M/s. Transocean offshore International Ventures Ltd., New Delhi V. DCIT, Dehradun

ITA 4448/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3934 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 05-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: H BENCH, NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER ITA NO: 4448/DEL/2010 ASSESSMENT YEAR : 2005-06 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VS. DCIT- 1, DEHRADUN VENTURES LTD. C/O NANGIA & CO. SUITE 4A, PLAZA M-6, JASOLA NEW DELHI 25 ( PAN: AABCT 7361B ) (APPELLANT) (RESPONDE NT) APPELLANT BY : SH. AMIT ARORA, C.A. RESPONDENT BY : MS. REENA S PURI, CIT, D.R. O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING OUT OF ORDER OF CIT(A)-II, DEHRADUN DATED 3.6.2010 PERTAINING TO A.Y. 2005-06. THE GROUNDS OF APPEAL READ AS UNDER. ITA 4448/DEL/2010 PAGE 2 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI 1. THAT THE LD.CIT(A) HAS ERRED ON FACTS AND IN LA W IN AFFIRMING THE ACTION OF THE A.O. IN HOLDING THAT TH E AMOUNTS AGGREGATING TO RS. 2,30,54,979/- RECEIVED B Y THE APPELLANT FROM OIL & NATURAL GAS CORPORATION LI MITED AND RELIANCE INDUSTRIES LTD. AS REIMBURSEMENT OF A CTUAL EXPENSES INCURRED BY THE APPELLANT ON THEIR BEHALF IS TO BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE I NCOME TAX ACT, 1961 (THE ACT). 2. THAT THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN AFFIRMING THE ACTION OF THE A.O. IN HOLDING THAT TH E SUM OF RS. 24,69,40,000/- RECEIVED BY THE APPELLANT TOWARD S FEE FOR MOBILIZATION OF THE RIG FROM OUTSIDE INDIA IS T O BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE ACT WITHOUT APPRECIATING THAT THE SAID AMOUNT DOES NOT ACCRUE OR ARISE TO THE APPELLANT IN INDIA IN TERMS OF S.5(2) READ WITH S.9 OF THE ACT. 2.1. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) ER RED ON FACTS AND IN LAW IN NOT HOLDING THAT ONLY THAT PROP ORTION OF THE ABOVE AMOUNT ATTRIBUTABLE TO THE MOBILIZATION O F THE RIG WITHIN INDIA WAS TAXABLE IN THE HANDS OF THE AP PELLANT IN INDIA IN TERMS OF S.9(1)(1) READ WITH S.44BB OF THE ACT. 3. THAT THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN RESTORING THE ISSUE OF INCLUSION OF RS. 46,075,711/ - PERTAINING TO RBFRC IN THE TAXABLE INCOME OF THE APPELLANT TO THE FILE OF THE AO WITHOUT ADJUDICATIN G ON THE SAME INDEPENDENTLY. ITA 4448/DEL/2010 PAGE 3 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI 4. THAT THE CIT(A) ERRED IN NOT ADJUDICATING UPON THE GROUND RAISED BY THE APPELLANT AGAINST THE ACTION O F THE AO IN NOT ALLOWING CREDIT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 22,30,311/-. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OM IT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL AND /OR THE RELIEF CLAIMED, AT ANY TIME BEFORE OR AT THE TI ME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE LD.ITAT TO DECIDE THIS APPEAL ACCORDING TO LAW. 3. THE ASSESSEE RECEIVED RS. 2,53,17,19,582/- ON AC COUNT OF VARIOUS CONTRACTS ENTERED INTO WITH RELIANCE INDUSTRIES LTD . AND OIL & NATURAL GAS CORPORATION LIMITED. THESE REVENUES WERE OFFER ED U/S 44BB OF THE INCOME TAX ACT. IT WAS CLAIMED THAT WORK EXECUTED UNDER THESE CONTRACTS WERE IN CONNECTION WITH EXPLORATION AND EXTRACTION OF MINERAL OILS AND IS THEREFORE THE PROVISIONS OF S. 44 BB OF THE ACT ARE APPLICABLE. 4. AT THE OUTSET OF THE APPEAL THE LD.A.R. SUBMITTE D THAT GROUND NO.1 RELATING TO AGGREGATING THE RECEIPTS FROM OIL & NATURAL GAS CORPORATION LIMITED AND RELIANCE INDUSTRIES LTD. INCLUDING THE CASH CLAIM/REIMBURSEMENT OF ACTUAL EXPENSES FOR THE WORK ING OUT THE CROSS RECEIPTS U/S 44B OF THE ACT IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. HALLIBURTON OFFSHORE SERVICES INC. 300 ITR 265, UT TARAKHAND. THE LD.D.R. WAS ALSO HAVING THE SAME VIEWS. ITA 4448/DEL/2010 PAGE 4 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI 5. AFTER HEARING BOTH THE SIDES WE FIND THAT HONBL E UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. HALLIBURTON OFFS HORE SERVICES LTD HAS HELD AS UNDER. S.44BB OF THE INCOME TAX ACT, 1961 IS A COMPLETE C ODE IN ITSELF. IT PROVIDES BY A LEGAL FICTION THE PROFITS AND GAINS O F A NON-RESIDENT ASSESSEE ENGAGED IN THE BUSINESS OF OIL EXPLORATION AT 10 PE R CENT OF THE AGGREGATE AMOUNT SPECIFIED IN SUB SECTION (2) CLAUSE(A) OF SU BSECTION(2) REFERS TO THE AMOUNTS, (A) PAID TO THE ASSESSEE (WHETHER IN OR OU T OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECT ION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PR OSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA, AND (B) PAYABLE TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION 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, OR EXTR ACTION OR PRODUCTION OF, MINERAL OILS IN INDIA. CLAUSE (B) OF SUB SECTION ( 2) REFERS TO THE AMOUNTS, (A) RECEIVED BY ASSESSEE IN INDIA ON ACCOUNT OF THE PRO VISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT A ND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS OUTSIDE INDIA. THUS, IT IS CLEAR FROM A PE RUSAL OF SECTION 44BB THAT ALL THE AMOUNTS EITHER PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) ARE MUTUALLY INCLUSIVE. THIS AMOUNT IS THE BASIS OF DE TERMINATION OF DEEMED PROFITS AND GAINS OF THE ASSESSEE AT 10 PER CENT. THE AMOUNT PAID OR RECEIVED REFERS TO THE TOTAL PAYMENT TO THE ASSESSE E OR PAYABLE TO THE ASSESSEE OR DEEMED TO BE RECEIVED BY THE ASSESSEE, WHEREAS INCOME HAS BEEN DEFINED U/S 2(24) OF THE INCOME TAX ACT AND SE CTION 5 AND 9 DEAL WITH THE INCOME AND ACCRUED INCOME AND DEEMED INCOM E. ITA 4448/DEL/2010 PAGE 5 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI THE ASSESSEE RENDERED SERVICES TO THE ONGC. FOR TH E A.Y. 1991-92, IT CLAIMED THAT THE AMOUNT OF RS. 6,16,989/- RECEIVED ON ACCOUNT OF REIMBURSEMENT OF FREIGHT AND TRANSPORTATION CHARGES ACTUALLY INCURRED IN RESPECT OF EQUIPMENT WAS NOT INCLUDIBLE WHILE COMPU TING ITS INCOME U/S 44BB. THE A.O. REJECTED THE CLAIM BUT THE CIT(A) A ND THE TRIBUNAL ACCEPTED IT. ON APPEAL TO THE HIGH COURT : HELD, ALLOWING THE APPEAL, THAT IT WAS NOT IN DISPU TE THAT THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE. THEREFORE THE AO AD DED THE SAID AMOUNT WHICH WAS RECEIVED BY THE NON RESIDENT COMPANY REND ERING SERVICES UNDER THE PROVISIONS OF SECTION 44 BB TO THE ONGC AND IMP OSED THE INCOME TAX THEREON. HE WAS JUSTIFIED IN DOING SO. FACTS BEING THE SAME, RESPECTFULLY FOLLOWING THE A BOVE CITED ORDER (SUPRA) WE DISMISS THIS GROUND OF ASSESSEES APPEA L. 6. THE ISSUE INVOLVED IN GROUND NO.2 IS REGARDING F EE FOR MOBILIZATION OF THE RIGS. THE LD.A.R. FAIRLY CONCEDED THAT THI S ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN SEDCO FOREX INTERNATIONAL DRILLING INC. 299 ITR 23 8. THE LD.DR WAS ALSO HAVING THE SAME VIEW. 7. AFTER HEARING BOTH THE SIDES WE FIND THAT IN SED CO FOREX INTERNATIONAL DRILLING INC. (SUPRA) IT WAS HELD THA T HELD, DISMISSING THE APPEAL, THAT THE PAYMENT MADE TO THE ASSESSEE WAS O UTSIDE INDIA AND THE MOBILIZATION CHARGES PAID TO THE ASSESSEE BY ONGC H AD NO NEXUS WITH THE ITA 4448/DEL/2010 PAGE 6 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI ACTUAL AMOUNT INCURRED BY THE ASSESSEE FOR TRANSPOR TATION OF DRILLING UNITS OF RIGS TO THE SPECIFIED DRILLING LOCATIONS IN INDI A. THUS, THE MOBILIZATION CHARGES WERE NOT REIMBURSEMENT OF EXPENDITURE. ONG C WAS LIABLE TO PAY A FIXED SUM AS STIPULATED IN THE CONTRACT REGARDLES S OF THE ACTUAL EXPENDITURE WHICH MIGHT BE INCURRED BY THE ASSESSEE FOR THE PURPOSE. IN VIEW OF THE FICTIONAL TAXING PROVISION CONTAINED U/ S 44BB, THE AO WAS RIGHT IN ADDING THE AMOUNT OF RS. 99,04,000/- FOR THE A.Y . 1986-87 AND THE AMOUNT OF RS. 64,64,530/- FOR THE A.Y. 1987-88 REC EIVED BY THE ASSESSEE TOWARDS MOBILIZATION CHARGES FOR THE PURPOSE OF IMP OSING INCOME TAX AND THE CIT(A) AND THE TRIBUNAL WERE ALSO RIGHT IN UPHO LDING THE ORDER OF AO. FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE D ECISION OF HONBLE UTTARAKHAND HIGH COURT WE DISMISS THIS GROUND OF AP PEAL BY THE ASSESSEE. 8. IN GROUND NO.3 THE ISSUE INVOLVED IS REGARDING I NCLUSION OF RS. 46,075,711 PERTAINING TO RBFRC IN THE TAXABLE INCOM E OF THE APPELLANT. THE LD.AR SUBMITTED THAT THE LD.CIT(A) HAS RESTORED THE ISSUE WITHOUT ADJUDICATING THE SAME INDEPENDENTLY. THE LD.D.R. SUBMITTED THAT THE LD.CIT(A) HAS NOT REMANDED THE ISSUE OR SET ASIDE T HE ISSUE TO THE FILE OF AO IT HAS BEEN SIMPLY ASKED THE AO TO VERIFY THE CL AIM OF ASSESSEE IN VIEW OF THE IDENTICAL CLAIM IN A.Y. 2005-06. THE LD.CIT(A) HAS ALSO MENTIONED THAT THIS MISTAKE COULD HAVE BEEN RECTIFI ED BY MAKING AN APPLICATION FOR RECTIFICATION. AS IT IS CLAIMED TH AT THE AMOUNT PERTAINED ITA 4448/DEL/2010 PAGE 7 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI TO A DIFFERENT COMPANY AND THE DIFFERENT COMPANY HA S ALREADY DECLARED THEN THIS ISSUE CAN BE FINALIZED ONLY BY WAY OF VER IFICATION AT THE LEVEL OF THE AO. IN VIEW OF THIS FACT WE SUSTAIN THE ORDE R OF CIT(A) IN THIS REGARD. 9. IN GROUND NO.4 THE ASSESSEE HAS RAISED THE ISSUE REGARDING NOT ALLOWING THE CREDIT FOR TDS. WE HAVE HEARD BOTH TH E SIDES AND AFTER HEARING WE DIRECT THE AO TO ALLOW THE CREDIT AFTER VERIFYING THE NECESSARY DOCUMENTS. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MAY, 2011. SD/- SD/- (C.L.SETHI ) (B.C.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13 TH MAY, 2011 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER ITA 4448/DEL/2010 PAGE 8 OF 8 M/S TRANSOCEAN OFFSHORE INTERNATIONAL VENTURES LTD. NEW DELHI DY. REG ISTRAR // C O P Y //