Halliburton Offshore Services Inc., Noida V. DCIT (International Taxation), Dehradun

ITA 6178/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3717 (ITAT-DEHRADUN)
• Duration Of Justice: 4 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: THAKUR SINGH MAPWAL
• Keywords: Business income; Double taxation relief; Maximum Marginal Rate; Permanent establishment
• Section: 144C; 264; 44DA; 13; 119

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6178 /DEL/201 6 (ASSESSMENT YEAR: 2012 - 13 ) HALLIBURTON OFFSHORE SERVICES LTD, C/O. NANGIA & COMPANY, A - 109, SECTOR - 136, NOIDA PAN: AAACH5154M VS. DCIT(INTERNATIONAL TAXATION), CIRCLE - 1, DEHRADUN (APPELLANT (RESPONDENT) ASSESSEE BY: SHRI AMIT ARORA, CA REVENUE BY : SHRI THAKUR SINGH MAPWAL, JCIT DR DATE OF HEARING 05 /03/2021 DATE OF PRONOUNCEMENT 0 4 / 0 6 / 2 0 2 1 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 2, NOIDA DATED 27.09.2016 FOR THE ASSESSMENT YEAR 2012 - 13 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - GROUND NO. 1 - REIMBURSEMENT OF EXPENDITURE INCURRED ON BEHALF OF CLIENT: NOT IN THE NATURE OF INCOME THE LD. CIT(A) ERRED IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE RECEIPTS AMOUNTING TO INR 2,405,405 ON ACCOUNT OF REIMBURSEMENT O F EXPENDITURE INCURRED ON BEHALF OF CLIENT AS ROYALTY/FEES FOR TECHNICAL SERVICES CHARGEABLE TO TAX UNDER SECTION 44DA OF THE INCOME TAX ACT, 1961 BY APPLYING AN ESTIMATED PROFIT RATE OF TWENTY - FIVE PER CENT AS OPPOSED TO THE CLAIM OF APPELLANT THAT SAME D OES NOT CONSTITUTE ANY PROFIT ELEMENT AND THEREFORE, IS NOT CHARGEABLE TO TAX. GROUND NO. 2 - REIMBURSEMENT OF SERVICE - TAX: STATUTORY LEVY, NOT IN THE NATURE OF INCOME THE LD. CIT(A) ERRED IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT TH E RECEIPTS AMOUNTING TO INR 368,543,516 ON ACCOUNT OF SERVICE - TAX REIMBURSEMENTS AS ROYALTY / FEES FOR TECHNICAL SERVICES CHARGEABLE TO TAX UNDER SECTION 44DA OF THE INCOME TAX ACT, 1961 BY APPLYING AN ESTIMATED PROFIT RATE OF TWENTY - FIVE PER CENT AS OPPOS ED TO THE CLAIM OF APPELLANT THAT SAME BEING A STATUTORY LEVY, IS NOT CHARGEABLE TO TAX. THIS SPACE IS BEING LEFT BLANK INTENTIONALLY GROUND NO. 3 - DENIAL OF DTAA BENEFIT IN RESPECT OF INTEREST INCOME ON INCOME - TAX REFUND THE LD. CIT(A) ERRED IN AFFIRMI NG THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT INTEREST INCOME AMOUNTING TO INR 5,570,269 ON ACCOUNT OF INCOME - TAX REFUND IS TAXABLE AT MAXIMUM MARGINAL RATE OF FORTY PER CENT WITHOUT APPRECIATING THE TERMS OF ARTICLE N(2)(B) OF THE INDO - USA DOUBLE TAXATION AVOIDANCE AGREEMENT. YOUR APPELLANT PRAYS THAT THE ERRONEOUS ORDER BE CANCELLED AND APPROPRIATE RELIEF MAY BE GRANTED TO THE APPELLANT. PAGE | 2 3. ASSESSEE IS A NON - RESIDENT , NONDOMESTIC COMPANY , ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITH EXPLORATION, EXPLOITATION, AND PRODUCTION OF MINERAL OIL IN INDIA AND IN SUPPLYING PLANT AND MACHINERY ON HIRE, USED OR TO BE USED IN THE PROSPECTING OF MINERAL OILS. 4. FOR THE YEAR THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 SEPTEMBER 2012 DECLARING TOTAL INCOME OF 334,507,920 / . ASSESSEE OFFERED THE INCOME BY APPLYING THE PROVISIONS OF SECTION 44 BB OF THE INCOME TAX ACT . THE ASSESSEE CLAIMED THAT THAT INCOME OF THE ASSE SSEE WOULD BE CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION AND WOULD BE COMPUTED UNDER THE PRESUMPTIVE TAX SCHEME OF SECTION 44 BB OF THE INCOME TAX ACT . THE ASSESSEE ALSO CLAIMED THAT THE REIMBURSEMENT OF EXPENSES INCURRE D ON BEHALF OF THE CLIENT IS AMOUNTING TO 2,405,405/ IS NOT CHARGEABLE TO TAX . IT WAS ALSO STATED THAT AMOUNT OF SERVICE TAX OF 368,543,560 IS ALSO NOT CHARGEABLE TO INCOME TAX U/S 44 BB OF THE ACT . THE ASSESSEE IS ALSO SHOWN THE INTEREST RECEIVED FROM INCOME TAX DEPARTMENT OF 5,570,269 IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND SUCH INCOME WAS OFFERED TO TAX AS PER ARTICLE 11 (2) ( B ) OF THE INDO US DTAA. 5. THE ASSESSMENT ORDER WAS PASSED U/S 143 (3) READ WITH SECTION 144C (3 ) ( B ) OF THE INCOME TAX ACT ON 12 MAY 2015 DETERMINING TOTAL INCOME OF THE ASSESSEE AT 669,309,644/ . THE LEARNED ASSESSING OFFICER HELD THAT ASSESSEE HAS A PERMANENT ESTABLISHMENT IN INDIA THROUGH WHICH THE BUSINESS WAS CARRIED ON IN INDIA AND THAT THE INCOME AS AFORESAID WAS ATTRIBUTABLE TO SUCH PERMANENT ESTABLISHMENT . HE FURTHER HELD THAT THE REVENUE RECEIVED BY THE ASSESSEE ON ACCOUNT OF PROVISION OF OILFIELD EQUIPMENT ON HIRE AND SUPPLY TO KNOWN THE ASSESSEE PARTNERS IS TO BE CHARGED AS ROYALTY U/ S 9 (1) ( VI ) OF THE ACT AND FURTHER THE REVENUE RECEIVED ON ACCOUNT OF PROVISION OF VARIOUS SERVICES AND OPERATING PERSONNEL WOULD BE IN THE NATURE OF FEES FOR TECHNICAL SERVICES . HE FURTHER HELD THAT RECEIPT BECAUSE OF SERVICE TAX AND REIMBURSEMENT OF EX PENSES WOULD BE IN THE NATURE OF ROYALTY/FEES FOR TECHNICAL SERVICES TO BE COMPUTED U/S 44 DA OF THE INCOME TAX ACT. THUS IN THE ABSENCE OF BOOKS OF ACCOUNTS BE APPLIED THE PROFIT RATE OF 25% OF THE GROSS RECEIPT . WITH RESPECT TO THE INTEREST ON REFUND R ECEIVED FROM THE INCOME TAX DEPARTMENT, HE HELD THAT IT IS CHARGEABLE TO TAX AT THE MAXIMUM MARGINAL RATE OF 40%. 6. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LEARNED ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX ( APPEALS ) 2, NOIDA WHO PASSED AN ORDER ON 27/9/2016 PARTLY ALLOWING THE APPEAL OF THE ASSESSEE . THEREFORE THE ASSESSEE IS AGGRIEVED WITH THE ORDER OF THE LEARNED CIT A FOR THE REASON THAT THE LEARNED CIT A CONFIRMED THE ACTION OF THE LEARNED ASSESSING OFFICER I N HOLDING THAT THE RECEIPTS AMOUNTING TO 2,405,405/ RECEIVED ON ACCOUNT OF REIMBURSEMENT OF EXPENDITURE INCURRED ON BEHALF OF THE CLI ENT IS CHARGEABLE TO TAX U/S 4 4DA OF THE INCOME TAX ACT APPLYING AN ESTIMATED PROFIT RATE OF 25% WHEREAS THE CLAIM OF TH E ASSESSEE WAS THAT IT DOES NOT CONSTITUTE ANY PROFIT ELEMENT AND THEREFORE IS NOT CHARGEABLE TO TAX. LEARNED CIT A ALSO AFFIRMED THE ACTION OF THE AO IN HOLDING THAT THE RECEIPT OF 368,543,516 ON ACCOUNT OF SERVICE TAX IS ALSO CHARGEABLE TO TAX U/S 44 DA OF THE INCOME TAX ACT . THE LEARNED CIT A ALSO CONFIRMED THE ACTION OF THE AO HOLDING THAT THE INTEREST INCOME OF 5,570,269 ON ACCOUNT OF INCOME TAX REFUND IS ALSO PAGE | 3 TAXABLE AT MAXIMUM MARGINAL RATE OF 40% . THUS, ASSESSEE IS AGGRIEVED WITH THE ORDER OF THE LEARNED CIT A HAS PREFERRED THIS APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED ORDERS OF THE LOWER AUTHORITIES. 8. GROUND NUMBER 1 IS AGAINST THE REIMBURSEMENT OF EXPENDITURE INCURRED ON BEHAL F OF THE CLIENT ASSESSEES CLAIM IS THAT IT IS NOT IN THE NATURE OF INCOME . BRIEF FACTS SHOW THAT THE ASSESSEE HAS SHOWN RECEIPT ON ACCOUNT OF REIMBURSEMENT OF EXPENDITURE OF 368,543,516/ AND 2,405,405/ AS REIMBURSEMENT OF EXPENDITURE . THE AO HAS H ELD THAT THE RECEIPT ON ACCOUNT OF REIMBURSEMENT OF EXPENSES ARE CHARGEABLE TO TAX U/S 44 DA AN ESTIMATED PROFIT AT THE RATE OF 25% OVER SUCH INCOME . ISSUE OF THE REIMBURSEMENT OF EXPENDITURE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONOURABLE SUPREME COURT AGAINST WHICH THE REVIEW PETITION HAS ALREADY BEEN DISMISSED IN SEDCO FOREX INTERNATIONAL INC. V. CIT [2017] 87 TAXMANN.COM 29/251 TAXMAN 459/399 ITR 1 (SC) . [2018] 94 TAXMANN.COM 119 (SC)/[2018] 256 TAXMAN 65 (SC). IN VIEW OF THIS GROUND NUMBER ONE OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 9. THE SECOND GROUND OF APPEAL IS WITH RESPECT TO THE REIMBURSEMENT OF SERVICE TAX IT IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE HONOURABLE UTTARAKHAN D HIGH COURT IN DIRECTOR OF INCOME - TAX INTERNATIONAL TAXATION VS SCHLUMBERGER ASIA SERVICES LTD [2019] 104 TAXMANN.COM 353 (UTTARAKHAND) (FB)/[2019] 264 TAXMAN 108 (UTTARAKHAND) (FB)/[2019] 414 ITR 1 (UTTARAKHAND) (FB) WHEREIN IT HAS BEEN HELD THAT AMOUNT REIMBURSED TO ASSESSEE (SERVICE PROVIDER) BY ONGC (SERVICE RECIPIENT), REPRESENTING SERVICE TAX PAID EARLIER BY ASSESSEE TO GOVERNMENT OF INDIA, AND NOT BEING AN AMOUNT PAID TO ASSESSEE ON ACCOUNT OF PROVISION OF SERVICES IN CONNECTION WITH EXPLORATION AND PRODUCTION OF MINERAL OIL, WOULD NOT FORM PART OF AGGREGATE TAXABLE AMOUNT REFERRED TO IN CLAUS ES (A) AND (B) OF SUB - SECTION(2) OF SECTION 44BB. THUS, GROUND NUMBER 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. GROUND NUMBER 3 IS WITH RESPECT TO CHARGEABILITY OF INTEREST INCOME ON ACCOUNT OF INCOME TAX REFUND WHICH IS ALSO COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONOURABLE HIGH COURT IN B. J. SERVICES CO. MIDDLE EAST LTD. VS ASSISTANT COMMISSIONER OF INCOME - TAX, (O.S.D.) RANGE - 1, DEHRADUN [2015] 60 TAXMANN.COM 246 (UTTARAKHAND)/[2015] 234 TAXMAN 604 (UTTARAKHAND)/[2016] 380 ITR 138 (UT TARAKHAND)/[2016] 288 CTR 214 (UTTARAKHAND) WHEREIN IT HAS BEEN HELD THAT WHERE ASSESSEE IS CARRYING ON BUSINESS THROUGH A PERMANENT ESTABLISHMENT IN INDIA, INTEREST ON TAX REFUND IS TAXABLE AS BUSINESS INCOME UNDER CLAUSE 6 OF ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE TREATY BETWEEN INDIA AND UK. IN THE PRESENT CASE, ALSO IT IS N OT DENIED THAT ASSESSEE DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA . IN VIEW OF THIS GROUND NUMBER 3 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 4 . 0 6 .2021. - S D / - - S D / - (SUDHANSHU SRIVASTAVA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER PAGE | 4 DATED: 0 4 . 0 6 .2021 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI