M/s Ensco Maritime Ltd., New Delhi V. ADIT, Intl. Taxation, Dehradun

ITA 5482/DEL/2013

• Counselvise Citation: 548220114 RSA 2013
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Keywords: Presumptive income
• Section: 143(3); 142(1)

Judgement Text

ITA NO. 5482/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 5482/DEL/2013 A.Y. : 2010-11 ENSCO MARITIME LIMITED, C/O NANGIA & CO., CHARTERED ACCOUNTANTS, SUITE 4-A PLAZA M-6, JASOLA, NEW DELHI 110 025 (PAN: AABCE 1178P) VS. ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), INCOME TAX OFFICE, SUBHASH ROAD, DEHRADUN (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. AMIT ARORA, CA DEPARTMENT BY : SH. SANJEEV SHARMA, CIT(DR) DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 03 0303 03- -- -9 99 9- -- -2014 2014 2014 2014 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 05 0505 05- -- -9 99 9- -- -2014 2014 2014 2014 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. ASSESSING OFFICER PASSED U/S. 143(3) READ W ITH SECTION 144C OF THE I.T. ACT DATED 22.8.2013 AND PERTAINS TO ASS ESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO. 5482/DEL/2013 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED IN PROPOSING THAT MOBILIZATION REVENUE OF RS. 70,348,648/-, PROPORTIONATE TO THE VOYAGE UNDERTAKE N BY THE RIG OUTSIDE INDIAN TERRITORIAL WATERS, IS TO BE INC LUDED IN GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING INCOME UNDE R SUB- SECTION (1) OF SECTION 44BB OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED IN PROPOSING THAT RECEIPTS AGAINST THE REIMBURSEMENT OF EXPENSES OF RS. 20,725,491/- ARE T O BE INCLUDED IN THE GROSS RECEIPTS FOR THE PURPOSE OF D ETERMINING INCOME UNDER SUB-SECTION (1) OF SECTION 44AB OF THE I.T. ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED IN PROPOSING THAT RECEIPTS AGAINST THE SE RVICE TAX CHARGED AS PER LAW, AMOUNTING TO RS. 155,062,604/- ARE TO BE INCLUDED IN THE GROSS RECEIPTS FOR THE PURPOSE OF D ETERMINING INCOME UNDER SUB-SECTION (1) OF SECTION 44BB OF THE I.T. ACT, 1961. 4. WHETHER ON THE FACTS OF THE CASE THE DRP ERRED I N LAW IN NOT FOLLOWING THE ITATS ORDER IN THE CASE OF SEDCO FOR EX INTERNATIONAL DRILLING INCORPORATION IN ITA NO. 528 4/D/2011. ITA NO. 5482/DEL/2013 3 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- IN THIS CASE RETURN OF INCOME WAS FILED BY THE ASSE SSEE, ELECTRONICALLY ON 30.9.2010 DECLARING TOTAL INCOME OF RS. 14,42,93,138/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. ACCORDINGLY, NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 WAS ISSUED ON 30.8.2001 BY THE ADIT, INTERNATIONAL TAXATION, DEHRADUN. NOTICE UNDER SECTION 142(1) DA TED 11.2012 ALONGWITH QUESTIONNAIRES WERE ISSUED AND IN PURSUANCE THERETO WRITTEN REPLIES WERE SUBMITTED. UPON GOING THROUGH THE REPLIES, AO ASSESSED INCOME AT RS . 16,89,06,810/- UNDER SECTION 143(3) READ WITH SECTI ON 144C(1) OF THE I.T. ACT, 1961 VIDE DRAFT ASSESSMENT ORDER DATED 23.11.2012. 4. AGAINST THE ABOVE ORDER DATED 23.11.2012, THE AS SESSEE FILED THE OBJECTIONS BEFORE THE DISPUTES RESOLUTION PANEL (DRP)-II, NEW DELHI, WHO VIDE ITS IMPUGNED ORDER DATED 31.7.2013 HELD THAT NO INTERFERENCE IS REQUIRED TO BE MADE IN THE DRAFT AS SESSMENT ORDER PASSED BY THE AO ON ANY OF THE ABOVE THREE GROUNDS. THE OBJECTIONS OF THE APPLICANT ARE DISPOSED OF ACCORDINGLY. 5. PURSUANT TO THE DRPS DIRECTIONS THE ASSESSING O FFICER ASSESSED THE INCOME OF THE ASSESSEE AT RS. 16,89,0 6,810/- U/S. 143(3) READ WITH SECTION 144C(13) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 22.8.2013 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL PLACED BEFORE US. WITH REGARD TO GROUND NO. 1 REGA RDING MOBILIZATION REVENUE OF RS. 70,348,648/- IS CONCERN ED, THE LD. DR DURING THE HEARING HAS FILED A COPY OF THE DECISI ON OF THE ITAT, ITA NO. 5482/DEL/2013 4 BENCH H, NEW DELHI PASSED IN ITA NO. 4906/DEL/20 12 (A.Y. 2009- 10) IN THE CASE OF WESTERNGCO INTERNATIONAL LTD. VS . ADIT (INTT. TAXATION), DEHRADUN VIDE ORDER DATED 24.1.2014 AND SUBMITTED THAT THE ISSUE IN THE PRESENT CASE IS SQUARELY COVERED BY THE AFORESAID DECISION. THE TRIBUNAL VIDE ITS AFORESAID ORDER DATED 24.1.2014 HAS ADJUDICATED THE ISSUE VIDE PARA NO. 10 AS UNDER:- 10. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IS COVERED BY THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE C ASE OF SEDCO FOREX INTERNATIONAL INC.(SUPRA). WE ARE NOT CONVINCED WITH THE ARGUMENTS OF THE LD.COUNSEL FOR THE ASSESSEE TRYING TO DISTINGUISH THIS CASE LAW FOR T HE REASON THAT THE ENTIRE PAYMENT IN QUESTION WAS MADE FOR TH E PURPOSE OF EXECUTION OF THE CONTRACT IN INDIA. MOB ILISATION IS A STAGE PAYMENT, AS PART OF THE TOTAL CONSIDERATIO N FOR EXECUTION OF THE CONTRACT. THE ASSESSEE WOULD BE M OVING ITS MACHINERY FROM ONE PLACE OF WORK TO ANOTHER PLACE O F WORK. MOBILISATION IS PAID AS AN ADVANCE FOR SUCH MOVEME NT AND IS GENERALLY ADJUSTED AGAINST RUNNING BILLS. IT IS NOT A CASE WHERE A SEPARATE PAYMENT IS MADE FOR A TRANSPORTATI ON CONTRACT. THE SUBMISSION THAT THE ASSESSEE WOULD T RY TO WORK OUT, BASED ON SOME BASIS, THE REVENUES ATTRIBU TABLE TO THE ACTIVITY OF MOBILIZATION CARRIED OUT OUTSIDE IN DIA, CANNOT BE ACCEPTED, AS SUCH AN EXERCISE WOULD AMOUNT TO ESTIMATING INCOME FOR ACTIVITIES OUTSIDE INDIA, WHE N THE SCOPE OF THE CONTRACT IS FOR EXECUTION OF THE CONTR ACT IN INDIA. MOBILISATION IN OUR VIEW IS AN INCIDENTAL A CTIVITY TO ITA NO. 5482/DEL/2013 5 THE MAIN ACTIVITY OF CARRYING OUT THE CONTRACT IN I NDIA. THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA AND HYUNDAI HEAVY INDUSTRIES LTD. VS. DIT, REPORTED IN 288 ITR 408 HAS BEEN DISCUSSED BY THE H ONBLE HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATIONA L INC. (SUPRA). THE RATIO LAID DOWN BY THE HONBLE SUPRE ME COURT IN THAT CASE IS NOT APPLICABLE HERE AS IT IS NOT A CASE WHERE SEPARATE PARTS OF A CONTRACT ARE EXECUTED AT DIFFER ENT PLACES. THE ARGUMENT THAT THE PAYMENT WAS IN THE N ATURE OF REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESS EE COMPANY AND HENCE NOT INCOME WAS ALSO REJECTED BY T HE HONBLE HIGH COURT. THUS, WE ARE UNABLE TO AGREE W ITH THE CONTENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE. THU S THESE GROUNDS OF THE ASSESSEE ARE DISMISSED. 7.1 FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DEC IDED THE ABOVE ISSUE AGAINST THE ASSESSEE BY FOLLOWING THE JUDGME NT OF THE HONBLE UTTARAKHAND HIGH COURT DECISION IN THE CASE OF SE DCO FOREX INTERNATIONAL INC. REPORTED IN 299 ITR 238. NO CONT RARY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN POIN TED BY THE ASSESSEES COUNSEL. IN VIEW OF THE ABOVE, WE RESPE CTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE HIGH COURT OF UT TARAKHAND AND ALSO THE DECISION OF THE ITAT DECIDE THE ISSUE AGA INST THE ASSESSEE. 8. WITH REGARD TO GROUND NO. 2 REGARDING REIMBURSE MENT OF EXPENSES OF RS. 20,725,491/- IS CONCERNED, WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE ITAT, BENCH G, NEW DELHI PASSED IN ITA NO. 504/ DEL/2013 (A.Y. 2009-10) IN THE CASE OF M/S SEDCO FOREX INTERNATI ONAL DRILLING INC. VS. ADIT (INTT. TAXATION), DEHRADUN VIDE ORDER DA TED 2.8.2013. THE ITA NO. 5482/DEL/2013 6 TRIBUNAL VIDE ITS AFORESAID ORDER DATED 2.8.2013 HA S ADJUDICATED THE ISSUE VIDE PARA NO. 5 AS UNDER:- 5. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS U NDER:- THAT THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW I N AFFIRMING THE ACTION OF THE A.O. IN HOLDING THAT TH E AMOUNTS AGGREGATING TO RS.284,583,205/- RECEIVED BY THE APPELLANT FROM ITS CUSTOMERS AS REIMBURSEMENT OF ACTUAL EXPENSES INCURRED BY THE APPELLANT ON THEIR BEHALF IS TO BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE INCOME TAX ACT, 1961. 6. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FAIRLY AGREED THAT THIS ISSUE IS COVERED AGAINST THE ASSES SEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT AND ANOTHER VS. HALLIBURTON OFFSHORE SERVICES INC. [2008] 300 ITR 265 (UTTARAKHAND). THE FACTS IN THE SAID C ASE WERE THAT THE ASSESSEE RENDERED SERVICES TO THE ONGC. F OR THE ASSESSMENT YEAR 1991-92, IT CLAIMED THAT THE AMOUN T OF `6,16,989/- RECEIVED ON ACCOUNT OF REIMBURSEMENT OF FREIGHT AND TRANSPORTATION CHARGES ACTUALLY INCURRED IN RES PECT OF EQUIPMENT WAS NOT INCLUDIBLE WHILE COMPUTING ITS IN COME UNDER SECTION 44BB. THE ASSESSING OFFICER REJECTED THE CLAIM BUT THE CIT(A) AND THE TRIBUNAL ACCEPTED IT. ON AP PEAL, THE HONBLE HIGH COURT HELD AS UNDER:- HELD, ALLOWING THE APPEAL, THAT IT WAS NOT IN DISPUTE THAT THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER ADDED ITA NO. 5482/DEL/2013 7 THE SAID AMOUNT WHICH WAS RECEIVED BY THE NON- RESIDENT COMPANY RENDERING SERVICES UNDER THE PROVISIONS OF SECTION 44BB TO THE ONGC AND IMPOSED THE INCOME TAX THEREON. HE WAS JUSTIFIED IN DOING SO. 7. THE RATIO OF THE ABOVE DECISION OF HON'BLE JURI SDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE REJE CT GROUND NO.3 OF THE ASSESSEES APPEAL. 8.1 FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DEC IDED THE ABOVE ISSUE AGAINST THE ASSESSEE BY FOLLOWING THE JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT AND ANOTHER VS. HALLIBURTON OFFSHORE SERVICES INC. [2008] 300 ITR 2 65 (UTTARAKHAND). NO CONTRARY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN POINTED BY THE ASSESSEES COUNSEL. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NBLE HIGH COURT OF UTTARAKHAND AND ALSO THE DECISION OF THE ITAT D ECIDE THE ISSUE AGAINST THE ASSESSEE. 9. WITH REGARD TO GROUND NO. 3 REGARDING SERVICE T AX CHARGED AMOUNTING TO RS. 155,062,604/- IS CONCERNED, LD. CO UNSEL OF THE ASSESSEE DURING THE HEARING HAS FILED A COPY OF T HE DECISION OF THE ITAT, BENCH G, NEW DELHI PASSED IN ITA NO. 5284/ DEL/2011 (A.Y. 2008-09) IN THE CASE OF M/S SEDCO FOREX INTERNATION AL DRILLING INC. VS. ADDITIONAL DIT (INTT. TAXATION), DEHRADUN VIDE ORDE R DATED 29.6.2012 AND SUBMITTED THAT THE ISSUE IN THE PRESENT CASE I S SQUARELY COVERED BY THE AFORESAID DECISION IN FAVOR OF THE ASSESSEE. WE FIND THAT THE THIS DECISION HAS ALSO BEEN FOLLOWED EAR LIER BY THE TRIBUNAL IN ITA NO. 504/DEL/2013 (A.Y. 2009-10) IN THE CASE OF THE SAME ASSESSEE VIDE WHICH THE TRIBUNAL HAS DECIDED THE I SSUE IN FAVOR OF ITA NO. 5482/DEL/2013 8 THE ASSESSEE VIDE ITS ORDER DATED 02.8.2013. THE RE LEVANT PARAS 3 TO 4 ARE REPRODUCED HEREUNDER :- 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F ITAT IN ASSESSEES OWN CASE FOR AY 2008-09 DATED 29 TH JUNE, 2012 VIDE ITA NO.5284/DEL/2011, WHEREIN THE ITAT H ELD AS UNDER:- THE SERVICE TAX IS A STATUTORY LIABILITY LIKE CUSTOM DUTY. HONBLE UTTARAKHAND HIGH COURT IN THEIR DECISION IN SCHLUMBERGER ASIA SERVICES LTD. (SUPRA) CONCLUDED THAT REIMBURSEMENT OF CUSTOM DUTY PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. FOLLOWING THE VIEW IN THIS DECISION, MUMBAI BENCH IN THEIR DECISION IN ISLAMIC REPUBLIC OF IRAN ITA NO. 5482/DEL/2013 9 SHIPPING LINES (SUPRA) HELD THAT SERVICE TAX BEING A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMENT OF PROFIT AND ACCORDINGLY, THE SAME COULD NOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME. IN THE LIGHT OF VIEW TAKEN BY THE MUMBAI BENCH, ESPECIALLY WHEN THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US CONTROVERTING THE AFORESAID FINDINGS OF THE LD.CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION, WE ARE OF THE OPINION THAT SERVICE TAX PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS ITA NO. 5482/DEL/2013 10 REIMBURSEMENT. THEREFORE, GROUND NO.3 IN THE APPEAL IS ALLOWED. 4. FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DECIDED THE ABOVE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AND ANOTHER VS. SCHLUMBERGER ASIA SERVICES LTD. [2009] 317 ITR 156 (UTTARAKHAND). NO CONTRARY DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN POINTED OUT. IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AND ALSO THE DECISION OF ITAT IN ASSESSEES OWN CASE CITED SUPRA, DIRECT THE ASSESSING OFFICER TO EXCLUDE SERVICE TAX FROM THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING THE INCOME UNDER SECTION 44BB OF THE INCOME-TAX ACT, 1961. ACCORDINGLY, GROUND NOS.1 & 2 OF THE ASSESSEES APPEAL ARE ALLOWED. ITA NO. 5482/DEL/2013 11 9.1 FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DEC IDED THE ABOVE ISSUE IN FAVOR OF THE ASSESSEE BY FOLLOWING THE JU DGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DI RECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AND ANOTHER VS. SCHLUM BERGER ASIA SERVICES LTD. [2009] 317 ITR 156 (UTTARAKHAND). NO CONTRARY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT H AS BEEN POINTED BY THE LD. DR. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE HIGH COURT OF UTTARA KHAND AND ALSO THE DECISION OF THE ITAT DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/9/2014. SD/- SD/- [ [[ [G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 05/9/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 5482/DEL/2013 12