DDIT (IT) 1(1), MUMBAI V. ABAN 7 PTE LTD, MUMBAI

ITA 5496/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1674 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2007-2008
• Appeal Filed On: 01-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU SHARMA
• Keywords: Business income; Depreciation; Double taxation relief; Permanent establishment
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM I.T.A. NO. 5496/MUM/2014 ( ASSESSMENT YEAR: 2007 - 08 ) DY. DIT(IT) - 1(1), ROOM NO. 117, 1 ST FLOOR, SCINDIA HOUSE, N. M. ROAD, BALLARD ESTATE, MUM BAI - 4000 038 VS. M/S. ABAN 7PTE. LIMITED 81, VIKAS CENTER, S. V. ROAD, SANTACRUZ (W), MUMBAI - 400 054 PAN/GIR NO. AAFCA 7951 A ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI HIMANSHU SHARMA RESPONDENT BY : SHRI P. J. PARDIWALA/ SHRI MADHUR AG ARWAL DATE OF HEARING : 23.08.2018 DATE OF PRONOUNCEMENT : 05.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 10, MUMBAI (LD.CIT(A) FOR SHO RT) DATED 28.02.2014 AND PERTAINS TO THE A SSESSMENT YEAR (A.Y.) 2007 - 08. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAS NO PERMANENT ESTABLISHMEN T IN INDIA AS THE NUMBER OF DAYS FOR WHICH RIG WAS DEPLOYED FOR WORK IN INDIA WAS 179 DAYS EVEN WHEN THE RIG WAS ACTUALLY ENTERED INDIA IN 27,07.2006 AND WAS EXPORTED OUTSIDE INDIA ON 07.03.2007 AND THE NUMBER OF DAYS OF STAY IN INDIA WAS MORE THAN 183 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT ACTIVITIES OF PROJECT OFFICE ARE TO BE CONSIDERED AS PREPARATORY AND AUXILLARY IN NATURE AS PER ARTICLE 5(7)(E) OF THE INDIA SINGAPORE DTAA AND TO BE EXCLUDED F ROM THE ACTIVITIES OF THE PE EVEN WHEN THE EXPANSIVE PREPARATORY WORKS, INCLUDING PRE - HIRE SURVEY AND ALL PREMOBILIZATION JOBS, WERE CARRIED OUT BEFORE THE COMMENCEMENT. 2 ITA NO. 5496/MUM/2014 M/S. ABAN 7PTE. LIMITED 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, CIT(A) ERRED IN HOLD ING THAT THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA AND PROVISIONS OF 115JB ARE NOT APPLICABLE EVEN WHEN AS PER THE PROVISIONS OF ARTICLE 5(2)(J) OF THE INDIA SINGAPORE DTAA THE ASSESSEE HAS A PE IN INDIA AND IS THEREFORE, LIABLE U/S. 115JB OF TH E IT ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED AND REGISTERED IN SINGAPORE AND IS A TAX RESIDENT OF SINGAPORE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MAKING OVER AND DRILLING OF OIL WELLS IN OFFSHORE TERRITO RIES RELATING TO PROSPECTIVE FOR EXPLORATION AND EXPLOITATION OF MINERAL OILS AND NATURAL GASES. FOR THIS PURPOSE, THE ASSESSEE DEPLOYS ITS OWN RESOURCES FOR CARRYING OUT THE OPERATIONS OF DRILLING AND MAKING OVER OF THE OIL WELLS. 4. THE ISSUE IN DISPUT E WAS WHETHER THE ASSESSEE HAS PERMANENT ESTABLISHMENT (PE FOR SHORT ) IN INDIA. BASED UPON NUMBER OF DAYS OF THE OPERATION OF ITS RIG IN INDIA, THE ASSESSING OFFICER (A.O. FOR SHORT) HAS OPINED THAT IT HAD A PE ON THE BASIS OF NUMBER OF DAYS OF THE OPE RATION OF THE RIG IN INDIA. THE A.O. HAD HELD THE ASSESSEE TO BE LIABLE TO TAX U/S. 115JB OF THE INCOME TAX ACT, 1961 (THE ACT' HEREINAFTER). THE A.O. HAD CONCLUDED AS UNDER: 10. IN VIEW OF THE ABOVE, ASSESSEE HAS A PE IN INDIA. HENCE, ITS BUSINESS INCOME IS TAXABLE IN INDIA. AS ASSESSEE HAS MAINTAINED IT ACCOUNT FOR THE RELEVANT YEAR, IT CALIMS TO BE COVERED U/S. 44BB(3). THE BOOK PROFIT OF THE ASSESSEE IS RS.3,71,97,259/ - . SINCE THE ASSESSEE HAS FILED NIL INCOME BECAUSE OF DEPRECIATION ON RIG, THE TAX IS CALCULATED U/S.115JB AS FOLLOWS: BOOK PROFIT AS PER P & L A/C. RS.3,71,97,259/ - ADD: DEPRECIATION RS.23,37,42,245/ - LESS: DEPRECATION (EXCEPT REVALUATION RESERVE) RS.23,27,42,245/ - BOOK PROFIT AS PER SECTION 115JB RS.3,71,97,259/ - 3 ITA NO. 5496/MUM/2014 M/S. ABAN 7PTE. LIMITED 5. AGAINST T HE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A). 6. THE LD. CIT(A) TREATED CERTAIN ACTIVITIES AS PREPARATORY AND AUXILIARY AND REDUCING THE SAME FROM THE NUMBER OF DAYS OF THE OPERATION OF THE RIG C A ME TO THE CONCLUSION THAT THE ASSESSEE DID NOT HAVE A PE IN INDIA. THE LD. CIT(A) DID NOT D EAL WITH THE ISSUE OF EXIGIBILITY OF THE ASSESSEES TAXATION U/S. 115JB OF THE ACT. HE SUMMARILY HELD AS UNDER: 25. IN ABSENCE OF APPELLANT HAVING ANY PE IN INDIA, I HOLD THAT APPELLANT IS NOT LIABLE TO TAX IN INDIA AND ACCORDINGLY, TAX U/S. 115JB WOULD ALSO NOT APPLY. 7. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 8. THE GROUNDS RAISED BY THE REVENUE HAVE T W O FACETS. FIRSTLY, THE REVENUE IS AGGRIEVED BY THE TREATMENT OF THE LD. CIT(A) OF CERTAIN NUMBER OF THE OPERATION OF RIG TO BE EXCLUDED ON ACCOUNT OF BEING PREPARATORY AND AUXILIARY IN NATURE. SECONDLY, THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED INASMUCH AS HE HAS HELD THAT THERE IS NO LIABILITY U/S. 115JB AS THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT IN INDIA. 9. AT THE OUTSET, IN THIS CASE, THE LD. SENIOR COUNSEL OF THE ASSESSEE SHRI PERCEY PARDIWALA SUBMITTED THAT THE ISSUE OF ASSESSEES EXIGIBILITY TO TAX U/S. 115JB HAS NOT BEEN DULY DEALT WITH BY THE LD. CIT(A). HE SUBMITTED THAT IT IS AN IMPORTANT FACET OF THE ASSESSEES APPEAL AND THE SAME IS REQUIRED TO BE ADJUDICATED PROPERLY IN ORDER TO COMPLETE THE APPELLATE ORDER OF THE LD. CIT(A). IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ITAT ON SE VERAL OCCASION S HAD REMITTED SIMILAR INCOMPLETE ORDERS TO THE FILE OF THE LD. CIT(A) TO COMPLETE HIS APPELLATE ORDER ON THE TOUCH STONE OF THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RAMDAS PHARMACY 4 ITA NO. 5496/MUM/2014 M/S. ABAN 7PTE. LIMITED [1970] 77 ITR 276 (MAD). HENCE, THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT THE ISSUE ON ADJUDICATION OF EXISTENCE OF PE MAY BE LEFT OPEN AND THE LD. CIT(A) BE DIRECTED TO COMPLETE THE APPELLATE ORDER BY ADJUDICATING ON THE ASSESSEES GROUND THAT THE ASSESSEE CANNOT BE EXIGIBLE TO TAXAT ION U/S. 115JB OF THE ACT. IN THIS REGARD, HE STATED THAT THERE ARE SEVERAL CASE LAWS ON THE SUBJECT THAT ASSESSEE IN THE NATURE OF FOREIGN COMPANY LIKE THE ASSESSEE IS NOT SUBJECT TO PROVISION OF SECTION 115JB OF THE INCOME TAX ACT, 1961. 10. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR' FOR SHORT) SUBMITTED A PAPER BOOK AND PLACED INTER ALIA RELIANCE UPON THE DECISION OF THE ITAT IN THE CASE OF DCIT(IT) VS. DEEP DRILLING 1 PTE. LTD. (IN ITA NO. 1387/MUM/2015 VIDE ORDER DATED 19.04.2017) WHERE ON SIMILAR FACTS, THE ITAT HAD OPINED THAT THE ASSESSEE HAD A PE IN INDIA. HOWEVER, THE LD. DR FAIRLY AGREED WITH THE SR. LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE OF EXIGIBILITY OF ASSESSEE TO TAXATION U/S. 115JB HAS NOT BEEN DULY ADJUDICATED BY THE LD. CIT(A). 11. UPON CAREFUL CONSIDERATION, WE NOTE THAT THE ISSUE OF ASSESSEES EXIGIBILITY TO TAXATION U/S. 115JB HAS NOT BEEN P ROPERLY DECIDED BY THE LD. CIT(A). HE HAS SUMMARILY DEALT WITH THE ISSUE. IT IS SETTLED LAW THAT THE ASSESSEE HAS AN INDEFEASIB LE RIGHT OF A SPEAKING ORDER. AS EXPOUNDED IN HONBLE MADRAS HIGH COURT DECISION IN THE CASE OF RAMDAS PHARMACY (SUPRA), LEAVING SO ME ISSUES UNDECIDED BY APPELLATE AUTHORITIES LEADS TO MULTIPLICATION OF PROCEEDINGS. HENCE, WE ACCEDE TO THE REQUEST OF SR. L D. COUNSEL OF THE ASSESSEE ON REMITTING THE ISSUE TO THE FILE OF THE LD. CIT(A) TO DULY DECIDE THE ISSUE OF ASSESSEES EXIGIBILITY TO TAX U/S. 115JB OF THE ACT. THE LD. CIT(A) IS DIRECTED TO COMPLETE 5 ITA NO. 5496/MUM/2014 M/S. ABAN 7PTE. LIMITED THE APPELLATE ORDER BY DULY DECIDING ON THE ISSUE OF ASS ESSEES EXIGIBILITY TO TAX U/S. 115JB BY A SPEAKING ORDER. AFTER THE ORDER OF THE LD. CIT(A) IS COMPLETE UPON ADJUDICATION ON THIS ISSUE, BOTH THE PARTIES WILL BE AT LIBERTY TO FILE NECESSARY APPEALS AS AND IF NECESSARY. ACCORDINGLY, THE ISSUE OF ASSESSEE S EXIGIBILITY TO TAX U/S. 115JB IS REMITTED TO THE FILE OF THE LD. CIT(A). IN VIEW OF OUR REMITTING THIS ISSUE TO THE FILE OF THE LD. CIT(A) SO AS TO COMPLETE HIS ORDER, THE OTHER ISSUE RAISED IN THIS APPEAL ARE NOT BEING ADJUDICATED. 12. BOTH THE COUNSE LS FAIRLY AGREED TO THE ABOVE PROPOSITION. 13. IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 05.09.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HA MIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 05.09.2018 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBA I 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI