Swiber Offshore Marine Pte. Ltd., Mumbai V. ADIT, Dehradun

ITA 5652/DEL/2011

• Counselvise Citation: 565220114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 19-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 16-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV VERMA
• Assessee Lawyers: S D KAPILA; SWETA KARIA
• Keywords: Double taxation relief
• Section: 147; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G N EW DELHI BEFORE SHRI H.S. SIDHU , JUDICIAL MEMBER AND SHRI J.S. REDDY , ACCOUNTANT MEMBER IT A NO . 5652 / DEL / 20 1 1 ( ASSESSMENT Y EAR 200 5 - 0 6 ) SWIBER OFFSHORE MARINE PTE LTD. VS. ASSISTANT DIRECTOR OF INCOME TAX 502, B - WING, DELPHI DEHRA DUN HIRANANDANI BUSINESS PARK, POWAI, MUMBAI - 400076 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.D. KAPILA, AND SHRI O.P. SAPRA, ADVOCATES, SHRI DEVESH K SHAH, R.R. MAURYA, AND MS. SWETA KARIA, CA RESPONDENT BY : S HRI SANJEEV VERMA, DR ORDER PER J.S. REDDY , A . M : 1. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A), DEHRADUN DATED 19.09.2011 FOR THE A.Y. 2005 - 06. 2. THE ASSES SEE IS A COMPANY INCORPORATED AND REGISTERED IN SINGAPORE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITHIN PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OR EXTRACTION OF MINERAL OILS. 3. DURING THE FINANCIA L YEAR 2004 - 05 RELEVANT TO THE A.Y. 2005 - 06 , THE ASSESSEE HAS ENTERED INTO CONTRACT WITH ENGINEERS INDIA LTD. FOR TRANSPORTATION OF ITA NO.5652 /DEL/ 2011 2 COATED MATERIAL FROM MDLS AL L OCK YARD TO MUMBAI HIGH NORTH FIELD FOR ONGCS LTD. AND MHNRD THREE PIPELINE PROJECTS. THE COM PANY FILED ITS RETURN OF INCOME ON 14.02.2006 DECLARING TOTAL INCOME AS RS.21,03,200/ - BY APPLYING THE PROVISIONS OF SECTION 44BB OF THE INCOME TAX ACT, 1961. 4. NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 31.03.2010 FOR REOPENING THE ASSESSMENT UND ER SECTION 147 OF THE ACT THEREAFTER THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER BY HOLDING AS FOLLOWS: - WHEREAS THE SERVICES OR FACILITIES WHICH ARE PROVIDED IN CONNECTION WITH PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS ARE ELIGIBLE FOR THE BENEFIT OF SEC. 44BB. THE ASSESSEE IS MERELY ENGAGED IN THE TRANSPORTATION BUSINESS WHICH NOT AT ALL CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OILS. THE PROVISIONS OF SEC 44BB DOES NOT APPLY IN THE CASE OF THE ASSESSE E WHO IS NOT UNDERTAKING THE ACTIVITIES SPECIFIED IN SEC 44BB ITSELF. ALSO, THE PROVISIONS OF SEC 44BB WERE MEANT FOR THE ENTITIES WHICH INCUR HUGE EXPENSES AND WHICH ARE COMPLEX IN NATURE WHICH MAKE IT DIFFICULT TO COMPUTE INCOME UNDER ARTICLE 7 OF DTAA. THEREFORE, TO SIMPLIFY THE COMPUTATION OF INCOME, SUCH PROVISIONS WERE INTRODUCED. IN CASES LIKE THAT OF THE ASSESSEE THERE ARE NO EXPENSES OF COMPLEX NATURE AND IT IS NOT AT ALL DIFFICULT TO DETERMINE ACTUAL TAXABLE INCOME IN THE CASE OF THE ASSESSEE. TH US THE BENEFIT OF SECTION 44BB CANNOT BE PROVIDED TO THE ASSESSEE. 5. THE A.O. ALSO GAVE REASONS FOR REASSESSMENT. ON APPEAL , THE FIRST APPELLATE AUTHORITY UPHELD THE VALIDITY OF THE REOPENING. ON THE ISSUE OF APPLICABILITY OF SECTION 44BB THE LD. CIT(A ) OF PARA 6.1 TO 6.3 HELD AS FOLLOWS: - 6.1 THIS ISSUE HAS BEEN CAREFULLY EXAMINED IN THE LIGHT OF CASE LAWS CITED BY THE LD. AR, FINDING IN THE BODY OF ASSESSMENT ORDER AND FINALLY AN EXAMINATION OF THE CONTRACT DOCUMENT, ALONG WITH INVOICES ITA NO.5652 /DEL/ 2011 3 RAISED TO M/S EIL, FILE DURING APPELLATE PROCEEDINGS. THE FOLLOWING FACTS EMERGE: - (1) THE APPELLANT IS A SUB CONTRACTOR OF M/S ENGINEERS INDIA LTD. (EIL) AS SEEN FROM THE INVOICES RAISED FROM TIME TO TIME AND CLAUSE AA TITLED SCOPE OF WORK OF THE TRANSPORTATION SUB CONTRACTOR. THUS IT IS SEEN THAT THE APPELLANT HAS NOT BEEN DIRECTLY ENGAGED BY M/S ONGC. (2) THE JOB ASSIGNED IS OF A TRANSPORTER AS PER THE STIPULATION IN THE BID DOCUMENT AS UNDER: - EIL WISHES TO APPOINT A TRANSPORTATION SUB CONTRACTOR FOR THE COAT ED MATERIAL FROM MDLS ALCOCK YARD AT MUMBAI HIGH NORTH FIELD. A FINDING TO THIS EFFECT HAS ALSO BEEN GIVEN BY THE LD. AO IN THE LAST PARAGRAPTH ON SECOND PAGE OF THE ASSESSMENT ORDER. 6.2. THE AUTHORITIES CITED BY THE LD. AR LAY DOWN THE PRINCIPLE THAT IF THE ACTIVITIES FOR EARNING INCOME HAVE A PROXIMATE NEXUS TO THE PROSPECTING FOR, PRODUCTION OR EXTRACTION OF MINERAL OILS THEN SEC. 44BB OF THE ACT APPLIES. IN THIS CASE THE APPELLANT IS MERELY PROVIDING SPEC I ALIZED SERVICES IN TRANSPORTING EQUIPMENT/M ATERIAL ON BEHALF OF M/S EIL, WHO IN TURN ARE THE MAIN CONTRACTORS TO M/S ONGC. THUS, THE APPELLANT HAS FAILED TO ESTABLISH A DIRECT NEXUS WITH PRODUCTION, EXTRACTION AND EX PLORATION OF MINERAL OILS AND WOULD THUS NOT QUALIFY AS A CASE FALLING WITHIN SECTI ON 44BB OF THE ACT. THE FOLLOWING AUTHORITIES ARE BEING RELIED UPON TO ARRIVE AT THE ABOVE CONCLUSIONS: - (1) ARB INC. VS. JCIT, 93 ITD 520 (DEL) (2) ONGC VS. IAC, 29 ITD 422 (DEL) (3) ONGC VS ACIT, CIRCLE - 1, DEHRADUN, 9 SOT 8 (DELHI - SMC) 4. CIT VS. ONG C LTD., 179 TAXMAN 257 (UTTRAKHAND). 6.3 IN VIEW OF THE ABOVE FINDING OF THE FACT AND THE PRINCIPLES LAID DOWN IN THE CASES CITED ABOVE, THE ACTION OF LD. AO IS UPHELD AND THIS GROUND IS DISMISSED. 6. AGGRIEVED THE ASSESSEE BEFORE US ON THE FOLLOWING GROU NDS: - TH E UNDER MENTIONED GROUNDS OF APPEAL AR E WITHOUT PREJUDICE TO ONE ANOTHER . 1. T H A T ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE ITA NO.5652 /DEL/ 2011 4 COMMISSION E R OF INCOME TAX (APPE A L) [ HEREINAFTER REFERRED TO AS ' CIT(A) ' ] HAS ERRED IN H O LDING THAT RE ASSESSMENT MADE BY ASSESSING O F FICER IS IN ACCORDANCE WITH T HE PROVISIONS OF SECTION 148 O F THE ACT . 2. THE CIT (A) HA S ERR E D IN LAW AND ON FACTS IN HOLDING THAT SECTION 44BB IS NOT APPLICABLE TO YOUR APPELLANT . 3 . THE CIT (A) HAS ERRONEOUSLY HELD T HAT T HE APPE LL ANT HAS MERELY ENGAG E D IN THE TRANSPORTATION BUSINESS WHICH IS NOT CONNECTED WITH PROSPECTING , EXTRACTION OR PRODUCTION OF MINERAL OILS. 4. T HAT ON THE FACT S A ND THE CIRCUMS T ANCES O F THE CASE AND IN LAW, THE C I T ( A ) HA S ERRONEOUSLY HELD THAT SECTI ON 44BB COV E RS ONLY FIRST LEG CONTRACTOR , WH O A R E HAVING DIR E CT CONTRACT W I TH ON GC . 5. THAT ON TH E FACTS AND TH E CIRCUMSTANCES OF THE CASE AND I N LAW , C I T (A) HAS ERRED IN TAXING INCOME BY APPLYIN G DEE M ED PROFIT RATE @ 25% INSTEAD OF TAXING U / S 44BB OF TH E ACT . 6. THAT ON THE FACT S AND T HE CIRCUMSTANCES OF THE CASE AND I N LAW, THE CI T ( A) H AS ER R ED IN UPHOLDING TH E LEVY OF P E NALTY U / S 271B OF THE INCOME TAX ACT . 7. WE HAVE HEARD SHRI S.D. KAPILA, LD. COUNSEL FOR THE ASSESSEE AND SHRI SANJEEV VERMA, LD. C.I.T. (D R ) ON BEHALF OF REVENUE. 8. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE H O LD AS FOLLOWS: - 8.1 GROUND NO.1 IS ON THE ISSUE OF REOPENING T HE SAME I S DISMISSED AS NOT PRESSED. GROUND NO.6 IS DISMISSED AS PREMATURE. 8.2. THE GROUNDS NO. 2 TO 5 ARE ON THE ISSUE OF APPLICABILITY OF SECTION 44BB TO THE FACTS OF THE CASE. THESE GROUNDS HAVE TO BE ADJUDICATED. ITA NO.5652 /DEL/ 2011 5 9. THE ASSESSEE HAS FILED A PAPER BOOK RUNNING INTO 173 PAGES . AT PAGES 61 AND 62 OF THIS PAPER BOOK , THE SCOPE OF WORK AS PER THE LETTER INVITING BID B Y ENGINEERS INDIA LTD. IS GIVEN T HIS IS EXTRACTED FOR READY REFERENCE. 9.1 PARA AA UPTO PARA BB READS AS UNDER : AA. SCOPE OF WORK OF THE TRANSPORTAT ION SUB - CONTRACTOR BIDDERS SCOPE OF WORK SHALL BE BUT NOT LIMITED TO THE FOLLOWING: 1. TRANSPORTATION ANLAYSIS/ENGINEERING INCLUDING SEA FASTENING ENGINEERING. 2. MOBILIZATION OF CARGO BARGE AT MDLS ALCOCK YARD TRANSPORTING APPROXIMATELY 2100 METRIC TONS COA TED PIPES, RISERS, & RISER BENDS FROM MDLS A LOCK YARD TO MUMBAI HIGH NORTH FIELD TILL THE COMPLETION OF LAYING OF LINEPIPES AND RISERS AND RISER BENDS. 3. LOAD - OUT OF COATED PIPES, RISERS & RISER BENDS ON CARGO BARGE MOBILIZED BY THE BIDDER FROM MDLS ALOCK YARD. 4. THE FABRICATION WORK (I.E. SUPPORTS ETC.) OF SEA FASTENING (MATERIALS AS AVAILABLE SHALL BE SUPPLIED AS FIM TO CONTRACTOR) AS PER THE ENGINEERING REQUIREMENT. 5. SUPPLY OF WOODEN DUNCANS AS PER THE REQUIREMENT 6. SEA - FASTENING OF COATED PIPES, RISERS, & R ISER BENDS AT CARGO BARGE MOBILIZED BY THE BIDDER. THE SEA - FASTENING MATERIAL AS AVAILABLE SHALL BE SUPPLIED BY EIL AT THE MDLS ALOCK YARD TO THE BIDDER. 7. LASHING SLINGS 9 NOS. AND TURN BUCKLES 15 NOS. ARE ONLY AVAILABLE AND THE SAME SHALL BE HANDED OVER T O CONTRACTOR. BALANCE SLINGS/TURN BUCKLES, IF REQUIRED, SHALL BE SUPPLIED BY CONTRACTOR. 8. GETTING CLEARANCE FROM ALL STATUTORY BODIES AT THE MUMBAI PORTS FOR THE CARGO BARGE AND THE COATED MATERIALS. 9. BERTHING OF CARGO BARGE AT OFFSHORE SITE TILL THE UNLOADI NG OF LAST PIPE AT THE PIPE LAY BARGE OF INSTALLATION SUB - CONTRACTOR(MAXIMUM 20 DAYS). 10. INTER - FIELD MOVEMENTS OF CARGO BARGE AT OFFSHORE AS PER REQUIREMENT OF LAY BARGE DURING INSTALLATION. 11. BIDDER TO FOLLOW ALL RULES, REGULATIONS AND WORKING DURATION OF MDL WHILE CARRYING OUT OPERATIONS WHICH INCLUDE NOT ONLY COORDINATION WITH ITA NO.5652 /DEL/ 2011 6 MDL BUT ALSO OBTAINING WORK PERMITS, ENTRY PASSES, ETC FROM RESPECTIVE MDL DEPARTMENTS. BB. SCOPE OF WORK EIL SUPPLY OF SEA - FASTENING MATERIAL FOR FASTENING THE COATED PIPES, RISERS, R ISER - BENDS AVAILABLE AT MDLS ALOCK YARD. 10. THE PRICE SCHEDULE IS AT PAGE 47 OF THE PAPER BOOK , WHICH IS FOLLOWS: - ONGCS MHNRD 3 PIPELINES PROJECT PRICE SCHEDULE LUMP SUM PRICE INCLUSIVE OF ALL TAXES AND DUTIES FOR TRANSPORTATION OF COATED PIPES, RIS ER5S, & RISDER CLAMPS FROM MDLS ALOCK YARD, MUMBAI TO MUMBAI HIGH NORTH FIELD TILL THE COMPLETION OF LAYING OF LINEPIPES AND RISERS AND RISER BENDS INCLUDING LOAD - OUT OF COATED PIPES, RISERS, & RISER BENDS AND FABRICATION OF SEA - FASTENING SUPPORT AND SEA - FASTENING OF COATED PIPES, RISERS, & RISER BENDS ON CARGO BARGE AS PER THE DETAILS MENTIONED IN THE RELEVANT SECTIONS OF ONGC TENDER DOCUMENT NO. MR/OW/MM/3WIPL/07/2003 DATED JUNE 2003. S.NO. DESCRIPTIONS PRICE IN US $ 1.0 DETAILED ENGINEERING FOR LOAD - O UT, SEA FASTENING & TRANSPORTATION ANALYSIS/ENGINEERING 10,000.00 2.0 MOBILIZATION OF CARGO BARGE AT MDLS AL C OCK YARD FOR TRANSPORTING APPROXIMATELY 2100 METRIC TONS COATED PIPES, RISERS, & RISER BENDS FROM MDLS ALCOCK YARD TO MUMBAI HIGH NORTH FIELD TI LL THE COMPLETION OF LAYING OF LINE PIPES AND RISERS AND RISER BENDS 310,000.00 3.0 FABRICATION OF SEA - FASTENING SUPPORTS, ETC. 10,000.00 4.0 LOAD - OUT OF COATED PIPES, RISERS, & RISER BENDS ON CARGO BARGE MOBILIZED BY THE BIDDER FROM MDLS ALCOCK YARD. 8,000.00 5.0 SEA FASTENING OF COATED PIPES, RISERS, & RISER BENDS AT CARGO BARGE MOBILIZED BY THE BIDDER. (SEA - FASTENING MATERIAL SHALL BE PROVIDED BY EIL AT THE MDLS ALCOCK YARD). 8,000.00 6. DEMOBILIZATION FROM OFFSHORE 132,000.00 TOTAL PRICE 478,000.00 ITA NO.5652 /DEL/ 2011 7 11. PERUSAL OF THE ABOVE FACTS OF THE CASE DEMONSTRATE THAT THE SCOPE OF THE WORK IS NOT LIMITED TO THE TRANSPORTATION OF COATED PIPES ALONE, BUT ALSO FOR MANY OTHER ACTIVITIES LISTED IN THE SCOPE OF WORK AND PRIC E SCHEDULE. THE ASSESSEE IS , IN OUR VIEW ENGAGED IN PROVIDING SERVICES IN CONNECTION WITH PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF MINERAL OILS BY ONGC. 12. IN OUR VIEW THE LD. COUNSEL FOR THE ASSESSEE RIGHTLY RELIED ON THE DECISION OF THE MUMBAI L BENCH OF THE TRIBUNAL IN THE CASE OF ADIT (IT) - 2(1), VS. M/S. VALENTINE MARITIME (GULF) LLC (VMGL) IN ITA NOS. 700/MUM/2009 AND 701/MUM/2009 ORDER DATED 27.11.2013 WHICH IS A CASE WHERE SIMILAR ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE . O N SIMILAR FA CTS THE ITAT HELD AS FOLLOWS : - 3. THE ASSESSEE IS A NON - RESIDENT COMPANY ENGAGED IN THE BUSINESS OF PROVIDING TECHNICAL/ENGINEERING SERVICES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EXECUTED THE CONTRACT WITH ENGINEERS INDIA LTD. FOR LAYING/INS TALLA TION OF LINE PIPES FOR THESE PIP ELINE PROJECTS IN MUMBAI HIGH NORTH FIELD. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED TO BE A FOREIGN COMPANY INCORPORATED IN ABU DHABI, (UAE). THE ASSESSEE ALSO C LAIMED TO BE GOVERNED BY THE PROVISIONS OF DOUBLE TAX ATION A V OIDANCE AGREEMENT (DT AA ) BETWEEN INDIA AND UAE. THE AO CAREFULLY CONSIDERED THE DTAA AND CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT ELIGIBLE TO C LAIM THE BENEFITS OF THE AGREEMENT FOR A V OIDANCE OF DOUBLE TAXATION EXECUTED BETWEEN INDIA AND U AE. THERE F ORE , THE ASSESSEE WOULD BE GOVERNED B Y DOMESTIC INDIAN TAXATION LAW I . E. INCOME TAX ACT 1961. 3.1 DU R ING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOT I CED THAT THE A S SE SS EE HAS RECEI V ED PAYMENTS ITA NO.5652 /DEL/ 2011 8 AMOUNTING TO US$ 62 , 54,591/ - I . E. RS. 27 , 41,04 , 186/ - . THESE PAYMENTS WERE RECEI V ED UNDER VARIOUS HEADS SUCH AS MATERIAL , MOBILIZATION, INSTALLATION ETC. THE AO CONSIDERED THESE PAYMENTS RECEI V ED BY THE ASSESSEE IN THE LIGHT OF THE AGREEMENT OF THE ASSESSEE WITH ENGINEERS INDIA LTD., AS ALSO TO THE ORIGINAL BIDDING DOCUMENTS OF ONGC . THE AO ALSO OBSERVED THAT THE ASSESSEE HAS C LAIMED THAT ITS INCOME IS TAXABLE U/S. 44BB OF THE ACT . HOW EV ER , THE AO WA S OF THE OPINION THAT CONSIDERING THE V ARIOUS C LAUSES OF THE AGREEMENT RELATING TO THE S COPE OF SER V ICES RENDERED B Y THE A SSES S EE, THE ASSESSEE IS ALSO PROVIDING TECHNICAL SERVICES. THE AO FURTHER OB S ER V ED THAT THE CLAIM OF DEDUCTION FOR MOBILIZATION , DEMOBILIZATION EXPENSES BY THE ASSESSEE IS NOT TENABLE IN LAW AS PER THE RECENT DECISION OF THE HON ' BLE UTTARKHAND HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATION A L INC V S CIT IN ITA NO.99 OF 1999 NEW NO. 434 OF 2001 . THE AO WENT ON TO COMPUTE THE INCOME BY BIFURCATING THE TOTAL PAYMENTS RECEIVED BY THE ASSESSEE UNDER TWO HEADS (A) DEEMED INC OME U/S. 44BB AT THE RATE OF 10 % OF RS.12,97,61,300/ - COMPUTED THE TAXABLE INCOME UNDER THIS HEAD AS RS.12,97,61 , 30/ - AND (B ) FEES - FOR TECHNICAL SERVICES RS. L4,43 , 42,885/ - . 9. WE HA V E CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCES BROUGHT ON RECORD. THE ENTIRE DISPUTE REVOLVES AROUND WHETHER PART OF THE PAYMENT RECEI V ED BY THE ASSESSEE CAN BE CONSIDERED AS FEE FOR TECHNICAL SERVICES AND WHETHER THE OTHER PART WOULD BE ASSESSED UNDER T HE PRESUMPTIVE TAX OF SEC. 44BB OF THE ACT . IT IS NOT IN DISPUTE THAT BY SUB - CONTRACT AGREEMENT BETWEEN ENGINEERS INDIA LTD AND THE ASSESSEE, THE ASSESSEE WAS GIVEN A TURNKEY PROJECT FOR LAYING AND INSTALLATION OF PIPE LINES. IT IS A SETTLED PROPOSITION OF LAW THAT WHEN A CONTRACT CONSISTS OF A NUMBER OF TERMS AND CONDITIONS EACH CONDITION DOES NOT FORM SEPARATE CONTRACT . THE CONTRACT HAS TO BE REA D AS A WHOLE AS LAID DOW N B Y THE HON ' BLE SUPREME COUR T IN T HE CA S E O F CHATURBU J V ALLABHDAS AIR 1954 ( SC ) 236 . 9 .1. A CAREFUL PERUSAL OF THE VARIOUS CLAUSES OF THE CONTRACT IN THE HIGH OF THE PROVISIONS OF SEC.44BB WHICH READS AS UNDER: - '44B B . (1) NOTWITHSTANDING ANYTHING TO THE CONTRA R Y CONTAINED IN SECTION S 28 TO 41 AND SECTIONS 43 AND 43A, I N THE ITA NO.5652 /DEL/ 2011 9 CASE OF AN ASSE SSEE 28 TO 41 BEING A NON - RESIDENT . ] ENGAGED IN THE BUSINESS OF PROVIDING SER V I C ES OR FACILITIES IN C O NNEC T I O N WI TH , OR SUPPLYING PLANT AND MACHINER Y ON HIRE USED, OR TO BE USED, IN THE . P R OSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OI L S , A SU M EQUAL TO TEN PER CENT OF THE AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB - S E CTION (2) SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' : PROVI D E D THAT THIS SUB - SECTION SHALL NOT APPL Y IN A CAS E WHERE THE PRO V ISIONS OF SECT I O N 42 OR SE CTION 44D OR SECTION 115A OR SECTION 293A APPL Y FOR THE PURPOSES OF COMPUTING PROFITS OR GAINS OR ANY OTHER INCOME REFERRED TO IN THOSE SECTIONS. (2) THE AMOUNTS REFERRED TO IN SUB - SECTION ( 1 ) SHALL BE THE FOLLOWING , NAMEL Y : - (A) THE AMOUNT PAID OR PAYABLE (WHETHER IN O R OUT OF I NDIA) T O THE ASSESSEE OR TO AN Y PERSON ON HIS BEHAL F ON ACCOUNT 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, MINERAL OILS IN INDIA; AND ( B ) THE AMOUNT RECEI V ED OR DEEMED TO BE RECEIVED IN I NDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE PROVISION OF SERVICES AND FACI L ITIES 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, MINERAL OILS OUTSIDE I NDIA. [(3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (1),AN ASSESSEE MAY CLAIM LOWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN THAT SUB - SECTION, IF HE KEEPS AND MAINTAINS SUCH BOOKS OF ACCOUNT AND O TH E R DOCUMEN T S AS R E QUIR E D UND E R S UB - SECT I O N ( 2 ) OF SECTION 4 4AA AN D G E TS H I S ACCOUNTS A U DITED A N D FURNISHES A REPOR T O F SU CH A UDI T AS R EQUI RED UND E R SECTIO N 4 4 A B , AND TH E R E UP O N TH E A S SE SSING OFFIC E R SHALL PRO C EED T O MAKE AN A SS E SS M E NT O F THE TOTAL IN C OME O R LOS S OF THE ASS E S S EE UNDER SUB - SE C TION (3) O F SEC TION 143 AND DETERMINE THE SUM PA Y ABLE B Y, OR REFUNDABLE TO , THE ASSESSEE.] ITA NO.5652 /DEL/ 2011 10 E X PLANATI O N. - F O R T HE PURPOS E S OF THIS SE C TION , - (I) ' PLANT ' IN C LUDES SHIPS , AIRCRAFT , VEHI C LES , DRILLING UNITS , SCIENTIFIC APPARATUS AND EQUIPM E NT , USED FOR THE PURPOSES OF THE SAID BU S INE S S ; ( II ) ' MINERAL OIL' INCLUDES PETROLEUM AND NATURAL GAS.] IT C LEARLY S HOW S THAT THE A S SESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING S E RVICES OR FACILITIES IN CONNECTION WITH ITS BU S INES S , THEREFORE , PRO V ISIONS OF SEC . 44BB C LEARLY APPLY ON THE FACTS OF THE CASE. THE AO HAS GROS S LY ERRED IN CONSIDERING PART OF TH E INCOME OF THE ASSESSEE AS FEE FOR TECHNICAL SERVICES WITHOUT POINTING OUT WHICH PART RELATES TO FTS. THE LD . CIT ( A ) HA S RIGHTLY CONSIDERED THE ENTIRE INCOME TO BE TAXED U/S. 44BB OF THE ACT . 10. A CAREFUL PERUSAL OF THE VANOU S DECISIONS RELIED UPON BY T HE ASSESSEE S HOWS THAT THE WORK/SERVICES DONE BY THE ASSESSEE DO NOT COME WITHIN THE PURVIEW OF SEC . 9 ( L ) (VII) OF THE ACT . RESPECTFULLY FOLLOWING THE DECI S IONS OF THE TRIBUNAL, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) . ORD ER OF THE LD. CIT(A) IS CONFIRMED. GROUND NO. 1 & 2 ARE ACCORDINGLY DISMISSED. 13. CONSISTENT WITH THE VIEW TAKEN THEREIN WE UPHOLD THE CONTENTION OF THE ASSESSEE THAT , THE ASSESSEE BEING A NON - RESIDENT WHICH IS ENGAGED IN THE BUSINESS PROVIDING SERVICE S O R FACILITY IN CONNECTION WITH THE PROSPECTING FOR, OR EXTRACTION OF PRODUCTION OF MINERAL OIL , ITS INCOME HAS TO BE COMPUTED AS PER THE PROVISION OF SECTION 44BB. THE OBSERVATION OF THE LD. AO ON THE REQUIREMENT OF SECTION 44BB I.E. THAT IT REQUIRES HUG E EXPENDITURE, DIFFICULTY IN COMPUTE INCOME ETC. ARE NOT AS PER PROVISION OF LAW. 14. THE LD. DEPARTMENTAL REPRESENTATIVE , RELIED ON THE DECISION OF E BENCH OF THE ITAT, DELHI IN THE CASE OF NATIONAL PETROLEUM CONSTRUCTION COMPANY VS. ITA NO.5652 /DEL/ 2011 11 ADDITIONAL DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION [2012] 26 TAXMANN.COM 50 (DELHI TRIB.). HE S PECIFICALLY RELIED ON PARAGRAPH AT PAGE 28 UNDER THE HEAD OF APPLICABILITY OF SECTION 44BB. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THIS DECISION OF THE TRIBUNAL HAS BEEN REVERSED BY THE HONBLE HIGH COURT OF UTTRAKHAND AS THE ASSESSMENT WAS QUASHED. LATTER THE LD. COUNSEL FOR THE ASSESSEE FILED A LETTER STAT ING THAT HE HAD MADE A WRONG STATEMENT AND THE ORDER OF THE TRIBUNAL WAS NOT QUASHED BY THE HIGH COURT WHAT WAS QUASHED WAS AN APPEAL OF THE REVENUE FILED FOR ANOTHER ASSESSMENT YEAR. 15. WE HAVE CONSIDERED THE CASE LAW OF NPCC (SUPRA) . THERE IS A FACTUAL DIFFERENCE IN THE SCOPE OF WORK OF NPCC AND THE SCOPE OF WORK OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE WAS ENGAGED IN SUCCESSFUL INS TALLATION OF OFFSHORE PLATFORM . S UCH WORK WAS HELD AS NEITHER PROVIDING SERVICES NOR PROVIDING MACHINERY ON HIRE . IN THE CASE OF ONE HAND , THE SCOPE OF WORK DEMONSTRATES THAT THE ASSESSEE HAS PROVIDED SERVICES IN RELATION TO EXTRAC TION O R PRODUCTION OF MINERAL OIL. THUS, THIS CASE RELIED UPON BY THE LD. D.R. IS NOT APPLICABLE TO THE CASE ON HAND. 16. LD. DEPARTMENTAL REPRESENTATIVE FURTHER RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME - TAX V S. RIO TINTO TECHNICAL SERVICES [2012] 17 TAXMANN.COM 70 (DELHI) FROM THE PREPOSITION THAT ITA NO.5652 /DEL/ 2011 12 THE TERM TECHNICAL SERVICES TAKE S INTO ITS FOLD A NUMBER OF ACTIVITIES I.E. THE TERM IS OF WIDE CONNOTATION . HE FURTHER RELIED ON THE DECISION OF THE HONBLE DELHI H IGH COURT IN THE CASE OF PGS GEOPHYSICAL AS VS. ADDITIONAL DIRECTOR OF INCOME TAX IN ITA NO. 612 OF 2012 FOR THE PROPOSITION THAT SECTION 44BB DOES NOT APPLY WHEN INC OME IS RECEIVED BY THE ASSESSEE, D URING THE RELEVANT PREVIOUS YEAR , AS FEE FOR TECHNICAL S ERVICES , IN VIEW OF PROVISO OF SECTION 44BB. 17. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IT IS NOBODIES CASE THAT THE INCOME IN QUESTION IS FEE FOR TECHNICAL SERVICES. HE FURTHER SUBMITS THAT THE PROVISO DOES NOT APPLY TO THE YEAR IN QUESTION. 18. AFTE R HEARING RIVAL CONTENTIONS, WE FIND THAT THIS ARGUMENT OF LD. CIT.D.R. IS NOT THE BASIS ON WHICH EITHER THE ASSESSING OFFICER OR THE LD. CIT(A) HAVE COME TO A CONCLUSION , THAT THE PROVISIONS OF SECTION 44BB D O NOT APPLY WITH THE FACTS OF THE CASE. NEITHER THE AO NOR THE LD. CIT(A) HAVE CONSIDERED THE RECEIPT IN QUESTIN AS FTS. THIS IS ENTIRELY A NEW ARGUMENT AND INTERPRETATION SOUGHT TO BE PLACED BY THE LD. CIT.D.R. THIS CANNOT BE PERMITTED. 19. WHEN THE ASSESSING OFFICER INTERPRETATION OF THE SCOPE OF WO RK IS THAT THE ASSESSEE IS MERELY ENGAGED IN TRANSPORTATION BUSINESS AND WHEN LD. CIT(A) ALSO HOLD S THAT THE ASSESSEE IS MERELY PROVIDING SPECIALIZED SERVICES IN TRANSPORTING EQUIPMENT /MATERIAL ON BEHALF OF THE M/S EIL, THE LD. D.R. CANNOT TAKE TOTALLY ITA NO.5652 /DEL/ 2011 13 NEW STAND THAT THE INCOME RECEIVED BY THE ASSESSEE FTS. THUS, THIS ARGUMENT IS DISMISSED. 20. IN VIEW OF THE ABOVE DISCUSSION, CONSISTENT WITH THE VIEW OF THE ITAT IN THE CASE OF M/S VALENTINE MARITIME (GULF) LLC (VMGL) (SUPRA) WE HOLD THAT THE CLAIM OF THE ASSESSEE THAT THE INCOME IN QUESTION IS TO BE DETERMINED BY APPLYING THE PROVISION OF SECTION 44BB IS TO BE UPHELD. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 .0 8 .2014 SD/ - SD/ - ( H.S. SIDHU ) ( J.S. REDDY ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 29 .0 8 .2014 A KS* COPY OF THE ORDER FORWARDED TO: - 1. APPELLANT 2. RE SPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ASSISTANT REGISTRAR