M/s. Ensco Maritime Limited, New Delhi V. DDIT, Dehradun

ITA 5624/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5152 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-08-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: AMIT ARORA CA SH VISHAL MISRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NOS.-5624/DEL/2014 ( ASSESSMENT YEAR: 2011-12) ENSCO MARITIME LIMITED C/O NANGIA & CO., SUITE 4A PLAZA, M-6, JASOLA, NEW DELHI. AABCE1178P VS DDIT INTERNATIONAL TAXATION, DEHRADUN. ASSESSEE BY SH. AMIT ARORA, CA SH. VISHAL MISRA, CA REVENUE BY SH. GAURAV DUDEJA, SR. DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL AGAINST THE ASSESSMENT ORDER DAT ED 03.09.2014 PASSED U/S 143(3)/144C(13) OF THE INCOME TAX ACT (FOR SHORT HEREINAFTER CALLED THE ACT) PURSUANT TO THE DIRECTIONS U/S 144C(5) OF THE ACT PASSED BY THE DISPUTE RESOLUTION PANEL-II, NEW DELHI ON 25.08.2014. DATE OF HEARING 01.08.2017 DATE OF PRONOUNCEMENT 02.08.2017 2 ITA NO. 5624/DEL/2014 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON-RESIDENT COMPANY ENGAGED IN THE BUSINESS OF PROVIDING OFFSHO RE DRILLING SERVICES FOR EXPLORATION AND PRODUCTION OF MINERAL OIL AND GAS AND SUCH SERVICES ENTAILS PROVIDING OFFSHORE MOBILE JAC K-UP RIGS AND OPERATING PERSONNEL IN RESPECT OF DRILLING OPERATIO NS TO BE CARRIED OUT IN THE PANNA/MUKTA CONTRACT AREAS. IN THE AY 2 011-12 THE ASSESSEE EXECUTED THE CONTRACT WITH BG EXPLORATION AND PRODUCTION INDIA LIMITED. ON 27.09.2011 THE ASSESS EE FILED THEIR RETURN OF INCOME FOR THE AY 2011-12 DECLARING A TOT AL INCOME OF RS. 3,91,17,640/- AND DURING THE SCRUTINY U/S 143(3 ) OF THE ACT, AO PROPOSED CERTAIN ADDITIONS OF AMOUNTS, WHICH THE ASSESSEE REDUCED FROM THE GROSS RECEIPTS FOR WORKING OUT PRO FITS U/S 44BB OF THE ACT AND SUCH ADDITIONS ARE: I. DEMOBILIZATION CHARGES AMOUNTING TO RS. 9,29, 51,439/- II. RECEIPTS ON ACCOUNT OF REIMBURSEMENTS RS. 8 4,70,298/- III. RECEIPTS ON ACCOUNT OF SERVICE TAX RS. 5,16,47 ,646/- TOTAL RS. 15,30,69,383/- WHEN THE ASSESSEE CARRIED THE MATTER BEFORE THE DIS PUTE RESOLUTION PANEL-II BY WAY OF ORDER DATED 25.08.201 4, THE DISPUTE RESOLUTION PANEL CONFIRMED THE ADDITIONS ON THE GRO UND THAT IN RESPECT OF THE ADDITION OF RS. 9,29,51,429/- AND 84 ,70,289/-, 3 ITA NO. 5624/DEL/2014 RECORDING THE CONCESSION MADE BY THE AR, THAT THE A DDITIONS ON THESE COUNTS WERE CONFIRMED BY THE DRP IN ASSESSEE S OWN CASE FOR PRECEDING THREE YEARS NAMELY AY 2008-09 TO 2010 -11 AND THE MATTER WAS PENDING BEFORE THE FURTHER APPELLATE AUT HORITIES. INSOFAR AS THE SERVICE TAX ASPECT IS CONCERNED, DRP CONFIRMED THE SAME FOR AY 2010-11 AND FOR THE PRECEDING TWO YEARS THE MATTER WAS REMANDED BY THE ITAT TO DRP FOR A DETERMINATION AS THE DRP HAD NOT ADJUDICATED UPON THE SAID ISSUE. BASING ON THE DIRECTIONS OF THE DRP AO PASSED THE ASSESSMENT ORDER DATED 03. 09.2014 MAKING SUCH ADDITIONS THREE COUNTS. 3. AGGRIEVED BY THE SAME THE ASSESSEE IS BEFORE US IN THIS APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. AO/DRP HAS ERRED IN HOLDING THAT DEMOBILIZATION REVENUE OF RS. 92,951,439/-, WHICH IS PROPORTIONATE TO THE VOYAGE UNDERTAKEN BY THE RIG OUTSIDE INDIAN TERRITORIAL WATERS, IS TO BE INCLUDED IN GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING INCOM E UNDER 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 HOLDING THAT RECEIPTS AGAINST THE REIMBURS EMENT OF EXPENSES INCURRED ON BEHALF OF THE CUSTOMER OF RS. 8,470,289/-, ARE TO BE INCLUDED IN THE GROSS RECEIPTS FOR THE PU RPOSE OF DETERMINING INCOME UNDER THE SUB-SECTION (1) OF SEC TION 44BB OF THE INCOME TAX ACT, 1961. 4 ITA NO. 5624/DEL/2014 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED IN HOLDING THAT RECEIPTS AGAINST THE SERVICE TAX AMOUNTING TO RS. 51,647,646/-, ARE TO BE INCLUDED IN THE GROS S RECEIPTS FOR THE PURPOSE OF DETERMINING INCOME UNDER SUB-SECTION (1) OF SECTION 44BB OF THE INCOME TAX ACT, 1961. 4. WHETHER ON THE FACTS OF THE CASE THE DRP ERRED IN L AW IN NOT FOLLOWING THE ORDER OF THE ITAT DELHI BENCH IN THE CASE OF SEDCO FOREX DRILLING INCORPORATION IN ITA NO. 5284/DEL/20 11, WHEREIN IT WAS HELD THAT THE RECEIPTS ON ACCOUNT OF SERVICE TAX BEING A STATUTORY CHARGE CANNOT FORM PART OF THE REVENUE FO R THE PURPOSE OF DEEMED PROFIT UNDER SECTION 44BB OF THE INCOME T AX ACT, 1961. APPELLANT PRAYS THAT THE ERRONEOUS ORDER BE CANCELL ED AND APPROPRIATE RELIEF MAY BE GRANTED TO THE APPELLANT. APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AMEND, VAR Y, OMIT, SUBSTITUTE OR DELETE ANY OF THE AFOREMENTIONED GROU NDS OF APPEAL OR ADD A NEW GROUND OR GROUNDS OF APPEAL AT ANY TIME B EFORE OR AT THE TIME OF HEARING OF THE APPEAL. 4. LD. AR PLACED RELIANCE ON THE DECISION OF THIS T RIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2010-11 IN ITA NO. 5482/DEL/2013, WHERE UNDER GROUNDS NO. 1 & 2 ARE DE CIDED IN FAVOUR OF THE REVENUE, WHEREAS GROUNDS NO. 3 & 4 AR E DECIDED IN FAVOUR OF THE ASSESSEE. LD. DR HEAVILY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY GONE THROUGH THE MATERIAL PAPE RS AVAILABLE ON RECORD IN THIS MATTER IN THE LIGHT OF THE DECISI ON OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2010-11 IN ITA NO . 5482/DEL/2014. THERE IS NO DISPUTE AS TO THE SIMIL ARITY OF THE 5 ITA NO. 5624/DEL/2014 FACTS INVOLVED IN THESE TWO CASES. IN RESPECT OF D EMOBILIZATION REVENUE OF RS. 92,951,439/-, WHICH IS PROPORTIONATE TO THE VOYAGE UNDERTAKEN BY THE RIG OUTSIDE INDIAN TERRITORIAL WA TERS, WHILE RELYING UPON THE DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 4906/DEL/2012 FOR THE AY 2009-10 IN THE CAS E OF WESTERNGCO INTERNATIOANL LTD. VS. ADIT (INTT. TAXAT ION), DEHRADUN VIDE ORDER DATED 24.01.2014 AND THE DECISION OF HON BLE UTTRAKHAND HIGH COURT IN THE CASE OF SEDCO FOREX IN TERNATIONAL INC. 299 ITR 238 IT WAS HELD IN ITA NO. 5482/DEL/20 14, THAT THE CONTENTION OF THE ASSESSEE THAT THE PAYMENT WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE COMPANY AND WAS NOT INCOME, WAS NOT ACCEPTABLE. THERE IS NO CHA NGE OF FACTS IN THIS MATTER AS SUCH WHILE FOLLOWING THE DECISION OF THE HONBLE UTTRAKHAND HIGH COURT AND THE COORDINATE BENCH OF T HIS TRIBUNAL, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. HENCE, GROUND NO. 1 IS DISMISSED. 6. NOW TURNING TO GROUND NO. 2 REGARDING THE REIMBU RSEMENT OF EXPENSES OF RS. 84,70,289/-, VIDE PARAGRAPH NO. 8 & 8.1 IN ITA NO. 5482/DEL/2013 THIS TRIBUNAL REFERRED TO THE DECISIO N OF A 6 ITA NO. 5624/DEL/2014 COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/ S SEDCO FOREX INTERNATIONAL DRILLING INC. VS. ADIT (INTT. TAXATIO N), DEHRADUN IN ITA NO. 504/DEL/2013 FOR THE AY 2009-10 WHICH IN TU RN FOLLOWED THE DECISION OF THE HONBLE HIGH COURT OF UTTRAKHAN D IN THE CASE OF CIT VS. HALLIBURTON OFFSHORE SERVICES INC. (2008) 3 00 ITR 265 (UTTARAKHAND) AND HELD THAT THE RECEIPTS AGAINST TH E REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF THE CUSTOMER CANNOT BE INCLUDED IN THE GROSS RECEIPTS FOR THE PU RPOSE OF DETERMINING INCOME UNDER THE SUB-SECTION (1) OF SEC TION 44BB OF THE INCOME TAX ACT, 1961, AND ACCORDINGLY HELD THE ISSUE AGAINST THE ASSESSEE. IN VIEW OF THIS ESTABLISH POSITION O F LAW WHILE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. HALLIBURTON OFFSHORE SERVICES INC. (SUPRA) WE DECIDE THE ISSUE AGAINST THE REVENUE. 7. NOW COMING TO GROUNDS NO. 3 & 4 WHICH ARE INTERR ELATED, LD. AR PLACES RELIANCE ON THE ABOVE DECISION IN ASSESSE ES OWN CASE AND VIDE PARAGRAPH NO. 9 A COORDINATE BENCH OF THIS TRIBUNAL WHILE RELYING UPON THE DECISION OF THE HONBLE UTTARAKHAN D HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONA L TAXATION) VS. 7 ITA NO. 5624/DEL/2014 SCHLUMBERGER ASIA SERVICES LTD. (2009) 317 ITR 156 (UTTARAKHAND) HELD THAT THE SERVICE TAX PAID BY THE ASSESSEE COUL D NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFIT U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. RESP ECTFULLY FOLLOWING THIS LINE OF JUDICIAL DECISIONS, WE DECID E THIS GROUND IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO DELETE A SUM OF RS. 5,16,47,646/-. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.2017 SD/- SD/- (B.P. JAIN) (K. NARSIM HA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 02.08.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 5624/DEL/2014 DRAFT DICTATED ON 01.08.2017 DRAFT PLACED BEFORE AUTHOR 02.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 02.08.2017 APPROVED DRAFT COMES TO THE SR.PS/PS 02.08.2017 KEPT FOR PRONOUNCEMENT ON 02.08.2017 FILE SENT TO THE BENCH CLERK 02.08.2017 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.