ADIT, Intl. Taxation, Dehradun V. M/s AOP of (Schlumberger Asia Services Ltd., & Transocean Offshore Deepwater Drilling Inc), Gurgaon

ITA 4655/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3066 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Keywords: Residential status; Deemed to accrue or arise in india
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI G.D.AGRAWAL, HON BLE PRESIDENT AND SMT. BEENA A PILLAI, ACCOUNTANT MEMBER ITA NO. 5822 /DEL/201 0 A.Y. 20 07 - 08 ITA NO. 105/DEL/2012 A.Y. 20 08 - 09 T RANSOCEAN OFFSHORE DEEP WATER DRILLING INC. 101, TRANSOCEAN HOUSE LAKE BOULEVARD ROAD HIRANANDANI BUSINESS PARK POWAI MUMBAI 400 076 PAN: AABCT 6720 C VS . ADDL. DIT, INTERNATIONAL TAXATION DEHRADUN ITA NO. 3044 /DEL/201 3 A.Y. 20 09 - 10 ADDL. DIT, INTERNATIONAL TAXATION D EHRADUN VS . TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. DEHRADUN ITA NO. 4655 /DEL/201 3 A.Y. 20 07 - 08 ADDL. DIT, INTERNATIONAL TAXATION DEHRADUN VS . A.O.P. OF (SCHLUMBERGER ASIA SERVICES LTD. & TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC . DEHRADUN C.O. 60/DEL/14 & C.O. 66/DEL/14 (IN ITA 465 5 /DEL/13) ASSESSMENT YEAR 200 7 - 08 ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 2 A.O.P. OF (SCHLUMBERGER ASIA SERVICES LTD. & TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. DEHRADUN VS . ADDL. DIT, INTERNATIONAL TAXATION DEHRADUN ITA NO . 4656 /DEL/201 3 A.Y. 20 08 - 09 ADDL. DIT, INTERNATIONAL TAXATION DEHRADUN VS . A.O.P. OF (SCHLUMBERGER ASIA SERVICES LTD. & TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. DEHRADUN C.O. 61/DEL/14 & C.O. 67/DEL/14 (IN ITA 4656/DEL/13) ASSESSMENT YEAR 2008 - 09 A.O.P. OF (SCHLUMBERGER ASIA SERVICES LTD. & TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. DEHRADUN VS . ADDL. DIT, INTERNATIONAL TAXATION DEHRADUN (APPELLANT) (RESPONDENT) A SSESSEE BY SHRI M.S. SYALI, SR.ADV. SH. TARANDEEP SINGH, CA DEPARTMENT BY SH. G.K.DHALL, C IT, DR . DATE OF HEARING 16.01.2018 DATE OF PRONOUNCEMENT 26.03. 201 8 ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 3 ORDER PER BE NCH THE PRESENT A PPEALS AND C RO SS O BJECTIONS FILED BY R EVENUE AS WELL AS ASSESSEE IN ITS INDIVIDUAL CAPACITY AS WELL AS A OP , HA VE BEEN FILED AGAINST THE ORDER OF LD.ACIT (INTERNATIONAL TAXATION), DEHRA DUN AND LD. CIT(A) - 2 DEHRA DUN AS UNDER: PARTICULARS ASSESSEE TRANSOCEAN OFFSHORE S D EEPWATER DRILLING INC. ALLEGED AOP OF SLUMBERGER ASIA SERVICES LTD AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ASST.YR 07 - 08 08 - 09 09 - 10 07 - 08 08 - 09 ITA NO. 5822/10 105/12 3044/13 4655/13 4656/13 CO NO. 60& 66/14 61 &67 / 14 IMPUGNED ORDER ACIT(IT) ACIT(IT) CIT(A) CIT(A) CIT(A) DATE OF ORDER 30/09/10 8/11/11 31/03/13 31/05/13 31/05/13 THE GROUNDS RAISED BY THE RESPECTIVE APPELLANTS IN THE APPEALS FILED ARE AS UNDER: ITA NO.5822/ D EL/2010 GROUND NO.1 1 . 1 . O N THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD.ADIT, INTERNATIONAL TAXATION, DEHRADUN (ASSESSING OFFICER) ERRED IN ASSESSING THE APPELLANT ON A PROTECTIVE BASIS. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 4 1 . 2 . ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD.DI SPUTE RESOLUTION PANEL (DRP) ERRED IN NOT ISSUING ANY DIRECTIONS TO AO U/S 144C OF THE INCOME TAX ACT, 1961 (THE ACT). 1 . 3 . IN VIEW OF GROUNDS AT 1.1 AND 1.2 ABOVE, THE APPELLANT PRAYS THAT IMPUGNED ORDER PASSED U/S 143(3) R.W.S. 1 44C(13) OF THE ACT BE QUASHED SINCE IT IS BAD IN LAW AND VOID AB INITIO TO THE EXTENT OF ASSESSMENT MADE IN THE HANDS OF APPELLANT ON PROTECTIVE BASIS. GROUND 2. 2.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT THE CONS ORTIUM OF APPELLANT AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) CONSTITUTES AN ASSOCIATION OF PERSON (AOP) UNDER THE PROVISIONS OF THE ACT. 2.2. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. ASSESSING OFFICER ERRED IN HOLDING THAT T HE CONSORTIUM OF APPELLANT AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) CONSTITUTES RESIDENT AOP WITHIN THE MEANING OF SECTION 6(4) OF THE ACT. 2.3. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. ASSESSING OFFICER ERRED IN CONSIDERING THE GROSS REVENUE AS PER RETURN OF INCOME AT RS.2,710,962,770 AS AGAINST RS.2,689,794,956/ - DECLARED BY THE APPELLANT IN THE RETURN OF INCOME GROUND 3 3.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. DRP/ ASSESSING OFFICER ERRED IN INCLUDING THE AMOUNTS RECEIVED ON ACCOUNT OF REIMBURSEMENTS OF FUEL CHARGES AND MATERIAL ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 5 RECHARGE FROM ONGC AGGREGATING TO RS.541,510,321, WHILE COMPUTING THE TAXABLE INCOME OF APPELLANT UNDER THE PROVISIONS OF SECTION 44BB OF THE ACT. GROUND NO.4 4.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. ASSESSING OFFICER ERRED IN LEVYING INTEREST U/S 234B OF THE ACT. GROUND NO.5 5.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. ASSESSING OFFICER ERRED IN LEVYI NG INTEREST U/S 234D OF THE ACT. ITA NO.105/ D EL/2012 (ASSESSEE S APPEAL) GROUND 1. 1 . 1 . ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD. DISPUTE RESOLUTION PANEL (DRP)/ ADIT, INTERNATIONAL TAXATION, DEHRADUN (ASSESSING OFFICER) ERRED IN HOLD ING THAT THE CONSORTIUM OF APPELLANT AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) CONSTITUTES AN ASSOCIATION OF PERSON (AOP) UNDER THE PROVISIONS OF THE ACT. 1 . 2 . ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE CASE, THE LD. DRP/ ASSESSING OFFICER ERRED IN ASSES SING THE APPELLANT ON A PROTECTIVE BASIS. 1 . 3 . IN VIEW OF GROUNDS AT 1.1 AND 1.2 ABOVE, THE APPELLANT PRAYS THAT IMPUGNED ORDER PASSED U/S 143(3) R.W.S.144C(13) OF THE ACT BE QUASHED SINCE IT IS BAD IN LAW AND VOID AB INITIO TO THE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 6 EXTENT OF ASSESSMENT MADE IN THE HANDS OF THE APPELLANT ON PROTECTIVE BASIS. GROUND 2 2.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD.DRP ERRED IN NOT ISSUING ANY DIRECTIONS TO AO U/S 144C OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE RESIDENTIAL STATUS OF AO P. 2.2. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE PRESENT CASE, THE LD.DRP E RRED IN HOLDING THAT THE CONSORTIUM OF APPELLANT AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) CONSTITUTES A RESIDENT ASSOCIATION OF PERSON (AOP) WITHIN THE MEANING OF SECTION 6(4) OF THE ACT. GROUND 3 3.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE CASE, THE LD. DRP/ ASSESSING OFFICER ERRED IN INCLUDING THE AMOUNTS RECEIVED ON ACCOUNT OF REIMBURSEMENTS OF FUEL CHARGES AND MATERIAL RECHARGE AGGREGATING TO RS.524,625,069, WHILE COMPUTING THE TAXABLE INCOME OF APPELLANT ON PROTECTIVE BASED UNDER THE PROVISIONS OF SECTION 44BB OF THE ACT. GROUND NO.4 4.1. ON THE FACTS, IN LAW AND IN CIRCUMSTANCES OF THE CASE, THE LD. ASSESSING OFFICER ERRED IN LEVYING INTEREST U/S 234D OF T HE ACT. ITA NO.3044/ D EL/2013 (REVENUE S APPEAL) 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT ( A) HAS ERRED IN IGNORING THE SPECIFIC FINDING OF THE AO THAT THERE WAS A CONSORTIUM CONTRACT WITH TRANSOCEAN OFFSHORE DEEPWATER DRILLING ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 7 ( TODDI) AN D SCHLUMBERGER ASIA SERVICES LTD ( SASL) AS CONSORTIUM MEMBERS AND ONGC AS THE SECOND PARTY, FORMED AN AOP. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT ( A ) HAS ERRED IN IGNORING THE FACTS THAT THE INCOME OF THE CONSORTIUM WAS EARNED AND LI ABLE TO TAX IN THE CAPACITY OF AOP. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT ( A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO BE ASSESSED AS AOP IN RESPECT OF ITS CONTRACTUAL RECEIPTS FROM ONGC FOR PROVISION OF DEEPWATER D RILLING RIGS ALONG WITH INTEGRATED SERVICES. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT ( A) HAS ERRED IN REVERSING THE FINDING OF THE AO THAT THE ASSESSEE WAS AN AOP WHICH WAS FORMED WITH THE OBJECT OF ASSOCIATING FOR THE COMMON PURPOSE OF DRIVING PROFITS AND GAINS FROM THE EXECUTION OF CONTRACT AWARDED BY ONGC ON THE BASIS OF THE CONSORTIUM AGREEMENT DATED 28.05.2003 BETWEEN THE PARTIES FOR COMMON PURPOSE COMMON ACTION AND JOINT AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN IGNORING THAT TERMINATION IN RESPECT OF INDI V IDUAL MEMBER AS PER CLAUSE 2.7 WOULD BE TERMINATION OF CONTRACT. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E THE CIT (A) HAS ERRED IN HOLDING THAT THERE WAS NO SHARING OF PROFIT AND LOSS, WHICH E S TABLISHED THE MOST VITAL INGREDIENT FOR EXISTENCE OF AOP AS LAID DOWN BY APEX COURT IN 39 ITR 546(SC). ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 8 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN HOLDING THAT THERE WAS NO AOP WHEN BID WAS SUBMITTED AS AN AOP, CONTRACT WAS AWARDED TO AOP (REFER PARA 4.3 OF CONSORTIUM CONTRACT) AND RISKS AND COST W ERE AL SO CAST ON AOP AND A CONSORTIUM LEADER(REFER ARTICLE 5) TO ENSURE SMOOTH EXECUTION OF THE PROJECT. 8. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN IGNORING THAT NONE OF THE PARTNERS OF THE JV INDIVIDUALLY ELIGIBLE AND COMPETENT FOR EXECUTING THE PROJECT ON THEIR OWN AND BID WAS SUBMITTED BY THEM AS AN AOP FOR EXECUTION OF A SINGLE CONTRACT BASED ON CONSORTIUM AGREEMENT DATED 28.05.2003 AND AWARDED ON THAT BASIS AND ANY SUBSEQUENT AGREEMENT BETWEEN THE PARTNERS COULD NOT OVERRIDE THE SAID MOU ON WHICH BASIS THE CONTRACT HAD BEEN AWARDED. 9. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN REVERSING THE FINDING OF THE AO THAT THE ASSESSEE WAS AN AOP WHICH WAS FOUND WITH THE OBJECT OF ASSOCIATED FOR THE COMMON PURPOSE OF DERIVING PROFITS AND GAIN FROM THE EXECUTION OF CONTRACT AWA RDED BY ONGC ON THE BASIS OF CONSORTIUM AGREEMENT DATED 28.05.2003 FOR COMMON PURPOSE ACTION AND JOINTS AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. 10. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN N OT RELYING ON THE RULING OF AAR IN THE CASE OF LINDE AG WHICH ARE SIMILAR TO THE FACTS OF THE CASE. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 9 11. WHETHER THE LD.CIT (A) H AS ERRED IN ADMITTING THE ADDITIONAL GROUND ON THE INTEREST ON THE INCOME TAX REFUND AND ALSO HOLDIN G THAT THE REFUND IS NOT C ONNECTED WITH THE PE. 12. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN RELYING UPON THE DECISION OF THE CLOUGH ENGINEERING IGNORING THE FACTS THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 13. WHETHER ON TH E FACTS AND CIRCUMSTANCES OF THE CASE THE CIT (A) HAS ERRED IN REVE RS ING THE FINDING OF THE AO THAT THE ASSESSEE WAS AN AOP. 14. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT ( A) HAS ERRED IN HOL DING THAT INTEREST U/S 234 - B WAS NOT CHARGEABL E IN THIS CASE BY RELYING UPON THE DECI S ION OF HON'BLE UTTRAKHAND HIGH COURT IN THE CASE OF MAERSK ( 334 ITR 7 9) WHERE AS TH E DEPARTMENT HAS CONTESTED THE ISSUE AND HAS FILED SLP BEFORE THE APEX COURT AGAINST IN THE CAS E OF JACOBS CIVIL INCORPORATED MITSUB ISHI INVOLVING SIMILAR ISSUE. 15. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OF BEFORE THE HEARING OF THE APPEAL. ITA NO. 4655/ D EL/2013 (ASSESSMENT YEAR 2007 - 08) WITH CO NO.60/ D EL/2014 & CO NO. 66/ D EL /2014 ITA NO. 4655/ D EL/2013 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE SPECIFIC FINDING OF THE A.O THAT THE CONSORTIUM CONTRACT OF TRANSOCEAN OFFSHORE DEEPWATER DRILLING ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 10 (TODDI) AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) AS CONSORTIUM MEMBERS, AND ONGC AS THE SECOND PARTY, FORMED AN ASSOCIATION OF PERSONS (AOP). 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACTS THAT THE INCOME OF THE CONS ORTIUM WAS EARNED AND LIABLE TO BE TAXED IN THE CAPACITY OF ASSOCIATION OF PERSONS. THE LD. CIT(A) HAS ERRED IN SIMPLY FOLLOWING HIS OWN DECISION IN THE APPELLATE ORDER FOR A. Y. 2009 - 10 IN THE CASE OF M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. AND CO MPLETELY IGNORING THE RELEVANT FACTS AND SPECIFIC FINDINGS RECORDED IN THE ASSESSMENT ORDER OF THE PRESENT CASE THAT THE INCOME WAS EARNED AND LIABLE TO THE TAXED IN THE CAPACITY AS ASSOCIATION OF PERSONS. 3.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO BE ASSESSED AS AOP IN RESPECT OF ITS CONTRACTUAL RECEIPTS FROM ONGC FOR PROVISION OF DEEPWATER DRILLING RIGS ALONG WITH INTEGRATED SERV I CES. 4.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESERVING THE FINDING OF THE AO THAT THE ASSESSEE WAS AN AOP WHICH WAS FORMED WITH THE OBJECT OF ASSOCIATING FOR THE COMMON PURPOSE OF DERIVING PROFITS AND GAINS FROM THE EXECUTION OF CONTRACT AWAR DED BY ONGC ON THE BASIS OF CONSORTIUM AGREEMENT DATED 28/05/2003 BETWEEN TODDI AND SASL FOR COMMON PURPOSE, COMMON ACTION AND JOINT AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 11 5.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THAT TERMINATION IN RESPECT OF INDIVIDUAL MEMBER AS PER CLAUSE 2.7 OF THE CONSORTIUM AGREEMENT WOULD BE TERMINATION OF CONTRACT. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO SHARING OF PROFIT AND LOSS, WHICH ESTABLISHED THE MOST VITAL INGREDIENT FOR EXISTENCE OF AOP AS LAID DOWN BY APEX COURT IN 39 ITR 546(SC). 7.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO AOP WHEN BID WAS SUBMITTED AS ON AOP, CONTRACT WAS AWARDED TO AOP (REFER PARA 4.3 OF CONSORTIUM CONTRACT) AND RISKS AND COSTS WERE ALSO CAST ON AOP AND A CONSORTIUM LEADER (REFER ARTICLE 5) TO ENSURE SMOOTH EXECUTION OF T HE PROJECT. 8.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THAT NONE OF THE PARTNERS OF THE JV WERE INDIVIDUALLY ELIGIBLE AND COMPETENT FOR EXECUTION OF THE PROJECT ON THEIR OWN AND BID WAS SUBMITTED BY T HEM AS AN AOP FOR EXECUTION OF A SINGLE CONTRACT BASED ON CONSORTIUM AGREEMENT DATED 28.5.2003 AND AWARDED ON THAT BASIS AND ANY SUBSEQUENT AGREEMENT BETWEEN THE PARTNERS COULD NOT OVERRIDE THE SAID MOU ON WHICH BASIS THE CONTRACT HAD BEEN AWARDED. 9.WHE THER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESERVING THE FINDING OF THE AO THAT ASSESSEE WAS AN AOP WHICH WAS FORMED WITH THE OBJECT OF ASSOCIATING FOR THE COMMON ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 12 PURPOSE OF DERIVING PROFITS AND GAINS FROM THE EXECUTION OF CONTRACT AWARDED BY ONGC ON THE BASIS OF CONSORTIUM AGREEMENT DATED 28/05/2003 FOR COMMON PURPOSE, COMMON ACTION AND JOINT AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. 10.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN HOLDING THAT THE RATIO OF THE RULING OF AAR IN THE CASE OF LINDE AG (AAR NO. 962 OF2010) IS NOT APPLICABLE TO THIS CASE WHEN THE FACTS OF THE CASE ARE SIMILAR TO THOSE IN THE CASE OF LINDE AG. 11. THE APPELLANT PRAYS FOR LEAVE TO ADD , AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. CO NO.60/ D EL/2014 & CO NO. 66/ D EL/2014 1. THAT THE LD. COMMISSIONER OF INCOME - TAX, APPEALS - II, DEHRADUN [CIT(A)] ERRED IN LAW IN NOT ADJUDICATING UPON THE GROUND RAISED BY THE RESPONDENT CHALLENGING THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 READ WITH SECTION 148 OF THE INCOME TAX ACT ('THE ACT'). 2. THAT INTER - ALIA ON FACTS AND IN LAW, THE CIT(A) ERRED IN NOT ADJUDICATION UPO N GROUNDS OF APPEAL NOS. 1,2,3,4.7 AND 5 RAISED BEFORE HIM. 3. WITHOUT PREJUDICE AND IN THE ALTERNATE, IF THE APPELLANT IS HELD TO BE CORRECT IN HOLDING THE RESPONDENT TO BE AN ASSOCIATION OF PERSONS (AOP), THE SAID AOP SHOULD BE SUBJECT TO TAX IN INDIA I N TERMS OF SECTION 44BB OF THE ACT. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 13 THE ASSESSEE BEGS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY OF THE ABOVE CROSS OBJECTIONS AT THE TIME OF, OR BEFORE THE HEARING OF THE CROSS OBJECTIONS AND/OR APPEAL. ITA NO. 4656/ D EL/2013 (ASSESSMENT YEAR 2008 - 09) WITH CO NO.61/ D EL/2014 & CO NO. 67/ D EL/2014 ITA NO. 465 6 / D EL/2013 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE SPECIFIC FINDING OF THE A.O THAT THE CONSORTIUM CONTRACT OF TRANSOCEAN OFFSHORE DEEP WATER DRILLING (TODDI) AND SCHLUMBERGER ASIA SERVICES LTD. (SASL) AS CONSORTIUM MEMBERS, AND ONGC AS THE SECOND PARTY, FORMED AN ASSOCIATION OF PERSONS (AOP). 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORI NG THE FACTS THAT THE INCOME OF THE CONSORTIUM WAS EARNED AND LIABLE TO BE TAXED IN THE CAPACITY OF ASSOCIATION OF PERSONS. THE LD. CIT(A) HAS ERRED IN SIMPLY FOLLOWING HIS OWN DECISION IN THE APPELLATE ORDER FOR A. Y. 2009 - 10 IN THE CASE OF M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. AND COMPLETELY IGNORING THE RELEVANT FACTS AND SPECIFIC FINDINGS RECORDED IN THE ASSESSMENT ORDER OF THE PRESENT CASE THAT THE INCOME WAS EARNED AND LIABLE TO THE TAXED IN THE CAPACITY AS ASSOCIATION OF PERSONS. 3.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO BE ASSESSED AS AOP IN RESPECT OF ITS CONTRACTUAL RECEIPTS FROM ONGC FOR PROVISION OF DEEPWATER DRILLING RIGS ALONG WITH INTEGRATED S ERV I CES. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 14 4.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESERVING THE FINDING OF THE AO THAT THE ASSESSEE WAS AN AOP WHICH WAS FORMED WITH THE OBJECT OF ASSOCIATING FOR THE COMMON PURPOSE OF DERIVING PROFITS AND G AINS FROM THE EXECUTION OF CONTRACT AWARDED BY ONGC ON THE BASIS OF CONSORTIUM AGREEMENT DATED 28/05/2003 BETWEEN TODDI AND SASL FOR COMMON PURPOSE, COMMON ACTION AND JOINT AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. 5.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THAT TERMINATION IN RESPECT OF INDIVIDUAL MEMBER AS PER CLAUSE 2.7 OF THE CONSORTIUM AGREEMENT WOULD BE TERMINATION OF CONTRACT. 6. WHETHER ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO SHARING OF PROFIT AND LOSS, WHICH ESTABLISHED THE MOST VITAL INGREDIENT FOR EXISTENCE OF AOP AS LAID DOWN BY APEX COURT IN 39 ITR 546(SC). 7.WHETHER ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO AOP WHEN BID WAS SUBMITTED AS ON AOP, CONTRACT WAS AWARDED TO AOP (REFER PARA 4.3 OF CONSORTIUM CONTRACT) AND RISKS AND COSTS WERE ALSO CAST ON AOP AND A CONSORTIUM LEADER (REFER AR TICLE 5) TO ENSURE SMOOTH EXECUTION OF THE PROJECT. 8.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THAT NONE OF THE PARTNERS OF THE JV WERE INDIVIDUALLY ELIGIBLE AND COMPETENT FOR EXECUTION OF THE PROJECT ON ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 15 THEIR OWN AND BID WAS SUBMITTED BY THEM AS AN AOP FOR EXECUTION OF A SINGLE CONTRACT BASED ON CONSORTIUM AGREEMENT DATED 28.5.2003 AND AWARDED ON THAT BASIS AND ANY SUBSEQUENT AGREEMENT BETWEEN THE PARTNERS COULD NOT OVERRIDE THE SAID MOU ON WHICH BAS IS THE CONTRACT HAD BEEN AWARDED. 9.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESERVING THE FINDING OF THE AO THAT ASSESSEE WAS AN AOP WHICH WAS FORMED WITH THE OBJECT OF ASSOCIATING FOR THE COMMON PURPOSE OF DERIVING PROFITS AND GAINS FROM THE EXECUTION OF CONTRACT AWARDED BY ONGC ON THE BASIS OF CONSORTIUM AGREEMENT DATED 28/05/2003 FOR COMMON PURPOSE, COMMON ACTION AND JOINT AND SEVERAL RESPONSIBILITY FOR SUCCESSFUL COMPLETION OF THE CONTRACT. 10.WHETHER ON THE FAC TS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE RATIO OF THE RULING OF AAR IN THE CASE OF LINDE AG (AAR NO. 962 OF2010) IS NOT APPLICABLE TO THIS CASE WHEN THE FACTS OF THE CASE ARE SIMILAR TO THOSE IN THE CASE OF LINDE AG. 11. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. CO NO.61/DEL/2014 & CO NO. 67/DEL/2014 1. THAT THE LD. COMMISSIONER OF INCOME - TAX, APPEALS - II, DEHRADUN [CIT(A)] ERRED IN LAW IN NOT ADJUDICATING UPON THE GROUND RAISED BY THE RESPONDENT CHALLENGING THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 READ WITH SECTION 148 OF THE INCOME TAX ACT ('THE ACT'). ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 16 2. THAT INTER - ALIA ON FACTS AND IN LAW, THE CIT(A) ERRED IN NOT ADJUDICATION UPON GROUNDS OF APPEAL NOS. 1,2,3, AND 5 RAISED BEFORE HIM. 3. WITHOUT PREJUDICE AND IN THE ALTERNATE, IF THE APPELLANT IS HELD TO BE CORRECT IN HOLDING THE RESPONDENT TO BE AN ASSOCIATION OF PERSONS (AOP), THE SAID AOP SH OULD BE SUBJECT TO TAX IN INDIA IN TERMS OF SECTION 44BB OF THE ACT. THE ASSESSEE BEGS FOR LEAVE TO ADD, AMEND, MODIFY OR ALTER ANY OF THE ABOVE CROSS OBJECTIONS AT THE TIME OF, OR BEFORE THE HEARING OF THE CROSS OBJECTIONS AND/OR APPEAL. 2 . BRIEF FACTS OF THE CASE ARE AS UNDER : TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD., NON - RESIDENT COMPANY ENGAGED IN THE BUSINESS OF PROVIDING OIL DRILLING RIG AND EQUIPMENT ON HIR E IN INDIA. TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD ALONG WITH SLUMBERGER ASIA SE RVICES LTD., FORMED A CONSORTIUM FOR THE PURPOSES OF SUBMITTING TENDER TO ONGC IN CONNECTION WITH THE PROVISIONS OF DEEPWATER DRILLING RIG ALONG WITH INTEGRATED SERVICES. THE CONSORTIUM EVENTUALLY ENTERED INTO A CONTRACT WITH ONGC UNDER WHICH TRANSOCEAN O FFSHORE DEEPWATER DRILLING PVT.LTD WAS TO PROVIDE OIL DRILLING RIG AND SOME INTEGRATED SERVICES AND SLUMBERGER ASIA SERVICES LTD., W AS TO PROVIDE CERTAIN MUD ENGINEERING SERVICES. TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD FOR THE ASSESSMENT YEARS UNDE R CON SIDERATION FILE D RETURN OF ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 17 INCOME OFFERING INCOME FROM CONTRACT WITH ONGC TO TAX UNDER SECTION 44 BB OF THE A CT. 2.1. THE CASE WAS SELECTED FOR SCRUTINY AND A DRAFT ORDER UNDER SECTION 144C WAS PASSED IN WHICH CERTAIN VARIATIONS WERE PROPOSED IN THE RETURN OF INCOME OF TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. WHICH ARE AS UNDER, BEING THE ISSUES FOR ADJUDICATION IN APPEALS FILED BY TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD .; LD. AO PROPOSED TO HOLD TRANSOCEAN OFFSHORE DEEPWATER DRILLING PV T.LTD AND S LUMBERS ASIA SERVICES LTD . AS AN ASSOCIATION OF PERSONS (AOP) ; LD. AO PROPOSED TO TAX THE INCOME DECLARED BY TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. LTD . ON PROTECTIVE ASSESSMENT IN THE HANDS OF TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. L TD., WHILE HOLDING THAT INCOME ACTUALLY ACCRUED TO THE AOP; AND LD. AO PROPOSED TO HOLD THE AOP TO BE HAVING A RESIDENT STATUS WITHIN THE MEANING OF SECTION 6 (4) OF THE A CT; THE LD. AO PROPOSED TO TAX THE REIMBURSEMENT OF FUEL CHARGES AND MATERIAL TO RECH ARGE UNDER PROVISIONS OF SECTION 44 BB OF THE AC T. 2.2. IN SO FAR AS THE APPEALS FILED BY R EVENUE, ARE AGAINST THE ALLEGED AOP OF SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD., WHEREIN LD.CIT(A) DECIDED THE ISSUE IN FA VOUR OF ASSESSEE, BY HOLDING THAT THE CONSORTIUM DOES NOT AMOUNT TO AOP. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 18 2.3. FURTHER THROUGH C ROSS O BJECTIONS FILED BY ALLEGED AOP OF SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHO RE DEEPWATER DRILLING PVT.LTD.( ASSESSEE ), CHALLENGES REOPENING OF A SSESSMENT AND ASSUMPTION OF JURISDICTION BY A SSESSING O FFICER TO BE BAD IN LAW AND AGAINST THE FINDING OF LD. AO THAT THE ASSOCIATION OF P ERSONS IS LIABLE TO BE TAXED IN INDIA. ITA NO. 5822/DEL/2010 (AY 2007 - 08) AND 105/DEL/2012 (AY 2008 - 09) 2.4. ALL THES E ISSUE REVOLVE S AROUND , WHETHER SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. C OULD BE CONSIDERED TO BE AN AOP. I T IS VERY MUCH NECESSARY TO DEAL WITH THE INTENTION OF THE PARTIES , AS EMERGES FROM CONSORTIUM A GREEMENT. ACCORDINGLY BOTH PARTIES TOOK US THROUGH VARIOUS C LAUSES OF AGREEMENTS , ENTERED INTO BY CONSORTIUM MEMBERS INDEPENDENTLY AS WELL AS BETWEEN THE CONSORTIUM MEMBERS AND ONGC. IT IS VERY MUCH NECESSARY TO ANALYSE THE AGREEMENTS IN ORDER TO ARRIVE AT A CONCL USION / FINDINGS REGARDING STATUS OF THE CONSORTIUM. 2.5. LD. C OUNSEL SUBMITTED THAT ONGC ISSUED INVITATION TO TENDER FOR PROVISION OF DEEPWATER DRILLING RIGS ALONG WITH INTEGRATED SERVICES. IT WAS SUBMITTED THAT TENDER ESSENTIALLY INVOLVED TWO DISTINCT SCOP E OF WORK BEING; CARRYING OUT OF DRILLING SERVICES BY PROVISION OF DRILLING RIG AND RELATED EQUIPMENT ALONG WITH CREW AND CERTAIN INTEGRATED SERVICES SUCH AS AIR AND MARINE LOGISTIC SERVICES; AND ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 19 PROVISION OF MUD LOGGING SERVICES, MUD ENGINEERING AND DRILL ING FLUID SERVICES. 2.6. ACCORDINGLY SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. ENTERED INTO CONSORTIUM A GREEMENT DATED 04/05/03 , DEFINING THEIR RIGHTS AND OBLIGATIONS INTER - SE , FOR EFFICIENT COORDINATION OF WORK UN DER CONTRACT WITH ONGC . LD. C OUNSEL REFERRED TO AGREEMENT PLACED IN PAPER BOOK AT PAGE S 1 - 23. 2.7. LET US ANALYSE THE RELEVANT C LAUSES OF THE CONSORTIUM AGREEMENT DATED 04/05/03. ARTICLE 1.1 OTHER DEFINITIONS AND INTERPRETATION OF TERMS IN THE AGREEMENT WHE RE (C) DEFINES THE TERM CONSORTIUM AS; (C) CONSORTIUM SHALL MEAN THE TEMPORARY COLLABORATION OF TRANSOCEAN AND SCHLUMBERGER FOR THE LIMITED PURPOSE OF PREPARING AND SUBMITTING A TENDER TO ONGC AND PERFORMING THE CONTRACT IN COORDINATED MANNER IN ACC ORDANCE WITH THE TRANSOCEAN S AND SCHLUMBERGER S SCOPE OF WORK, ALL IN ACCORDANCE WITH ITS TERMS AND THOSE OF THIS AGREEMENT T HEREAFTER ARTICLE 2.2 IS A RELATIONSHIP BETWEEN THE MEMBERS WHICH READS AS FOLLOWS: 2 . 1 . THE MEMBERS HEREBY ASSOCIATE THEMSELVES FOR T HE SOLE AND LIMITED PURPOSE OF : ( A ) PREPARING AND SUBMITTING THE TENDER; ( B ) PERFORMING THE CONTRACT IN A COORDINATED MANNER IN ACCORDANCE WITH EACH MEMBER S SCOPE OF WORK; AND ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 20 ( C ) DEFINING THEIR RIGHTS AND OBLIGATIONS IN CONNECTION WITH THE PERFORMANCE OF THE CO NTRACT AS MENTIONED THEREIN. 2 . 2 . NOTHING IN THIS AGREEMENT NOR THE CONTRACT IS INTENDED TO, NOR SHALL ANY OF ITS PROVISIONS BE CONSTRUED AS (A) CREATING A PARTNERSHIP OR JOINT VENTURE AMONG THE MEMBERS OR (B) CREATING OR REQUIRING ANY CONTINUING RELATIONSHIP O R COMMITMENT AMONG THEM. FOR THE AVOIDANCE OF DOUBT, IT IS HEREBY CLARIFIED THAT THE CONSORTIUM HAS BEEN FORMED BY THE MEMBERS HERETO FOR THE SOLE PURPOSE OF COORDINATING THE PERFORMANCE OF CONTRACT IN ACCORDANCE WITH EACH MEMBER S SCOPE OF WORK. THE MEM BERS OF THE CONSORTIUM HAVE ASSUMED JOINT AND SEVERAL LIABILITY VIS A VIS ONGC IN RESPECT OF PERFORMANCE OF CONTRACT, ONLY AS PER THE REQUIREMENT OF ONGC. IT IS EXPRESSLY AGREED BETWEEN THE MEMBERS THAT EACH MEMBER VIS A VIS THE OTHER MEMBER IS SOLELY LI ABLE FOR THE PERFORMANCE OF ITS SCOPE OF WORK IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT EACH MEMBER VIS A VIS THE OTHER MEMBER SHALL BE INDIVIDUALLY RESPONSIBLE FOR MAKING ALL NECESSARY INVESTMENTS/ARRANGEMENTS RELATING TO ITS SCOPE OF WORK. ANY PROFITS OR LOSSES ACCRUING TO A MEMBER FROM THE PERFORMANCE OF ITS SCOPE OF WORK SHALL BE ITS OWN AND SHALL NOT BE SHARED IN ANY MANNER WHATSOEVER WITH THE OTHER MEMBER. 2.3 ANY INDIVIDUALLY OWNED PROPERTY WHICH EITHER MEMBER MAY PROVIDE FOR USE I N CONNE CTION WITH THE PERFORMANCE OF ITS SCOPE OF WORK SHALL REMAIN THE SOLE PROPERTY OF SAID M EMBER AND SHALL NOT BE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 21 THE PROPERTY OF THE C O NSORT IUM, SUBJECT ALWAYS TO THE PROVISIONS OF ARTICLE 11.0. 2.4 UNLESS SPECIFICALLY PROVIDED OTHERWISE HEREIN , NO MEMBER NOR ITS REPRESENTATIVE SHALL BE DEEMED TO BE A REPRESENTATIVE, AGENT, OR EMPLOYEE OF THE OTHER MEMBER BY CONTRACT OR BY EMPLOYMENT OR FOR ANY PURPOSE W HATSOEVER . 2.5 NO MEMBER SHALL HAVE THE RIGHT TO BORROW MONEY ON B EHALF OR I N THE NAME OF THE CONSORT IUM OR O F THE OTHER M EMBERS , NOR SHALL EITHER MEMBER PLEDGE THE CREDIT OF THE CONSORTIUM OR THE OTHER MEMBER WITHOUT THE EXPRESS PRIOR WRITTEN CO N SENT OF SUCH OTHER MEMBER. 2.6. IT IS INTENDED THAT EACH MEMBER SHALL ENTER INTO THE CONTRACT (IF AWARDED) AND (A) BE I NDIVIDUALLY RESPONSIBLE FOR THE FULFILLMENT OF ITS CONTRACTUAL OBLIGAT IONS CONTAINED THEREIN AND IN TH I S AGREEMENT AND (B) HAVE THE BENEFITS OF ITS CONTRACTUAL RIGHTS CONTAINED THEREIN AND IN THIS AGREEMENT. 2.7. IF ONGC TERMINATES THE CONT RACT IN RESPECT OF AN INDIVIDUAL MEMBER (THE 'TERMINATED ME MBER '), THE AGREEMENT SHALL BE DEEMED TO HAVE SIMULTANEOUSLY TERM I NATED, PROVIDED THAT THE TERMINATED MEMBER SHALL BE BOUND BY THIS AGR E EMENT UNTIL SUCH TIME AS THE TERMINATED MEMBER HAS FULF ILLED ALL OF ITS OBLIGATIONS HEREUNDER WHICH WERE OUT STANDING AT THE TIME OF TERMINATION OF THE CONTRACT BY ONGC AS AFORESAID. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 22 ARTICLE 3.0 : SCOPE OF WORK CLAUSE 3.1: EACH MEMBER S SCOPE OF WORK AS SET OUT IN APPENDIX A (SCOPE OF WORK) SHALL BE PERFORMED BY SUCH MEMBER IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS MOU AND THE CONTRACT. 3.2. EACH MEMBER SHALL BE RESPONSIBLE FOR OBTAINING AND MAINTAINING ALL PERMITS, LICENCES AND OTHER AUTHORISATIONS REQUIRED FOR THE PERFORMANCE OF ITS PARTICULAR SCO PE OF WORK. ARTICLE 6 : PAYMENTS AND FINANCING 6.1. ALL PAYMENTS DUE TO ONGC SHALL BE MADE TO RESPECTIVE ACCOUNT OF EACH OF THE MEMBERS AND THAT RESOLUTIONS OF DISPUTES OVER INVOICES SHALL BE THE RESPONSIBILITY OF THE RELEVANT MEMBERS ONLY AND NOT OF THE C ONSORTIUM LEADER. 6.2. THE CONSORTIUM MEMBERS SHALL SUBMIT INVOICES TO ONGC IN UNITED STATES DOLLARS IN EACH MONTH FOLLOWING THE MONTH IN WHICH THE MEMBERS PERFORM THE WORK IN ACCORDANCE WITH THE CONTRACT. SCHLUMBERGER SHALL PROVIDE ITS INVOICES TO ONGC SIMULTANEOUSLY WITH TRANSOCEAN S INVOICES. ALL INVOICES SHALL CONTAIN SUFFICIENT DETAILS AS REQUIRED BY ONGC TO SUPPORT ALL CHARGES AND, IF APPLICABLE, THIRD PARTY INVOICES. 6.3. EACH MEMBER SHALL PROVIDE ITS OWN WORKING CAPITAL AND FINANCING FOR ITS OW N SCOPE OF WORK, EXCEPT IF AND TO EXTENT PROVIDED BY ONGC. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 23 ARTICLE 7 .0 : TAXES 7.1 EA CH MEMBER SHALL BEAR RESPONSIBILITY FOR ITS OWN TAXES AS MEASURED BY ITS REVENUES, NET INCOME, OR FINANCIAL RESULTS , WHICH ARE I MPOSED BY ANY COUNTRY HAVING JURISDIC TION OVER ITS SCOPE OF WORK AND SHALL INDEMNIFY, SAVE, AND HOLD EACH OF THE OTHER MEMBERS HARMLESS FROM ANY EXPENSE, CLAIM , LIABILITY, OR OBLIGATION WITH RESPECT TO SUCH CHARGES. 7.2 IF GOVERNMENT ASSESSMENTS AR E I MPOSED ON THE TOTAL VALUE OF THE CONT RACT, OR NET FI NANCIAL RESULTS ACHIEVED UNDER THE CONTRACT, INCLU DING THE COMBINED ACTIVITIES OF THE CONSORTIUM, EACH MEMBER AGREES TO BEAR RESPONSIBILITY FOR THE PORTION OF THE ASSESSMENT WHICH IS DIRECTLY ATTRIBUTABLE TO ITS SCOPE OF WORK AND SH ALL INDE MNIFY, SAVE, AND HOLD EACH OF THE OTTER MEMBERS HARMLESS FROM ANY EXPENSE, CLAIM, LIABILITY, OR OBLIGATION WITH RESPECT THERETO . 7.3. EACH MEMBER SHALL BEAR RESPONSIBILITY FOR TAXES AND OTHER DUTIES RELATING TO ITS EMPLOYEES AND SUBCONTRACTORS, AND SHALL INDEMNIFY , SAVE, AND HOLD THE OTHER MEMBERS HARMLESS FROM ANY EXPENSE, CLAIM , LIABILITY, OR OBLIGATION WITH RESPECT THERETO. ARTICLE 9 : DEALS WITH L IABILITIES, I NDEMNIFICATION AND R ESPONSIBILITIES 9.1. MEMBERS RESPONSIBILITIES EACH MEMBER SHALL BE SOLELY RESPONSIBLE FOR THE PERFORMANCE OF ITS SCOPE OF WORK AND ANY AND ALL LIABILITIES THAT MAY ARISE IN CONNECTION THEREWITH UNLESS SPECIFICALLY PROVIDED OTHERWISE HEREIN. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 24 THE ABOVE NOTWITHSTANDING, THE MEMBERS AGREE HOWEVER THAT IN THE EVENT OF ANY I NVOCATION BY ONGC OF CLAUSES 1.4 (LIQUIDATED DAMAGES), 3.5. (HULL INSPECTION), 3.11. (PERFORMANCE BOND) OR 6.5. (LIABILITY FOR THE WELL), EACH MEMBER EXPRESSLY AGREES AND ACCEPTS TO BE RESPONSIBLE TO ONGC IN PROPORTION TO THEIR RESPECTIVE SHARE OF EFFECTI VE DAY RATE IN THE CONTRACT REGARDLESS OF WHOSE FAULT, LIABILITY OR BREACH OF ANY MEMBER THAT CAUSED OR RESULTED IN SUCH INVOCATION BY ONGC. IN NO EVENT SHALL ANY MEMBER, ITS AGENTS, SUB CONTRACTORS OR ITS SUPPLIERS BE LIABLE TO THE OTHER, WHETHER ARISING UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE FOR ANY LOSS OR DAMAGE OF ANY NATURE ARISING AT ANY TIME OR FROM ANY CAUSE WHATSOEVER AS A RESULT OF INVOCATION OF THE ABOVE CLAUSES BY ONGC. 9.2 CLAIMS OF ONGC OR THIRD PARTIES I T IS A REQUIREMENT BY ONGC THAT BOTH MEMBERS ARE JOINTLY AND SEVERALLY RESPONSIBLE FOR DISCHARGING ALL THE OBLI GAT IONS UNDER THE CONTRACT AND THE M EMBERS HEREBY ACKNOWLEDGE SUCH A RE QUIRE MENT. NOTWITHS T AND I NG T H E A FO RESA I D OR ANYTHING CONTAINED IN T HE AGREEMENT OR THE CONTRACT TO THE CON TRARY BUT EXCEPT AS OTHERWISE PROVIDED I I CL AUS E 9.1 ABOVE , EACH MEMBER SHALL BE I NDEMNIFIED, HELD HARMLESS AND DEFENDED BY THE OTHER MEMBER AGA INST ANY CLAIM RA I SED BY ONGC OR ANY THIRD PARTY AGAINST IT IN CONNEC TIO N WI TH THE PERFORMANCE OF THE CONTRACT AND RESULTING FROM AN ACT I ON OR INACTION REASONABLY ATTRIBUTABLE TO THE OTHER MEMBER (THE 'RESPONSIBLE MEMBER'), PROV I DE D THAT NO ADMISSION OF GUILT OR CULPABILITY SHALL BE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 25 MADE OR PREJUDICIAL ACTION TAKEN WITHOUT THE PRIOR WRITTEN CONSENT OF THE RESPONS I BLE MEMBER. ANY AMOUNT RESULTING FROM A JUDGMENT, AWARD , PENALTY OR OTHERWISE THAT IS ASSESSED AGAINST A MEMBER AS A RESULT OF AN ACTION OR INACTION THAT MAY BE REA SO NABLY ATTRIBUTED TO THE RESPONS IBLE MEMBER IN ADVANCE OF ANY DUE DATE. NOTHING CONTAINED HEREIN SHALL PREVENT THE R ESPON SIBLE MEMBER TO INITIATE PROCEEDINGS FOR SETTLEMENT OF ANY DISPUTE OR DIFFERENCE IN RESPECT OF ANY CLAIMS MADE BY ONGC OR A NY THIRD PARTY AS AFORESAID. ACCORDINGLY, THE MEMBER H ELD LIABLE SHALL EXTEND ALL POSSIBLE COOPERATION TO THE RESPONSIBLE MEMBER IN RESPECT OF THE SETTLEMENT OF SUCH DISPUTE OR DIFFERENCE AND SHALL WITHHOLD PAYMENT TOWARDS THE CLAIM PENDING SETTLEMENT OF DISPUTE, UNLESS REQUIRED UNDER APPLICABLE LAWS OR REGUL ATIONS. 9.3 L IABILITY FOR CLAIMS AMONG THE MEMBERS EXCEPT TO THE EXTENT OF ANY REIMBURSEMENTS PROVIDED DIRECTLY BY ONGC IN THE CONTRACT , EACH MEMBER (THE ' I NDE MNITOR ) SHALL BE RESPONSIBLE FOR AND SHALL DEFEND, IN D EMNIFY AND HOLD HARMLESS THE OTHER MEMBER AND ITS RESPECTIVE MEMBER GROUP FROM AND AGAINST: ( A ) ALL CLAIMS IN RESPECT OF LOSS OF OR DAMAGE TO THE PROPERTY OF THE INDEMNITOR AND ITS MEMBER GROUP; AND ( B ) ALL CLAIMS IN RESPECT OF INJURY (INCLUDING FATAL INJURY AND DISEASE) TO THE PERSONNEL OF TH E INDEMNITOR AND ITS MEMBER GROUP HOWSOEVER CAUSED (INCLUDING, WITHOUT LIMITATION, LOSS, DAMAGE OR INJURY CAUSED BY THE NEGLIGENCE OR BREACH OF DUTY OF ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 26 THE OTHER MEMBER AND ITS MEMBER GROUP) AND ARISING OUT OF OR I N CO NNECTION WITH THE PER F ORMANCE OF THE CONTRACT. 9.4 POLLUTION EACH MEMBER SHALL BE RESPONSIBLE FOR AND SHALL DEFEND, INDEM NI FY AND HOLD THE OTHER HARMLESS FROM AND AGAINST CONTROL AND REMOVAL OF POLLUTION OR CONTAMINATION WHICH ORIGINATES ABOVE THE SURFACE OF THE WATER FROM SPILLS OF FUELS , LUBRICANTS, MOTOR, OILS, NORMAL WATER BASE DRILLING FLUID AND ATTENDANT CUTTINGS, PIPE, DOPE, PAINTS, SO L VENTS, BALLAST, BILGE AND GARBAGE WHOLLY IN SUCH MEMBER'S POSSESSION AND CONTROL AND DIRECTLY ASSOCIATED WITH ITS EQUIPMENT AND FACILITIES . FOR PURPO SES HEREOF THE TERMS - NORMAL WATER BASE DRILLING FLUID' MEANS DRILLING FLUID WHICH DOES NOT EXCEED TOXICITY LIMITS SPECIFIED F O R OFFSHORE DISCHARGES BY THE ENVIRONMENTAL PROTECTION ENTITY HAVING JURISDICTION OVER THE OPERATING AREA. 9.5 CONSEQUENTIAL LO SSES IN NO EVENT SHALL ANY MEMBER, ITS AGENTS, SUBCONTRACTORS OR ITS SUPPLIERS BE LIABLE TO THE OTHER, WHETHER AR I S I NG UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY NATUR E ARISING AT ANY TIME OR FROM ANY CAUSE W H ATSOEVER I NCLUDING BUT NOT LIMITED TO LOSS OF PROFITS OR ANTICIPATED PROFITS, LOSS OF REVENUE, LO SS OF PRODUCTION OR LOSS OF BUSI NESS I NTERRUPTION, IT BEING UNDERSTOOD HOWEVER THAT IN NO EVENT SHALL A NY CLA IMS ENFORCED BY ONGC OR A THIRD P A RTY AGAINST A MEMBER BE CONS I DERED AS A SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGE UNDER THIS AGREEMENT. ALL D ISPUTES, ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 27 IF ANY, I N THIS REGARD SHALL BE RAISED AND SETTLE D BY THE CONCE RNED MEMBER DIREC TLY WITH ONGC. 9.6 MITIGATION OF DAMAGES EACH MEMBER WILL BE UNDER THE OB LIGATION TO MITIGATE ITS DAMAGES IN THE EVENT OF THE OTHER MEMBER'S DEFAULT UNDER THIS AGREEMENT OR THE CONTRACT. 9.7 RESPONSIBILITIES OF THE MEM B ERS FOR PERFORMANCE TRANSOCE AN IN ITS ROLE AS CONS ORTIUM LEADER WILL ENDEAVOUR TO ENSURE THAT THE PROJECT IS PERFORMED WITH DUE CARE IN A PROPER AND PROFESS I ONAL MANNER. HOWEVER, TRANSOCEAN DOES NOT WARRANT THE ACCURACY, CORRECTNESS OR COMPLETENESS OF ANY SERVICES PERFORMED WITHIN THE PROJECT BY OTHER MEMBERS, AND ALL WARRANT I ES OR GUARANTEES, WHETHER EXPRESS OR IMPLIED, IN RELATION TO SUCH SERVICES ARE EXPRESSLY EXCLUDED. EACH MEMBER ASSUMES FULL RESPONSIBILITY FOR ALL SERVICES PROVIDED BY IT TO ONGC UNDER THE CONTRACT. 9.8 RESP ON SIBILITY MATRIX EAC H PARTY (TRANSOCEAN MEMBER GROUP AND SCHLUMBERGER MEMBER GROUP) SHALL FOLLOW THE RESPONSIBILITY MATRIX AS ATTACHED HEREIN (APPENDIX C). THIS MATRIX SHALL GUIDE THE SAID PARTIES IN THEIR RESPECTIVE RESPONSIBILITIES FOR THE PERFORMANCE OF EA CH PARTY'S SCOPE OF WORK AS PER CLAUSE AND THE CONTRACT ENTERED BETWEEN ONGC AND THE CONSORTIUM MEMBERS. THIS MATRIX SHALL ALSO APPLY IN ASCERTAINING THE ASSUMPTION AND APP LICABILITY OF LIABILITIES THAT MAY ARISE IN CONNECT I ON WITH THE PERFORMANCE OF EACH PARTY'S SCOPE OF ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 28 WORK AS PER CLAUSE AND THE C O NTRACT ENTERED BETWEEN ONGC AND THE CONSORTIUM MEMBERS. ARTICLE 11.0 : MATERIAL BREACH AND INSOLVENCY 11.1 MATERIAL BREACH/DEFAULT IF ANY MEMBER ( DEFAULTING MEMBER ) IS IN MATERIAL BREACH O F DE F AUL T UNDER THIS AGREEMENT AND SUCH MATERIAL BREACH OR DEFAULT IS NOT CURED OR REASONABLE ACTION TO CURE HAS NOT BEEN INITIATED WITHIN FIFTEEN (15) DAYS AFTER WRITTEN NOTICE THEREOF, THE OTHER MEMBERS SHALL HAVE THE RIGHT TO TAKE OVER AND COMPLETE THE DEFAULT ING MEMBER S SCOPE OF WORK. 11.2. INSOLVENCY ETC. IF ANY MEMBER (INSOLVENT MEMBER) BECOMES INSOLVENT OR BANKRUPT OR GOES INTO LIQUIDATION, WHETHER VOLUNTARY OR OTHERWISE, OR IF A RECEIVER OR ADMINISTRATOR IS APPOINTED IN RESPECT OF ITS BUSINESS AFFAIRS OR IF A WINDING UP ORDER IS MADE AGAINST IT, THEN AND IN ANY SUCH EVENT THE FOLLOWING SHALL TAKE EFFECT, SUBJECT TO APPLICABLE LAW: ( A ) THE OTHER MEMBER SHALL HAVE THE RIGHT TO T AKE OVER AND COMPLETE THE INSOLVENT MEMBER S SCOPE OF WORK AND IN DOING SO, THE OT HER MEMBER SHALL BE ENTITLED TO ALL OF THE INSOLVENT MEMBER S ACCOUNTS RECEIVABLE AND PAYMENTS FROM ONGC AND OTHER THIRD PARTIES IN CONNECTION WITH THE PROJECT RELATING ONLY TO THE SCOPE OF WORK TAKEN OVER, THE INSOLVENT MEMBER SHALL PROMPTLY UPON THE FIR ST REQUEST BY THE OTHER MEMBER TAKE WHATEVER ACTIONS OR MEASURES AS MAY ENABLE THE OTHER MEMBER TO RECEIVE SUCH ACCOUNTS RECEIVABLE AND OTHER PAYMENTS. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 29 ( B ) THE OTHER MEMBER SHALL HAVE THE EXCLUSIVE USE AND POSSESSION AND A PREFERRED LIEN ON ALL OF THE INSOLVE NT MEMBER S EQUIPMENT (INCLUDING MANUFACTURING FACILITIES), TEMPORARY WORKS, MATERIALS AND ALL OTHER THINGS USED OR SUPPLIED BY MEMBER OR THE PERSON PUT IN CHARGE OF THE PROPERTY OF SUCH INSOLVENT MEMBER, WILL PROMPTLY U PON THE FIRST REQUEST BY THE OTHER MEMBER TA KE WHATEVER ACTIONS OR MEASURES AS MAY BE REQUIRED TO ESTABLISH THIS PREFERRED, LIE N . SUC H PREFERRED LIEN SH ALL BE IN THE FORM OF A FIDUCIARY TRA NSFER OF OWNERSHIP OF THE S AID EQ UIP MENT, TEMPORARY WORKS, MATERIALS AND OTHER THINGS TO AND I N FAVOR OF THE OTHER MEMBER OR SUCH OTHER FORM OF PREFERRED LIEN AS THE OTHER MEMBER IN THEIR DISCRETION MAY DETERMINE. (C) THE I NSOLVENT MEMBER SHALL BE FULLY RESPONSIBLE FOR AND SHALL REMAIN LIABLE FOR AL L ADDITIONAL COSTS INCURRED IN THE COMPLETION OF IT S SCOPE OF WORK. (D) ANY SUCH EVENT OR ACTION AS MENTIONED IN THIS ARTICLE 11.2 SHALL NOT DIMINISH OR AFFECT ANY LIABILITY OF THE INSOLVENT MEMBER PURSUANT TO ARTICLES 7.0 OR 9.0. ARTICLE 10 - PERFORMANCE BOND/BANK GUARANTEE 10.1. IF ONGC REQUIRES TRAS NOCEAN TO PROVIDE A PERFORMANCE BOND OR BANK GUARANTEE TO COVER PERFORMANCE OF MORE SERVICES THAN THOSE FOR WHICH TRANSOCEAN IS RESPONSIBLE FOR PROVIDING UNDER THE CONTRACT, THOSE MEMBERS WHOSE SERVICES ARE COVERED BY SUCH BOND OR GUARANTEE SHALL PAY TRANS OCEAN IN ADVANCE A SHARE OF THE PRICE PAID BY TRANSOCEAN FOR THE BOND OR GUARANTEE IN THE PROPORTION WHICH THE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 30 ESTIMATED VALUE OF SERVICES TO BE PROVIDED BY THAT MEMBER BEARS TO THE ESTIMATED TOTAL VALUE OF THE SERVICES THE PERFORMANCE OF WHICH IS COVERED BY SUCH PERFORMANCE BOND OR BANK GUARANTEE. FURTHER, AS STATED IN CLAUSE 10.2 BELOW, SUCH MEMBER SHALL ALSO GIVE TO TRANSOCEAN SIMILAR PERFORMANCE BOND OR BANK GUARANTEE AS THE CASE MAY BE FOR THE PROPORTIONATE AMOUNT CORRESPONDING TO ITS SCOPE OF WORK U NDER THE CONTRACT. 10.2. PERFORMANCE BOND IF A MEMBER IS SO REQUIRED BY TRANSOCEAN, IT SHALL PROVIDE TRANSOCEAN, AT TRANSOCEAN S SOLE DISCRETION, A PERFORMANCE BOND (IN A FORM OF BANK LETTER OF GUARANTEE SIMILAR TO THAT ISSUED BY TRANSOCEAN TO ONGC, CORRE SPONDING AND PROPORTIONATE TO MEMBERS SCOPE OF WORK BUT NOT LESS THAN (I) FIVE PERCENT (5%) OF THE ESTIMATED VALUE OF SERVICES TO BE PROVIDED BY THAT MEMBER TO THE ESTIMATED TOTAL VALUE OF CONTRACT OR (II) IF THE GUARANTEE REQUIRED BY ONGC IS MORE THAN 5% OF THE TOTAL CONTRACT VALUE, THE AMOUNT EQUIVALENT OF PROPORTIONATE SHARE OF RESPECTIVE MEMBER CORRESPONDING TO SERVICES TO BE PERFORMED BY SUCH MEMBER, (WHICHEVER IS HIGHER), TO ENSURE THAT TRANSOCEAN IS COMPENSATED FOR ANY PAYMENTS WHICH TRANSOCEAN MAY B E REQUIRED TO MAKE TO GUARANTORS AS A RESULT OF NON OBSERVANCE OR NON PERFORMANCE BY THAT MEMBER OF ITS OBLIGATIONS UNDER THE CONTRACT OR THIS AGREEMENT. 2.8. LD. C OUNSEL FURTHER SUBMITTED THAT SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPW ATER DRILLING PVT.LTD. ENTERED ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 31 INTO ANOTHER M EMORANDUM OF U NDERSTANDING (M O U) ON 28/05/03. IT WAS SUBMITTED BY LD. C OUNSEL THAT THIS M O U DATED 28/05/03 WAS EXECUTED IN ORDER TO BE ANNEXED ALONG WITH TENDER APPLICATION FILED BEFORE ONGC. HE SUBMITTED THA T IT WAS FOR THAT REASON THAT MOST OF THE C LAUSES APPEARING IN AGREEMENT DATED 04/05/03 WERE NOT REFLECTED IN THE MOU DATED 28/05/03. HE THUS SUBMITTED THAT THE ENTIRE SCOPE OF WORK BETWEEN THE TWO CONSORTIUM PARTNERS W ERE TOTALLY SEPARATE AND INDEPENDE NT OF EACH OTHER AS PARTICULARLY AGREED - UPON ON THE TERMS AND CONDITIONS AS PER AGREEMENT DATED 04/05/03. HE THEREAFTER REFERRED TO THE MAIN AGREEMENT ENTERED INTO BY THE CONSORTIUM WITH ONGC SUBSEQUENT TO THE TENDER BEING AWARDED TO THE CONSORTIUM, WHICH WAS ON 06/11/03 , WHEREIN TERMS WERE IN RESPECT OF THE CONSORTIUM FOR PERFORMING THE WORK FOR ONGC. HE REFERRED TO PAGE 55 OF THE AGREEMENT WITH ONGC WHEREIN PAYMENT C LAUSE HAS BEEN MENTIONED. IT W AS SUBMITTED BY LD. C OUNSEL THAT THE PAY MENT FOR THE WORK PERFORMED BY CONSORTIUM MEMBERS WOULD BE PAID BY ONGC SEPARATELY TO EACH MEMBER. IT IS ALSO SUBMITTED THAT THE PAYMENT C LAUSE 7 SPECIFICALLY RECOGNISES SEPARATE INVOICE PRESENTATION BY EACH MEMBER OF THE CONSORTIUM TO ONGC FOR THEIR PARTICULAR SCOPE OF WO RK. 2.9. LD. COUN SEL VEHEMENTLY ARGUED THAT C ONSORTIUM A GREEMENT BETWEEN SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. WOULD NOT CONSTITUTE AN AOP AS IT DOES NOT FULFILL THE NECESSARY CONDITIONS FOR BEING AN AOP . ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 32 3. ON THE CONTRARY LD. CIT DR SUBMITTED THAT THERE ARE RAMIFYING MODIFICATIONS WHICH LEADS TO THE CONCLUSION THAT M O U DATED 28/05/03 CONTAINS CLAUSES WHICH CONSTITUTE SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. AS AOP. HE TABULATED CERTAIN DIFFERENCES IN ORDER TO SUBSTANTIATE HIS ARGUMENT OF SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. BEING AN AOP WHICH ARE AS UNDER: SL.NO. ATTRIBUTES MOU 4/5/03 MOU 28/5/03 ONGC CONTRACT A.1 CLEAR DE MARCATION/SEGREGATION OF WORK YES (APP - B) YES (APP - A) YES (EX - M) A.2. CLEAR DEMARCATION/SEGREGATION OF COSTS YES. CL. 2.2. NO NO (SILENT) A.3. PROVISION FOR EACH MEMBER INCURRING EXPENDITURE ONLY IN ITS SPECIFIED AREA OF WORK YES. CL. 2.2, 5.3 NO NO (SIL ENT) B PROFIT OR LOSS ON THE BASIS OF INDEPENDENT PERFORMANCE OF THE PARTY NO SHARING/ALLOCATION/ATTRIBUTION OF PROFIT/LOSS OUTSIDE THE SCOPE OF WORK YES. CL. 2.2. NO NO (SILENT) C.1 SEGREGATION OF PERSONNEL USED UNDER THE RISK AND CONTROL OF MEMBERS N O SUCH PROVISION NO SUCH PROVISION NO (CL. 4.2 & 5.1) C.2 SEGREGATION OF MATERIAL USED UNDER THE RISK AND CONTROL OF MEMBERS NO SUCH PROVISION NO SUCH PROVISION NO (CL. 4.1 & 5.1) D. UNIFIED CONTROL AND MANAGEMENT NO. TODDI IN CONSULTATION WITH SASL (ART .5) YES. ART. 5.1 YES (CL. 34) OTHER ADDL. FACTORS CLEAR SEGREGATION OF RISKS AND LIABILITIES SEGREGATION OF BONUS PENALTY (3.10.2) INDEPENDENT SHARING OF LIQUIDATED DAMAGES YES ART. 9.1. NO SUCH PROVISION YES ART. 9.1. NO. ART. 2.2 & 7 (JOINT & SEVER AL LI AB.) NO SUCH PROVISION NO. ART. 2.2 & 7 NO. (CL. 34.V) NO ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 33 3.1. LD. CIT DR SUBMITTED THAT AS PER C IRCULAR 7/2016 DATED 07/03/16 ISSUED BY CBDT THERE ARE CERTAIN ATTRIBUTES IN THE AGREEMENT DATED 28/05/03 WHICH IS ABSENT , WHICH WOULD CONSTITUTE SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. LTD. AS AN AOP. 3.2. IN R EJOINDER LD. C OUNSEL SUBMITTED THAT M O U DATED 28/05/03 WAS EXECUTED SOLELY FOR MEETING THE REQUIREMENT OF BID WITH ONGC. HE REITERATED THAT THE RELATIO NSHIP BETWEEN SLUMBERGER ASIA SERVICES LTD., AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. LTD. BEING THE PARTIES TO THE CONSORTIUM WAS ACTUALLY GOVERNED BY C ONSORTIUM A GREEMENT DATED 04/05/03, WHICH WAS INDEPENDENT OF BID MOU ( BEING 28/05/03 ) . HE SUBMI TTED THAT THIS IS A NORMAL PRACTICE TO RECORD DETAILED TERMS , INTER SE BETWEEN THE CONSORTIUM MEMBERS ON BASIS OF WHICH MOU FOR THE PURPOSES OF BID IS EXECUTED. 3.3. LD. C OUNSEL SUBMITTED THAT THERE IS A CLEAR SCOPE OF WORK WHICH IS DEMARCATED BETWEEN THE MEMBERS OF C ONSORTIUM , FOR WHICH SEPARATE REMUNERATION HAS BEEN RECEIVED FROM ONGC. HE SUBMITTED THAT TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. HAS BEEN CONSIDERED TO BE THE CONTROLLER OF THE CONSORTIUM ONLY FOR ADMINISTRATIVE CONVENIENCE WITH ONGC. 4. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE PARTIES IN THE LIGHT OF THE RECORDS PLACED BEFORE US . ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 34 W E REFER TO C IRCULAR NO. 7/2016 DATED 07/03/16 ISSUED BY CBDT , WHEREIN , CLARIFICATION REGARDING TAXABILITY OF CONSORTIUM MEMBERS HAS BEEN PROVID ED , WHICH READS AS UNDER: A CONSORTIUM OF CONTRACTORS IS OFTEN FORMED TO IMPLEMENT LARGE INFRASTRUCTURE PROJECTS, PARTICULARLY IN ENGINEERING, PROCUREMENT AND CONSTRUCTION ('EPC') CONTRACTS AND TURNKEY PROJECTS. THE TAX AUTHORITIES IN MANY CASES HAVE TAKE N A POSITION THAT SUCH A CONSORTIUM CONSTITUTES AN ASSOCIATION OF PERSONS ('AOP') I.E. A SEPARATE ENTITY FOR CHARGING TAX. THE CLAIM OF TAXPAYERS, ON THE OTHER HAND, IS CONTRARY TO THIS VIEW. THIS HAS LED TO TAX DISPUTES PARTICULARLY IN THOSE CASES WHERE E ACH MEMBER OF THE CONSORTIUM, ALTHOUGH JOINTLY AND SEVERALLY LIABLE TO THE CONTRACTEE, HAS A CLEAR DISTINCTION AND ROLE IN SCOPE OF WORK, RESPONSIBILITIES AND LIABILITIES OF THE CONSORTIUM MEMBERS. 2. THE TERM AOP HAS NOT BEEN SPECIFICALLY DEFINED IN THE INCOME - TAX ACT, 1961 ('A C T'). THE ISSUE AS TO WHAT WOULD CONSTITUTE AN AOP WAS CONSIDERED BY THE APEX COURT IN SOME CASES. ALTHOUGH CERTAIN GUIDELINES WERE PRESCRIBED IN THIS REGARD, THE COURT OPINED THAT THERE IS NO FORMULA OF UNIVERSAL APPLICATION SO AS TO CONCLUSIVELY DECIDE THE EXISTENCE OF AN AOP AND IT WOULD RATHER DEPEND UPON THE PARTICULAR FACTS AND CIRCUMSTANCES OF A CASE. IN THE SPECIFIC CONTEXT OF THE EPC CONTRACTS / TURNKEY PROJECTS, THERE ARE SEVERAL CONTRARY RULING OF VARIOUS COURTS ON WHAT CONS TITUTES AN AOP. 3. THE MATTER HAS BEEN EXAMINED. WITH A VIEW TO AVOID TAX - DISPUTES AND TO HAVE CONSISTENCY IN APPROACH WHILE HANDLING THESE CASES, THE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 35 BOARD HAS DECIDED THAT A CONSORTIUM ARRANGEMENT FOR EXECUTING EPC/TURNKEY CONTRACTS WHICH HAS THE FOLLOW ING ATTRIBUTES MAY NOT BE TREATED AS AN AOP: A. EACH MEMBER IS INDEPENDENTLY RESPONSIBLE FOR EXECUTING ITS PART OF WORK THROUGH ITS OWN RESOURCES AND ALSO BEARS THE RISK OF ITS SCOPE OF WORK I.E. THERE IS A CLEAR DEMARCATION IN THE WORK AND COSTS BETWEEN THE CONSORTIUM MEMBERS AND EACH MEMBER INCURS EXPENDITURE ONLY IN ITS SPECIFIED AREA OF WORK: B. EACH MEMBER EARNS PROFIT OR INCURS LOSSES, BASED ON PERFORMANCE OF THE CONTRACT FALLING STRICTLY WITHIN ITS SCOPE OF WORK. HOWEVER, CONSORTIUM MEMBERS MAY SHA RE CONTRACT PRICE AT GROSS LEVEL ONLY TO FACILITATE CONVENIENCE IN BILLING: C. THE MEN AND MATERIALS USED FOR ANY AREA OF WORK ARE UNDER THE RISK AND CONTROL OF RESPECTIVE CONSORTIUM MEMBERS; D. THE CONTROL AND MANAGEMENT OF THE CONSORTIUM IS NOT UNIFIED AND COMMON MANAGEMENT IS ONLY FOR THE INTER - SE COORDINATION BETWEEN THE CONSORTIUM MEMBERS FOR ADMINISTRATIVE CONVENIENCE. 4.1. ON A DETAILED COMPARISON OF VARIOUS C LAUSES OF TWO AGREEMENTS DATED 04/05/03, 28/05/03 , WE ARE OF THE CONSIDERED OPINION THAT C ONSORTIUM A GREEMENT DATED 04/05/03 IS THE BASIS ON WHICH THE ENTIRE SCOPE OF WORK HAS BEEN EXECUTED BY CONSORTIUM MEMBERS . THE ENTIRE RELATIONSHIP BETWEEN THE CONSORTIUM MEMBERS ARE GOVERNED BY CONSORTIUM AGREEMENT DATED 04/05/03, WHEREAS MOU DATED 28/05/ 03 HAS BEEN EXECUTED BY CONSORTIUM MEMBERS SOLELY FOR ONGC AND IS AS PER FORMAT OF ONGC, THEREFORE CONTAINED ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 36 CLAUSES RELEVANT ONLY FOR THE SAKE OF APPLICATION OF BID WITH ONGC . IN OUR CONSIDERED OPINION IN CASE OF ANY DIFFERENCES BETWEEN THE CONSORTIUM ME MBERS THE AGREEMENT DATED 04/05/03 ARE ENFORCEABLE INDEPENDENTLY. 4.2. FURTHER FROM THE AGREEMENT DATED 06/11/03 ENTERED INTO BY C ONSORTIUM WITH ONGC MAKES IT CLEAR THAT C ONSORTIUM MEMBERS BEING SLUMBERGER ASIA SERVICES LTD ., AND TRANSOCEAN OFFSHORE DEEPWA TER DRILLING PVT.LTD. HAD DISTINCT AND SEPARATE SCOPE OF WORK BY VIRTUE OF THEIR TECHNICAL EXPERTISE AND THEIR RESPECTIVE SPHERES OF WORK. SLUMBERGER ASIA SERVICES LTD WAS TO PROVIDE VARIOUS SERVICES LIKE LOGGING WHILE DRILLING, CEMENTING SERVICES, WIRE L INE LOGGING SERVICES, MUD LOGGING SERVICES AND MUD SERVICES WHEREAS TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT.LTD. WAS TO P ROVIDE DRILLING UNIT WHICH IS MAJOR CAPITAL EQUIPMENT PROVIDED ON CHARTER HIRE BASIS ALONG WITH PERSONNEL TO OPERATE THE SAID DRILLI NG UNIT. 4.3. IN RESPECT OF THE PAYMENTS BY ONGC IT IS FURTHER OBSERV ED THAT EACH CONSORTIUM MEMBER RAISED SEPARAT E INVOICES , ON WHICH ONGC SHALL HONOR BOTH THE INVOICES INDEPENDENTLY . IT IS ALSO OBSERVED THAT BOTH THE MEMBERS HAVE AGREED TO MAINTAIN SEPAR ATE BOOKS OF ACCOUNTS WHICH FURTHER EMPHASISES THEIR INDEPENDENT ROLE OF WORK WITH ONGC THOUGH WORK HAS TO BE PERFORMED JOINTLY. FURTHER IT IS ALSO OBSERVED THAT NO MEMBER HAD ANY ROLE TO PLAY IN RESPECT OF THE SCOPE OF WORK ALLOCATED TO THE OTHER MEMBER A ND NEITHER OF THE CONSORTIUM MEMBERS SHARED ANY COSTS NOR RISK AND HAD MANAGED THEIR OWN DELIVERABLES. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 37 4.4. LD. C OUNSEL PLACED RELIANCE UPON DECISION OF HON BLE DELHI HIGH COURT IN CASE OF LINDE AG LINDE ENGINEERING DIVISION VS. DDI REPORTED IN 365 ITR 1 W HEREIN IDENTICAL ISSUE HAS BEEN ADDRESSED BY HON BLE C OURT. 4.5. THUS RESPECTFULLY FOLLOWING THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF LINDE AG LINDE ENGINEERING D IVISION VS. DDI (SUPRA) WE HOLD THAT C ONSORTIUM A GREEMENT DATED 04/05/03 BETWE EN SLUMBERGER ASIA SERVICES LTD AND TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. LTD. , DO NOT CONSTITUTE AN AOP . 4.6. FROM THE ASSESSMENT ORDER IT IS OBSERVED THAT LD.AO HAS TAXED THE REVENUE UNDER SECTION 115 A AT 10%. SECTION 115A PRESUPPOSES THE RENDERIN G OF TECHNICAL SERVICES BY ASSESSEE AND NOW WITH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ONGC LTD (SUPRA) THE ISSUE STANDS SETTLED AS ON DATE , REGARDING PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL IS NOT TO BE TREATED AS TECHNI CAL SERVICES FOR THE PURPOSES OF EXPLANATION 2 TO SECTION 9 (1) (VII) AND WOULD RATHER BE COVERED BY SECTION 44 BB OF THE ACT. 4.7. THUS IN OUR CONSIDERED OPINION TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. BEING CONSORTIUM MEMBER HAS RIGHTLY OFFERED TO TAX THE RECEIPTS U/S 44BB IN THE RETURN OF INCOME. 4.8. ACCORDINGLY , WE ALLOW GROUNDS 1 2 RAISED BY ASSESSEE . 5. GROUND NO. 3 .1 ASSESSEE HAS CHALLENGED THE ACTION OF LD.AO IN NOT ALLOWING THE REIMBURSEMENT OF EXPENSES AMOUNTING TO RS.541,510,321. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 38 LD.AO OBSERVED THAT IN THE TAXABLE REVENUES, ASSESSEE HAD NOT INCLUDED THE AMOUNT RECEIVED ON ACCOUNT OF REIMBURSEMENT OF EXPENDITURE INCURRED ON BEHALF OF ONGC. IT WAS CLAIMED THAT THESE REIMBURSEMENTS WERE OF FUEL CHARGES AND MATERIAL CHARGES. LD AO WAS OF T HE OPINION THAT THESES WE R E TO BE INCLUDED IN REVENUE OFFERED TO TAX BY RELYING ON DECISION OF DELHI ITAT IN CASE OF M/S.SEDCO FOREX INTL. DRILLING INC.VS. DCIT REPORTED IN 72 ITD 415. THIS VIEW WAS CONFIRMED BY DRP. 5.1. THIS ISSUE HAS ATTAINED FINALITY BY DECISION OF HO BLE SUPREME COURT IN CASE OF M/S.SEDCO FOREX INTL.DRILLING INC.VS. DCIT REPORTED IN 87 TAXMANN.COM 29. HON BLE COURT HELD AS UNDER: 49. THE TRIBUNAL HAS RIGHTLY COMMENTED THAT SECTION 44BB OF THE ACT IS A SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION OF MINERAL OILS. ITS PURPOSE WAS EXPLAINED BY THE DEPARTMENT VIDE ITS CIRCULAR NO. 495 DATED SEPTEMBER 22, 1987, NAMELY, TO SIMPLIFY THE COMPUTATION OF TAXABLE INCOME AS NUMBER OF COMPLICATI ONS WERE INVOLVED FOR THOSE ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL ETC. INSTEAD OF GOING I NTO THE INTEGRITIES OF SUCH COMPUTATION AS PER THE NORMAL PROVISIONS CONTAINED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A OF THE ACT, THE LEGISLATURE HAS SIMPLIFIED THE PROCEDURE BY PROVIDING THAT TAX SHALL BE PAID @10% OF THE 'AGGREGATE OF THE ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 39 AMOUNTS S PECIFIED IN SUB - SECTION (2)' AND THOSE AMOUNTS ARE 'DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX...'. IT IS A MATTER OF RECORD THAT WHEN INCOME IS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', RATE OF TAX P AYABLE ON THE SAID INCOME IS MUCH HIGHER. HOWEVER, THE LEGISLATURE PROVIDED A SIMPLE FORMULA, NAMELY, TREATING THE AMOUNTS PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) AND AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AS MENTIONED IN SUB - SECTION (2) OF SECTION 44BB AS THE DEEMED PROFITS AND GAINS. THEREAFTER, ON SUCH DEEMED PROFITS AND GAINS (TREATING THE SAME AS INCOME), A CONCESSIONAL FLAT RATE OF 10% IS CHARGED TO TAX. IN THESE CIRCUMSTANCES, THE AO IS SUPPOSED TO APPLY THE PROVISIONS OF SECTION 44BB OF THE ACT, IN ORDER TO FIND OUT AS TO WHETHER A PARTICULAR AMOUNT IS DEEMED INCOME OR NOT. WHEN IT IS FOUND THAT THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA), OR AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA IS COVERED BY SUB - SECTION (2) O F SECTION 44BB OF THE ACT, BY FICTION CREATED UNDER SECTION 44BB OF THE ACT, IT BECOMES 'INCOME' UNDER SECTIONS 5 AND 9 OF THE ACT AS WELL. 50. IT IS STATED AT THE COST OF REPETITION THAT, IN THE INSTANT CASE, THE AMOUNT WHICH IS PAID TO THE ASSESSEES IS T OWARDS MOBILISATION FEE. IT DOES NOT MENTION THAT THE SAME IS FOR REIMBURSEMENT OF EXPENSES. IN FACT, IT IS A FIXED AMOUNT PAID WHICH MAY BE LESS OR MORE THAN THE EXPENSES INCURRED. INCURRING OF EXPENSES, THEREFORE, WOULD BE IMMATERIAL. IT IS ALSO TO BE BO RNE IN MIND THAT THE CONTRACT IN QUESTION ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 40 WAS INDIVISIBLE. HAVING REGARD TO THESE FACTS IN THE PRESENT CASE AS PER WHICH THE CASE OF THE ASSESSEES GET COVERED UNDER THE AFORESAID PROVISIONS, WE DO NOT FIND ANY MERIT IN ANY OF THE CONTENTIONS RAISED BY THE ASSESSEES. THEREFORE, THE ULTIMATE CONCLUSION DRAWN BY THE AO, WHICH IS UPHELD BY ALL OTHER AUTHORITIES IS CORRECT, THOUGH SOME OF THE OBSERVATIONS OF THE HIGH COURT MAY NOT BE ENTIRELY CORRECT WHICH HAVE BEEN STRAIGHTENED BY US IN THE ABOVE DISCUSSION. FO R OUR AFORESAID REASONS, WE UPHOLD THE CONCLUSION. RESULTANTLY, ALL THE APPEALS OF THE ASSESSEES ARE DISMISSED. 5.2. ON PERUSAL OF THE AGREEMENT WITH ONGC PLACED AT PAGE 42 TO 234 OF PAPER BOOK, IT IS OBSERVED THAT IN CLAUSE 4.4, ONGC AGREE S TO PAY DIESE L EXPENSES INCURRED BY ASSESSEE TO THE EXTENT OF 66 KL PER DAY BASED ON THE DIESEL PRICE PREVAILING ON THE 1 ST DAY OF EVERY MONTH. 5.3. FURTHER IT IS OBSERVED THAT IN CLAUSE 4.6 COST OF WELL MATERIALS ARE ALSO REIMBURSED AS PER ACTUAL CONSUMPTION AS PER T HE RATES MENTIONED IN E XHIBIT D TO AGREEMENT , A T PAGE 193, 194, 194 A OF PAPER BOOK. 5.4. IN OUR CONSIDERED OPINION, THESE ARE PAYMENTS RELATED TO THE SERVICES RENDERED BY ASSESSEE, AND FORMS PART OF THE RECEIPTS. RESPECTFULLY FOLLOWING THE DECISION OF H ON BLE SUPREME COURT IN CASE OF SEDCO FOREX(SUPRA), WE HOLD THAT THESE PAYMENTS ARE TO BE INCLUDED WHILE COMPUTING INCOME U/S.44 BB OF THE ACT. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED . ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 41 6. GROUND NO. 4.1 THIS GROUND RAISED BY ASSESSEE I S IN RESPECT OF LEVY OF INTEREST U/S.234 B OF THE ACT. 6.1 . IN OUR CONSIDERED OPINION, THIS ISSUE HAS ATTAINED FINALITY BY THE DECISION OF HON BLE SUPREME COURT IN CASE OF DIT, INTL.TAX. - I VS. G.E.PARTS INC ., REPORTED IN ( 2016) 73 TAXMAN.COM 186, WHEREIN HON BLE COURT UPHELD DECISION OF HON BLE DELHI HIGH COURT . HON BLE SUPREME COURT HAD DISMISSED THE SLP FILED BY THE REVENUE. 6.2. THE OBSERVATIONS OF HON BLE DELHI H IGH COURT UPHELD BY HON BLE SUPREME COURT ARE AS UNDER: 23. FOR THE ABOVE REASONS, THIS C OURT FINDS THAT NO INTEREST IS LEVIABLE ON THE RESPONDENT ASSESSEES UNDER SECTION 234B, EVEN THOUGH THEY FILED RETURNS DECLARING NIL INCOME AT THE STAGE OF REASSESSMENT. THE PAYERS WERE OBLIGED TO DETERMINE WHETHER THE ASSESSEES WERE LIABLE TO TAX UNDER SE CTION 195(1), AND TO WHAT EXTENT, BY TAKING RECOURSE TO THE MECHANISM PROVIDED IN SECTION 195(2) OF THE ACT. THE FAILURE OF THE PAYERS TO DO SO DOES NOT LEAVE THE REVENUE WITHOUT REMEDY; THE PAYER MAY BE REGARDED AN ASSESSEE - IN - DEFAULT UNDER SECTION 201, AND THE CONSEQUENCES DELINEATED IN THAT PROVISION WILL VISIT THE PAYER. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED WITHOUT ANY ORDER AS TO COSTS. 6.3 . RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT ASSESSEE CANNOT BE LEVIED WITH THE INTEREST UNDER SECTION 234B OF THE A CT. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 7. GROUND NO. 5 .1 : THIS GROUND HAS BEEN RAISED BY ASSESSEE AGAINST THE ACTION OF LD.AO IN LEVYING INTEREST U/S.234 D OF THE ACT. ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 42 7.1. THIS IS CONSEQUENTIAL IN NATURE AN D HENCE DISMISSED. 7.2. ACCORDINGLY THIS APPEAL BY ASSESSEE STANDS PARTLY ALLOWED. 8. ITA NO. 105/DEL/2012 8.1. GROUNDS 1 - 3: THESE GROUNDS RAISES BY ASSESSEE ARE AGAINST ACTION OF LD.AO IN CONSIDERING THE CONSORTIUM TO BE AOP AND TAXING ASSESSEE ON A P ROTECTIVE BASIS. 8.2 . BOTH PARTIES HAVE RELIED ON THEIR SUBMISSIONS RECORDED HEREINABOVE. WE HAVE ADDRESSED THE ISSUE AT LENGTH HEREINABOVE IN FAVOUR OF ASSESSEE. 8.3. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STAND ALLOWED. 9. GROUND NO. 4 9.1 . AS SESSEE HAS CHALLENGED THE ACTION OF LD.AO IN NOT ALLOWING THE REIMBURSEMENT OF EXPENSES 9.2 . WE HAVE DEALT WITH SIMILAR ISSUE HEREINABOVE IN GROUND NO. 3.1. BOTH PARTIES REITERATE D IDENTICAL ARGUMENTS. 9.3 . BASED ON THE DISCUSSIONS MADE THEREIN WE DISMI SS THIS GROUND RAISED BY ASSESSEE. ACCORDINGLY THIS APPEAL BY ASSESSEE STANDS PARTLY ALLOWED . ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 43 10. ITA NO. 4655, 4656 , 3044 / D EL/2013 (AY 2007 - 08 AND 2008 - 09 & 2009 - 10 ) (REVENUE S APPEALS) CO NO. 60&66, 61&67/DEL/2014( ASST.YR: 2007 - 08 & 2008 - 09) B OTH THE PARTIES RE ITERATED IDENTICAL ARGUMENTS THAT HA VE BEEN ADVANCED IN THE CASE OF APPEALS FILED BY TRANSOCEAN OFFSHORE DEEPWATER DRILLING PVT. LTD . 10 .1 . ISSUE S RAISED REGARDING CONSORTIUM BEING AN AOP OR HAS BEEN DECIDED IN FAVOUR OF ASSESSEE AND AGAINST REVE NUE HEREINABOVE . ACCORDINGLY THESE APPEALS BY REVENUE STANDS DISMISSED. 11 . T HE C ROSS O BJECTIONS FILED BY ASSESSEE, ARE AGAINST REOPENING OF ASSE SSMENT FOR THE ASSESSMENT YEARS . 12. AS APPEALS WE HAVE DECIDED THE ISSUES ON MERITS, AND HAVE DISMISSED THE REVENUES APPEAL, THESE BECOME INFRUCTUOUS . ACCORDINGLY BOTH REVENUE S APPEAL S AS WELL AS ASSESSEE S C ROSS O BJECTION S STAND DISMISSED. 13 . IN THE RESULT, ALL APPEALS AND CROSS OBJECTIONS STAND DISPOSED OF AS DISCUSSED ABOVE. ORDER PRONOUNCED IN THE O PEN C OURT ON 26/03/2018. SD/ - SD/ - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DATED: 26 TH MARCH, 2018. *MV ITA 5822/DEL/2010 ASSESSMENT YEAR 2007 - 08 ITA 105/DEL/2012 ASSESSMENT YEAR 2008 - 09 TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. VS. ADIT ITA 3044/DEL/13 ASSESSMENT YEAR 2009 - 10 ADIT VS. M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. ITA 4655/DE L/2013 A.Y. 2007 - 08 ( CO NO.60/DEL/2014 & CO NO. 66/DEL/2014) ITA 4656/DEL/2013 A.Y. 2008 - 09 ( CO NO.61/DEL/2014 & CO NO. 67/DEL/2014) ADIT VS. AOP OF SCHLUMBERGER ASIA SERVICES LTD. AND TRANSOCEAN OFFSHORE DEEPWATER DRI LLING INC. 44 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI