Transocean Offshore International Ventures ltd., New Delhi V. Addl. DIT, Dehradun

ITA 5600/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4021 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 13-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHWANI MAHAJAN
• Keywords: Deemed to accrue or arise in india
• Section: 234B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5600/DEL./2010 (ASSESSMENT YEAR :2007-08) M/S. TRANSOCEAN OFFSHORE INTERNATIONAL VENTURE LTD. , VS. ADDL.DIT, C/O NANGIA & COMPANY, INTERNATIONAL TAXATION, CHARTERED ACCOUNTANTS, DEHRADUN. SUITE 4A, PLAZA M 6, JASOLA, NEW DELHI 110 025. (PAN : AABCT7361B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT ARORA, CA REVENUE BY : SHRI ASHWANI MAHAJAN, CIT DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDE R OF ADDITIONAL DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION, DEH RADUN DATED 25.10.2010 FOR THE ASSESSMENT YEAR 2007-08. THE GROUNDS RAISE D IN THE APPEAL ARE AS UNDER :- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING ASSESSMENT UNDER SECTION 144C/143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT') AT AN INCOME OF RS.728,669,805/- AS AGAINST THE INCOME OF RS.659,23 3,049/- RETURNED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN HOLDING THAT THE REIMBURSEMENT RECEIPTS AND RECEIPT S ON ACCOUNT ITA NO.5600/DEL./2010 2 OF MOBILIZATION WERE RS.219,948,941 AND RS.560,727, 355 AS OPPOSED TO RS.227,240,748 AND RS.467,126,819 RESPEC TIVELY, AS RETURNED BY THE APPELLANT. 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN HOLDING THAT REVENUES RECEIVED FROM ONGC & RELIANCE INDUSTRIES LIMITED TOWARDS REIMBURSEMENT OF EXPENSE S WOULD FORM PART OF GROSS CONTRACTUAL RECEIPTS FOR THE PUR POSE OF SECTION 44BB OF THE INCOME-TAX ACT, 1961. 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN HOLDING THAT MOBILIZATION FEES PERTAINING TO VOYAGE OF THE RIG OUTSIDE THE TERRITORIAL WATERS OF INDIA, WOULD FORM PART OF GROSS CONTRACTUAL RECEIPTS FOR THE PURPOSE OF SECTION 44B B OF THE INCOME-TAX ACT, 1961. 5. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT GRANTING CREDIT OF TDS AMOUNTING TO RS.325,855,099 AS CLAIMED IN THE RETURN OF INCOME. 6. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT ESPE CIALLY WHEN THERE WAS NO LIABILITY ON THE ASSESSEE TO PAY ADVAN CE TAX UNDER SECTION 209(1)(D) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE COMPANY FILED RETURN OF INCOME ON 1 .11.2007 DECLARING TOTAL INCOME AT RS.65,92,33,049/-. THE ASSESSEE IS A NON-RESIDENT COMPANY AND DURING THE YEAR, IT HAS OFFERED ITS REVENUE ON ACCOUNT OF CONTRACTS WITH ONGC AND RELIANCE INDUSTRIES LTD. THE RETURN WAS F ILED OF INCOME OF RS.6,49,06,37,168/- WORKED OUT @ 10% AS DEEMED PROF IT U/S 44BB(1) OF THE INCOME-TAX ACT, 1961. 3. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY ADJUDICATION. 4. IN THE GROUND NO.2, THE ASSESSEE HAS RAISED THE ISSUE REGARDING THE FIGURES TAKEN FOR REIMBURSEMENT RECEIPTS AND RECEIP TS ON ACCOUNT OF ITA NO.5600/DEL./2010 3 MOBILIZATION AT RS.219,948,941/- AND RS.560,727,355 /- RESPECTIVELY AS AGAINST THE FIGURES OF RS.227,240,748/- AND RS.467,126,819/ - RESPECTIVELY. 5. AT THE OUTSET OF THE HEARING, THE LEARNED AR CON CEDED THAT THIS IS AN APPARENT MISTAKE AND IT CAN BE RECTIFIED U/S 154 OF THE INCOME-TAX ACT BY ASSESSING OFFICER. THE ASSESSEE MAY FILE AN APPL ICATION U/S 154 BEFORE THE ASSESSING OFFICER FOR CORRECTION OF THE MISTAKE. T HE ASSESSING OFFICER MAY RECTIFY THE MISTAKE. HENCE, WE ARE NOT ADJUDICATIN G ON THIS GROUND. 6. GROUND NO.3 OF ASSESSEES APPEAL IS RELATED TO T HE REVENUES RECEIVED FROM ONGC & RELIANCE INDUSTRIES LTD. TOWARDS REIMBU RSEMENT OF EXPENSES WHICH HAD BEEN HELD TO FORM PART OF GROSS CONTRACTU AL RECEIPTS FOR THE PURPOSE OF WORKING OUT OF PROFIT UNDER SECTION 44BB OF THE INCOME-TAX ACT, 1961. 7. AT THE OUTSET OF THE HEARING, LEARNED AR SUBMITT ED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON 'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT AND ANR. VS. HALLIBURTON O FFSHORE SERVICES INC. - 300 ITR 265 (UTTARAKHAND). 8. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF HALLIBURTON OFFSHORE SERVICES INC. (SUPRA) AND THE HON'BLE HIGH COURT HAS HELD AS UNDER :- S.44BB OF THE INCOME TAX ACT, 1961 IS A COMPLETE C ODE IN ITSELF. IT PROVIDES BY A LEGAL FICTION THE PROFITS AND GAINS OF A NON-RESIDENT ASSESSEE ENGAGED IN THE BUSINESS OF OI L EXPLORATION AT 10 PER CENT OF THE AGGREGATE AMOUNT SPECIFIED IN SUB SECTION ITA NO.5600/DEL./2010 4 (2) CLAUSE(A) OF SUBSECTION(2) REFERS TO THE AMOUNT S, (A) PAID TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUN T OF THE PROVISION OF 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, MI NERAL OILS IN INDIA, AND (B) PAYABLE TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILIT IES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY O N HIRE USED, OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS IN INDIA. CLAUSE (B) OF SUB SECTI ON (2) REFERS TO THE AMOUNTS, (A) RECEIVED BY ASSESSEE IN INDIA ON A CCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED I N THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MI NERAL OILS OUTSIDE INDIA. THUS, IT IS CLEAR FROM A PERUSAL OF SECTION 44BB THAT ALL THE AMOUNTS EITHER PAID OR PAYABLE (WHETHE R IN OR OUT OF INDIA) ARE MUTUALLY INCLUSIVE. THIS AMOUNT IS THE BASIS OF DETERMINATION OF DEEMED PROFITS AND GAINS OF THE AS SESSEE AT 10 PER CENT. THE AMOUNT PAID OR RECEIVED REFERS TO TH E TOTAL PAYMENT TO THE ASSESSEE OR PAYABLE TO THE ASSESSEE OR DEEMED TO BE RECEIVED BY THE ASSESSEE, WHEREAS INCOME HAS BEE N DEFINED U/S 2(24) OF THE INCOME TAX ACT AND SECTION 5 AND 9 DEAL WITH THE INCOME AND ACCRUED INCOME AND DEEMED INCOME. THE ASSESSEE RENDERED SERVICES TO THE ONGC. FOR TH E A.Y. 1991-92, IT CLAIMED THAT THE AMOUNT OF RS. 6,16,989 /- RECEIVED ON ACCOUNT OF REIMBURSEMENT OF FREIGHT AND TRANSPOR TATION CHARGES ACTUALLY INCURRED IN RESPECT OF EQUIPMENT W AS NOT INCLUDIBLE WHILE COMPUTING ITS INCOME U/S 44BB. TH E A.O. REJECTED THE CLAIM BUT THE CIT(A) AND THE TRIBUNAL ACCEPTED IT. ON APPEAL TO THE HIGH COURT : HELD, ALLOWING THE APPEAL, THAT IT WAS NOT IN DISPU TE THAT THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE. THEREFOR E THE AO ADDED THE SAID AMOUNT WHICH WAS RECEIVED BY THE NON RESIDENT COMPANY RENDERING SERVICES UNDER THE PROVISIONS OF SECTION 44 BB TO THE ONGC AND IMPOSED THE INCOME TAX THEREON. HE WAS JUSTIFIED IN DOING SO. ITA NO.5600/DEL./2010 5 FACTS BEING THE SAME, RESPECTFULLY FOLLOWING THE AB OVE CITED ORDER OF HON'BLE UTTARAKHAND HIGH COURT, WE DISMISS GROUND NO.3 OF A SSESSEES APPEAL. 9. IN GROUND NO.4, THE ASSESSEE HAS RAISED THE ISSU E REGARDING THE MOBILIZATION FEES, WHICH IS CLAIMED TO BE PERTAININ G TO VOYAGE OF THE RIG OUTSIDE THE TERRITORIAL WATERS OF INDIA BUT HELD TO FORM PART OF GROSS CONTRACTUAL RECEIPT FOR THE PURPOSE OF SECTION 44BB OF THE ACT. 10. AT THE OUTSET, LEARNED AR FOR THE ASSESSEE SUBM ITTED THAT THIS ISSUE IS ALSO COVERED AGAINST THE ASSESSEE BY THE DECISION H ONBLE UTTARAKHAND HIGH COURT IN SEDCO FOREX INTERNATIONAL DRILLING INC. 299 ITR 238. THE LD.DR WAS ALSO HAVING THE SAME VIEW. 11. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT I N THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING INC. (SUPRA), THE HON' BLE UTTARAKHAND HIGH COURT HAS HELD AS UNDER :- HELD, DISMISSING THE APPEAL, THAT THE PAYMENT MADE TO THE ASSESSEE WAS OUTSIDE INDIA AND THE MOBILIZATION CHA RGES PAID TO THE ASSESSEE BY ONGC HAD NO NEXUS WITH THE ACTUAL A MOUNT INCURRED BY THE ASSESSEE FOR TRANSPORTATION OF DRIL LING UNITS OF RIGS TO THE SPECIFIED DRILLING LOCATIONS IN INDIA. THUS, THE MOBILIZATION CHARGES WERE NOT REIMBURSEMENT OF EXPE NDITURE. ONGC WAS LIABLE TO PAY A FIXED SUM AS STIPULATED IN THE CONTRACT REGARDLESS OF THE ACTUAL EXPENDITURE WHICH MIGHT BE INCURRED BY THE ASSESSEE FOR THE PURPOSE. IN VIEW OF THE FICTIO NAL TAXING PROVISION CONTAINED U/S 44BB, THE AO WAS RIGHT IN A DDING THE AMOUNT OF RS. 99,04,000/- FOR THE A.Y. 1986-87 AND THE AMOUNT OF RS. 64,64,530/- FOR THE A.Y. 1987-88 RECEIVED B Y THE ASSESSEE TOWARDS MOBILIZATION CHARGES FOR THE PURPO SE OF IMPOSING INCOME TAX AND THE CIT(A) AND THE TRIBUNAL WERE ALSO RIGHT IN UPHOLDING THE ORDER OF AO. ITA NO.5600/DEL./2010 6 FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE UTTARAKHAND HIGH COURT, WE DISMISS THIS GROUND OF A SSESSEES APPEAL. 12. IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THA T THE ASSESSING OFFICER ERRED IN NOT GRANTING THE CREDIT OF TDS AMOUNT TO R S.325,855,099/- AS CLAIMED IN THE RETURN OF INCOME. 13. WE HAVE HEARD BOTH THE SIDES. SINCE THIS ISSUE IS REQUIRED VERIFICATION AT THE LEVEL OF ASSESSING OFFICER FOR GRANTING CRED IT, WE RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO GIVE CREDIT AFTER DUE VERIFICATION. 14. IN GROUND NO.6, THE ISSUE IS RAISED REGARDING T HE LEVY OF INTEREST U/S 234B OF THE ACT ESPECIALLY WHEN THERE IS NO LIABILI TY ON THE ASSESSEE TO PAY ADVANCE TAX U/S 209(1)(D) OF THE INCOME-TAX ACT. 15. LEARNED AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF HON'BLE HIGH COURT AND ALSO IN THE CASES OF CIT VS. TIDE WATER MARINE INTERNATIONAL INC. 309 ITR 85 (UTTARAKHAND), DIT VS. JACABS CIVIL INCORPORATED - 235 CTR 123 (DE L.), DIRECTOR OF INCOME- TAX (INTERNATIONAL TAXATION) VS. NGC NETWORK ASIA 313 ITR 187 (BOM.) AND CIT VS. SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. 264 ITR 320. 16. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT I N THE CASE OF CIT VS. TIDE WATER MARINE INTERNATIONAL INC. (SUPRA), THE H ON'BLE UTTARAKHAND HIGH COURT HAS HELD AS UNDER :- THE ASSESSEE, A NON-RESIDENT FOREIGN COMPANY, WAS ENGAGED IN THE BUSINESS OF EXPLORATION OF MINERAL O ILS BY ANOTHER ITA NO.5600/DEL./2010 7 NON-RESIDENT FOREIGN COMPANY, WHICH DID NOT DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE INCOME-TAX ACT, 196 1 ON PAYMENT TO THE ASSESSEE. THE ASSESSING OFFICER GAV E DIRECTIONS TO CHARGE INTEREST UNDER SECTION 234B OF THE ACT WH ILE ASSESSING THE ASSESSEE UNDER SECTION 143 OF THE ACT. THE TRI BUNAL HELD THAT THE INTEREST WAS NOT PAYABLE BY THE ASSESSEE U NDER SECTION 234B OF THE ACT. ON FURTHER APPEAL : HELD, DISMISSING THE APPEALS, THERE WAS NO ILLEGAL ITY IN THE TRIBUNALS ORDER SINCE THE ASSESSEE COULD NOT BE MA DE LIABLE TO PAY THE INTEREST UNDER SECTION 234B OF THE ACT AS I T WAS THE DUTY OF THE NON-RESIDENT FOREIGN COMPANY WHICH HAD ENGAG ED THE ASSESSEE TO DEDUCT THE TAX AT SOURCE. FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE UTTARAKHAND HIGH COURT, WE ALLOW THIS GROUND OF ASS ESSEES APPEAL. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 20 TH DAY OF MAY, 2011. SD/- SD/- (A.D. JAIN) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 20 TH DAY OF MAY, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.ADDL.DIT, INTERNATIONAL TAXATION, DEHRADUN. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.