Shelf Drilling International Inc(Formerly known as Sedco Forex Internation al Drilling Inc.), New Delhi V. JCIT (International Taxation), Dehradun

ITA 503/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3111 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 01-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIKAS MISRA
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 ITA NO. 503/DEL/2016 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI G. D. AGRAWAL, PRESIDE NT AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 503/DEL/20 16 (A.Y 2011-12) SHELF DRILLING INTERNATIONAL INC. (FORMERLY KNOWN AS SEDCO FOREX INTERNATIONAL DRILLING INC.) C/O. NANGIA & CO. SUITE-4A, PLAZA M-6, JASOLA, NEW DELHI AACCS9208D (APPELLANT) VS JCIT ((INTERNATIONAL TAXATION) INCOME TAX OFFICE SUBHASH ROAD DEHRADUN (RESPONDENT) APPELLANT BY SH. VIKAS MISRA, CA RESPONDENT BY NONE ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE AS SESSMENT ORDER DATED 16/11/2015 PASSED BY JCIT (INTERNATIONAL TAXATION) DEHRADUN U/S 143(3) READ WITH SECTION 144C(3) OF THE INCOME TAX ACT, 19 61 FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- GROUND NO. 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE AMOUNTS AGGREG ATING TO INR. 187,404,307/-, RECEIVED BY THE APPELLANT FROM ITS C USTOMERS AS REIMBURSEMENT OF ACTUAL EXPENSES(TOOLS AND FUEL REI MBURSEMENT) INCURRED DATE OF HEARING 14.03.2018 DATE OF PRONOUNCEMENT 15.03.2018 2 ITA NO. 503/DEL/2016 BY THE APPELLANT ON THEIR BEHALF, IS TO BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE INCOME TAX ACT, 1961 (THE ACT). 3. THE ASSESSEE, M/S SHELF DRILLING INTERNATIONAL I NC. (SDII), IS A NON- RESIDENT COMPANY INCORPORATED UNDER LAWS OF PANAMA. IT IS A GROUP COMPANY OF TRANSOCEAN GROUP WHICH IS ENGAGED IN THE BUSINESS O F PROVIDING SERVICES OR FACILITATES IN CONNECTION WITH EXPLORATION AND PROD UCTION OF MINERAL OILS. TRANSOCEAN GROUP HAS BEEN OPERATING GLOBALLY AND HA S BEEN PROVIDING SERVICES AND FACILITIES IN INDIA THROUGH ITS MULTIPLE ENTITI ES. FOR AY UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.11.2 011 DECLARING THEREIN AN INCOME OF RS. 18,81,09,080. UNDER PROVISIONS OF SEC TION 44BB OF THE ACT. IT OFFERED ITS REVENUE FROM TWO CONTRACTS: A) CONTRACT NO. MR/DS/MAT/RIG(CH) (TOIVL)/TRIDENT I I/2006- 2009/DYKDF 0349 DT, 12.03.2007 WITH ONGC LIMITED FO R CHARTER HIRE OF JACK-UP RIG TRIDENT-II. B) CONTRACT DATED 16.04.2010 WITH TRANSOCEAN DRILLI NG SERVICES (INDIA) PVT. LIMITED (TDSIPL). THE ASSESSING OFFICER IN HIS DRAFT ASSESSMENT ORDE R DATED 30.03.2015 HELD THAT SERVICE TAX AND REIMBURSEMENT OF EXPENSES RECE IVED FROM ONGC CONTRACT ARE INCLUDIBLE IN GROSS RECEIPTS FOR THE PURPOSES O F SECTION 44BB OF THE ACT. FURTHER, THE ASSESSING OFFICER HAS HELD THAT RECEIP TS FROM CONTRACT WITH TDSIPL ARE TAXABLE AS ROYALTY AND NOT U/S 44BB BECAUSE THI S IS SECOND LEG CONTRACT. THE ASSESSING OFFICER HAS HELD THAT SINCE THIS ROYA LTY INCOME IS EFFECTIVELY CONNECTED WITH PE, IT IS TAXABLE AS BUSINESS INCOME , THEREBY COMPUTING TAXABLE PROFITS @ 25%. THE ASSESSING OFFICER ALSO INCLUDED SERVICE T AX ELEMENT WHILE COMPUTING INCOME FROM CONTRACT WITH TDSIPL. BEING A GGRIEVED BY THE ORDER, THE ASSESSEE FILED OBJECTION BEFORE THE DISPUTE RES OLUTION PANEL (DRP). THE DRP ISSUED DIRECTIONS VIDE ORDER DATED 3/11/2015. I N COMPLIANCE TO DRP DIRECTIONS, THE INCOME OF THE ASSESSEE IS ASSESSED AT RS.98,86,97,712/-. 4. BEING AGGRIEVED BY THE FINAL ASSESSMENT ORDER, T HE ASSESSEE IS BEFORE US. 3 ITA NO. 503/DEL/2016 5. THE LD. AR SUBMITTED THAT IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2010-11, THE ISSUE IS DECIDED BY THE ITAT AGAINST T HE ASSESSEE. THE LD. AR FURTHER SUBMITS THAT THIS ISSUE CONTESTED HEREIN IS ALSO DECIDED BY THE HONBLE SUPREME COURT IN CASE OF SEDCO FOREX INTERNATIONAL INC. THROUGH ITS CONSTITUTED ATTORNEY MR. NAVIN SARDA VS. COMMI SSIONER OF INCOME TAX, MEERUT & ANR. (CIVIL APPEAL NO. 4906 OF 2010) VIDE ORDER DATED 30.10.2017 IN FAVOUR OF THE REVENUE. 6. NONE APPEARED FOR THE DEPARTMENTS, BUT THERE WAS ADJOURNMENT APPLICATION ON BEHALF OF THE DR. SINCE THE ISSUE I S COVERED AGAINST THE ASSESSEE BY THE HONBLE APEX COURT DECISION, NO HAR M WILL BE CAUSE TO THE REVENUE IN CASE THE MATTER IS DECIDED. THEREFORE, W E ARE TAKING UP THE APPEAL. 7. WE HAVE HEARD THE LD. AR AND PERUSED THE TRIBUN AL ORDER FOR ASSESSMENT YEAR 2010-11 IN THE ASSESSEES OWN CASE AS WELL AS THE APEX COURT DECISION DATED 30.10.2017. THE HONBLE APEX COURT HELD AS UNDER: 50) IT IS STATED AT THE COST OF REPETITION THAT, I N THE INSTANT CASE, THE AMOUNT WHICH IS PAID TO THE ASSESSEES IS TOWARDS MOBILISAT ION FEE. IT DOES NOT MENTION THAT THE SAME IS FOR REIMBURSEMENT OF EXPEN SES. IN FACT, IT IS A FIXED AMOUNT PAID WHICH MAY BE LESS OR MORE THAN THE EXPE NSES INCURRED. INCURRING OF EXPENSES, THEREFORE, WOULD BE IMMATERIAL. IT IS ALSO TO BE BORNE IN MIND THAT THE CONTRACT IN QUESTION WAS INDIVISIBLE. HAVING RE GARD 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 A NY OF THE CONTENTIONS RAISED BY THE ASSESSEES. THEREFORE, THE ULTIMATE CONCLUSIO N DRAWN BY THE AO, WHICH IS UPHELD BY ALL OTHER AUTHORITIES IS CORRECT, THOU GH SOME OF THE OBSERVATIONS OF THE HIGH COURT MAY NOT BE ENTIRELY CORRECT WHICH HA VE BEEN STRAIGHTENED BY US IN THE ABOVE DISCUSSION. FOR OUR AFORESAID REASO NS, WE UPHOLD THE CONCLUSION. RESULTANTLY, ALL THE APPEALS OF THE ASS ESSEES ARE DISMISSED. THUS, THE ISSUE CONTESTED HEREIN IS ALREADY COVERE D AGAINST THE ASSESSEE 4 ITA NO. 503/DEL/2016 IN LIGHT OF APEX COURT DECISION DATED 30.10.2017. T HEREFORE, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2018 . SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) PRESIDENT JUDICIAL MEMBER DATED: 15/03/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO. 503/DEL/2016 DATE 1. DRAFT DICTATED ON 14/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 14/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 15.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 1 5 .03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 6 ITA NO. 503/DEL/2016