTD. [2012] 24 TAXMANN.COM 390 [DEL.] AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT FROM THE ORDE R OF THE CO-ORDINATE BENCH:- 4. AT THE VERY OUTSET, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY G BENCH OF THE ITAT, DELHI AS REPORTE D IN (2012) 24 TAXMANN.COM 390 (DELHI) DATED 29.06.2010 WHICH HAS FURTHER BEEN FOLLOWED BY E BENCH, ITAT, DELHI IN THE CASE OF D DIT VS. M/S MITCHELL DRILLING INTERNATIONAL PTY. LTD., I.T.A. NO.698/DEL ./2012 DATED 31.08.2012 IN WHICH ONE OF THE MEMBER IS A PARTY. T HEREFORE, IT WAS PLEADED THAT SINCE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE AND CIT(A)S ORDER IS IN CONFORMITY WITH THE DECISI ONS OF THE TRIBUNAL, THEREFORE, RELYING UPON THESE DECISIONS, IT WAS PLE ADED FOR CONFIRMATION OF THE IMPUGNED ORDER. 5. LD.DR COULD NOT CONTROVERT THIS FACTUAL ASPECT A ND RATHER SUBMITTED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY VARIOUS DECISIONS OF THE TRIBUNAL AND APPEAL MAY BE DISPOSE D OF ACCORDINGLY. 8.2. A CAREFUL READING OF THE ORDER OF THE CO-ORDIN ATE BENCH FURTHER SHOWS THAT THE VIEW TAKEN BY THE CIT(A) IN 2007-08 ASSESSMENT YEAR WAS UPHELD RELYING UPON THE VIEW TAKEN IN THE CASE OF MITCHELL DRILLIN G INTERNATIONAL PTE. LTD. (CITED SUPRA). AS WOULD BE AVAILABLE FROM THE FOLLOWING EX TRACT FROM THE SAID ORDER:- 6. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATER IAL ON RECORD AND FIND THAT ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THE BENCHES INCLUD ING E BENCH, ITAT, DELHI, IN THE CASE OF DDIT VS. M/S MIT CHELL DRILLING INTERNATIONAL PTY. LTD. (SUPRA) IN WHICH SIMILAR ISSUE HAS BEEN DEALT WITH AND CONCLUDED FROM PARA.5 ONWARDS, WHICH IS REPRODUCED AS UNDER: 5. LD.CIT(A) WHILE CONSIDERING AND ACCEPTING THE P LEA OF THE ASSESSEE HAS CONCLUDED TO ALLOW THE APPEAL OF THE A SSESSEE GIVING ELABORATELY THE BASIS AND REASONING AS PER P ARAS.5 TO 5.9 OF HIS ORDER. 6. AGGRIEVED BY THIS ORDER OF CIT(A), DEPARTMENT HA S COME UP IN APPEAL AND WHILE RELYING UPON DECISION OF AUTHOR ITY FOR ADVANCE RULING IN THE CASE OF SIEM OFFSHORE INC., I N RE, (2011) 337 ITR 207 (AR) DATED 25.7.2011, HAS PLEADED FOR R EVERSAL OF THE ORDER PASSED BY THE CIT(A) AND RESTORING THAT O F THE ASSESSING OFFICER. SINCE SERVICE TAX IS PART OF REC EIPT, THEREFORE, FOR PRESUMPTIVE INCOME, SAME HAS RIGHTLY BEEN ADDED BY THE ASSESSING OFFICER AND RELIANCE WAS ALSO PLACED IN T HE CASE OF TECHNIP OFFSHORE CONTRACTING BV (2009) 29 SOT 33 (D EL.) AND I.T.A .NO.-422/DEL/2014 PAGE 7 OF 10 SO FAR AS UTTRAKHAND HIGH COURT JUDGMENT IS CONCERN ED, WHICH HAS BEEN RELIED UPON BY THE CIT(A), IT WAS SUBMITTE D THAT THE SAME IS NOT WITH REGARD TO SERVICE TAX, BUT RELATIN G TO CUSTOM DUTY, THEREFORE, DISTINGUISHABLE ON FACTS. AS SUCH ORDER OF CIT(A) NEEDS REVERSAL WHICH MAY BE REVERSED. 7. LD. COUNSEL FOR THE ASSESSEE WHILE RELYING UPON ITAT, G BENCH DECISION, WHICH IS DIRECTLY ON THE POINT THAT SERVICE TAX IS TO BE EXCLUDED FOR COMPUTING PRESUMPTIVE INCOME U/S 44BB OF THE ACT, AND IN THAT DECISION VARIOUS EARLIER DE CISIONS HAVE BEEN CONSIDERED INCLUDING THAT OF HONBLE UTTRAKHAN D HIGH COURT DECISION. THEREFORE, IT WAS PLEADED FOR CONFI RMATION OF THE IMPUGNED ORDER. 8. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MAT ERIAL ON RECORD AND FIND THAT SIMILAR ISSUE AROSE BEFORE G BENCH OF THE TRIBUNAL IN THE CASE OF SEDCO FOREX INTERNATIONAL D RILLING INC. VS. ADDL. DIT (INTERNATIONAL TAXATION) IN ITA NO.5284/DEL./2011, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND RELEVANT PORTION OF THE DECISION, WHIC H HAS BEEN DEALT WITH BY THE TRIBUNAL IN ITS ORDER AS UNDER: 4. ..REGARDING REIMBURSEMENT OF SERVICE TAX, TH E LD. AR POINTED OUT THAT THOUGH THE ITAT DELHI BENCH IN THEIR DECISION IN THE CASE OF DIT (INTERNATIONAL TAXATION) VS. TECHNIP OFFSHORE CONTRACTING BV,29 SOT 33(DELHI) CONCLUDED THAT SERVICE TAX COLLECTED BY THE ASSESSE E BEING DIRECTLY IN CONNECTION WITH SERVICES OR FACILITIES OR SUPPLY SPECIFIED U/S 44BB OF THE ACT PROVIDED BY THE ASSES SEE TO ONGC, HAVE TO BE INCLUDED IN THE TOTAL RECEIPTS FOR THE PURPOSE OF DETERMINATION OF PRESUMPTIVE PROFIT U/S 44BB, SUBSEQUENTLY, HONBLE UTTARAKHAND HIGH COURT DECISI ON DATED 24TH JULY, 2009 IN THE CASE OF DIT & ANR. VS. CHLUMBERGER ASIA SERVICES LTD. ,317 ITR 156(UTTARAKHAND) CONCLUDED THAT REIMBURSEMENT OF CUSTOM DUTY PAID BY THE ASSESSEE COULD NOT FORM PAR T OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB U NLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. FOLLOWING THE VIEW IN THIS DECISION, MUMBAI BENCH I N THEIR DECISION DATED 20.4.2011 IN I.T.A. NO.8845/MUM/2010 IN THE CASE OF ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS. DCIT,2011-TOII-77-MUMINTL, HELD THAT SERVICE TAX BEING A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMEN T OF PROFIT AND A SERVICE PROVIDER HAVING COLLECTED THE AMOUNT ON BEHALF OF THE GOVERNMENT, ACCORDINGLY, THE SAME COU LD NOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING T HE PRESUMPTIVE INCOME, THE LD. AR ADDED. ON THE OTHER HAND, THE LD. DR SUPPORTED THE FINDINGS OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS R ELIED UPON BY THE LD. AR. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT IN THEIR AFORESAID DECISION HALLIBURTON OFFSHORE SE RVICES INC. (SUPRA) WHILE ADJUDICATING AN IDENTICAL ISSUE RELAT ING TO REIMBURSEMENT OF FREIGHT & TRANSPORT CHARGES IN RES PECT OF EQUIPMENT, CONCLUDED AS UNDER:- I.T.A .NO.-422/DEL/2014 PAGE 8 OF 10 5. SEC. 44BB PROVIDES THAT THE DEEMED PROFITS AND GAINS UNDER SUB-S. (1) SHALL BE @ 10 PER CENT OF THE AGGR EGATE AMOUNT SPECIFIED IN SUB-S. (2). WE PROCEED TO ANALY ZE SUB-S. (2). CLAUSE (A) OF SUB-S. (2) REFERS TO THE AMOUNTS , (A) PAID TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUN T OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED, OR TO B E USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA, AND (B) PAYABLE TO THE ASSESSEE (WHE THER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVIC ES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT A ND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSP ECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS I N INDIA. CLAUSE (B) OF SUB-S. (2) REFERS TO THE AMOUNTS, (A) RECEIVED BY ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SE RVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT A ND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSP ECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS O UTSIDE INDIA, AND (B) DEEMED TO BE RECEIVED BY THE ASSESSEE IN IN DIA ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY O N HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXT RACTION OR PRODUCTION OF MINERAL OILS OUTSIDE INDIA. 6. THUS, IT IS CLEAR FROM THE PERUSAL OF S. 44BB TH AT ALL THE AMOUNTS EITHER PAID OR PAYABLE (WHETHER IN INDIA OR OUTSIDE INDIA) OR RECEIVED OR DEEMED TO BE RECEIVED (WHETHE R IN INDIA OR OUTSIDE INDIA) ARE MUTUALLY INCLUSIVE. THIS AMOU NT IS THE BASIS OF DETERMINATION OF DEEMED PROFITS AND GAINS OF THE ASSESSEE @ 10 PER CENT. THEREFORE, IN OUR VIEW, THE TRIBUNAL FELL INTO ERROR IN NOT APPRECIATING THE DIFFERENCE BETWEEN THE AMOUNT AND THE INCOME. AMOUNT PAID OR RECEIVED REFE RS TO THE TOTAL PAYMENT TO THE ASSESSEE OR PAYABLE TO THE ASSESSEE OR DEEMED TO BE RECEIVED BY THE ASSESSEE, WHEREAS INCOME HAS BEEN DEFINED UNDER S. 2(24) OF T HE IT ACT AND S. 5 AND S. 9 DEAL WITH THE INCOME AND ACCR UED INCOME AND DEEMED INCOME. SEC. 4 IS THE CHARGING SE CTION OF THE IT ACT AND DEFINITION AS WELL AS THE INCOMES RE FERRED IN SS. 5 AND 9 ARE FOR THE PURPOSE OF IMPOSING THE INC OME-TAX UNDER S. 143 (3). SEC. 44BB IS A COMPLETE CODE IN I TSELF. IT PROVIDES BY A LEGAL FICTION TO BE THE PROFITS AND G AINS OF THE NON-RESIDENT ASSESSEE ENGAGED IN THE BUSINESS OF OI L EXPLORATION @ 10 PER CENT OF THE AGGREGATE AMOUNT S PECIFIED IN SUB-S. (2). IT IS NOT IN DISPUTE THAT THE AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE COMPANY. THEREFORE, THE AO ADDED THE SAID AMOUNT WHICH WAS RECEIVED BY THE NON-RESID ENT COMPANY RENDERING SERVICES AS PER PROVISIONS OF S. 44BB TO THE ONGC AND IMPOSED THE INCOME-TAX THEREON. 5.1. IN THE LIGHT OF VIEW TAKEN BY THE HONBLE J URISDICTIONAL HIGH COURT IN THEIR AFORESAID DECISION, ESPECIALLY WHEN THE LD. AR ACCEPTED THE POSITION THAT THE ISSU E IS SQUARELY COVERED BY THE AFORESAID DECISION WHILE NO OTHER I.T.A .NO.-422/DEL/2014 PAGE 9 OF 10 CONTRARY DECISION WAS BROUGHT TO OUR NOTICE NOR THE LD. AR PLACED ANY MATERIAL BEFORE US, CONTROVERTING THE AF ORESAID FINDINGS OF THE DRP AND THE AO, WE HAVE NO HESITATI ON IN UPHOLDING THE FINDINGS OF THE AO IN THE LIGHT OF DI RECTIONS OF THE DRP IN PARA 3.2 OF THEIR ORDER DATED 2 ND SEPTEMBER, 2011 IN RESPECT OF REIMBURSEMENT OF AMOUNT ON ACCOU NT OF FUEL RECHARGE. IN VIEW THEREOF, GROUND NO. 2 IN THE APPEAL IS DISMISSED. 6. AS REGARDS REIMBURSEMENT OF AMOUNT IN RESPECT OF SERVICE TAX, AS POINTED OUT BY THE LD. AR, THE ITAT DELHI B ENCH IN THEIR DECISION IN TECHNIP OFFSHORE CONTRACTING BV(S UPRA) CONCLUDED THAT SERVICE TAX COLLECTED BY THE ASSESSE E BEING DIRECTLY IN CONNECTION WITH SERVICES OR FACILITIES OR SUPPLY SPECIFIED U/S 44BB OF THE ACT PROVIDED BY THE ASSES SEE TO ONGC, HAVE TO BE INCLUDED IN THE TOTAL RECEIPTS FOR THE PURPOSE OF DETERMINATION OF PRESUMPTIVE PROFIT U/S 44BB OF THE ACT. IT IS WELL ESTABLISHED THAT SECTION 44BB O F THE ACT IS A SPECIAL PROVISION, TREATING 10 PER CENT OF THE AG GREGATE AMOUNT SPECIFIED IN SUB-S. (2) OF S. 44BB AS DEEMED PROFITS AND GAINS OF SUCH NON-RESIDENT ASSESSEE WHO IS ENGA GED IN THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH, OR SUPPLYING PLANT AND MACHINERY ON HIGHER US ED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION O R PRODUCTION OF, MINERAL OILS. THE AMOUNT REFERRED IN SUB-S. (2) OF S. 44BB ARE THE AMOUNTS (A) PAID TO THE ASSESSEE (WHETHER I N OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES A ND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINER Y ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA, (B) PAYABLE TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACC OUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PROD UCTION OF, MINERAL OILS IN INDIA, (C) RECEIVED BY THE ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY O N HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXT RACTION OR PRODUCTION OF, MINERAL OILS OUTSIDE INDIA AND (D) D EEMED TO BE RECEIVED BY THE ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIGHER USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PROD UCTION OF, MINERAL OILS OUTSIDE INDIA. THE SERVICE TAX IS A ST ATUTORY LIABILITY LIKE CUSTOM DUTY. HONBLE UTTARAKHAND HIG H COURT IN THEIR DECISION IN SCHLUMBERGER ASIA SERVICES LTD .(SUPRA) CONCLUDED THAT REIMBURSEMENT OF CUSTOM DUTY PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURP OSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RE CEIVED TOWARDS REIMBURSEMENT. FOLLOWING THE VIEW IN THIS D ECISION, MUMBAI BENCH IN THEIR DECISION IN ISLAMIC REPUBLIC OF IRAN SHIPPING LINES(SUPRA)HELD THAT SERVICE TAX BEING A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMENT OF PROFIT AND ACCORDINGLY, THE SAME COULD NOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME. IN THE LIGHT I.T.A .NO.-422/DEL/2014 PAGE 10 OF 10 OF VIEW TAKEN BY THE MUMBAI BENCH, ESPECIALLY WHEN THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US, CONTROVERT ING THE AFORESAID FINDINGS OF THE LD. CIT(A) SO AS TO ENABL E US TO TAKE A DIFFERENT VIEW IN THE MATTER NOR BROUGHT TO OUR N OTICE ANY CONTRARY DECISION, WE ARE OF THE OPINION THAT SERVI CE TAX PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR T HE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. 9. SINCE THIS ISSUE IS COVERED BY EARLIER DECISION OF ITAT, G BENCH, DELHI, WHICH IS ON SIMILAR POINT AND NO CONT RARY OR ANY HIGHER COURTS PRECEDENT HAS BEEN CITED, THEREF ORE, WHILE FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF .CIT(A) AND DISMISS THE PRESENT APPEAL. 10. AS A RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THEREFORE, FOLLOWING THE SAID DECISIONS, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9. IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRCUMSTA NCES, WE FIND THAT IN THE FACE OF THE ORDER OF THE ITAT IN ASSESSEES OWN CASE ON SIMILAR FACTS AND CIRCUMSTANCES, THE DEPARTMENTAL APPEAL IN THE ABSEN CE OF ANY DECISION TO THE CONTRARY HAS TO BE DISMISSED. RESPECTFULLY FOLLOWI NG THE PRECEDENT, THE APPEAL OF THE REVENUE IS DISMISSED AS PRONOUNCED IN THE OP EN COURT. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08 OF FEBRUARY, 2016. SD/- SD/- (O.P.KANT) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/02/2016 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTAN T REGISTRAR ITAT NEW DELHI