DCIT (International Taxation),Circle-1, Dehradun V. Baker Hughes Singapore Pte, Mumbai

ITA 6178/DEL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9262 (ITAT-DEHRADUN)
• Duration Of Justice: 4 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation
• Section: 44BB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH, DEHRADUN Before Sh. Amit Shukla, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 6178/Del/2017 : Asstt. Year : 2013-14 DCIT(Intl. Taxation), Circle-1, Dehradun-248001 Vs Baker Hughes Singapore Pte., C/o Nangia & Co., 3 rd Floor, NCR Plaza, New Cantt. Road, Dehradun-248001 (APPELLANT) (RESPONDENT) PAN No. AAACB8516F Assessee by : Sh. Amit Arora, Adv. Revenue by : Sh. N. S. Jangpangi, CIT DR Date of Hearing: 09.11.2021 Date of Pronouncement: 08.02.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-2, Noida dated 14.07.2017. 2. Following grounds have been raised by the Revenue: “(i) Whether the CIT (A) has erred, on the facts and in the circumstances of the case, in holding that the amount received by the assessee on account of ‘equipment lost in hole’ is not includible in the gross revenue for the purpose of computation of profits under the presumptive provisions of section 44BB of the Act, when the said provisions are a complete code of taxation in themselves and do not distinguish between revenue and capital receipts having made allowance for expenditure including depreciation on capital assets to the extent of 90% of gross revenue. (ii) Whether the CIT (A) has erred in not appreciating the fact that the amount received by the assessee on account of ‘equipment lost in hole’ is infact the reimbursement of expenses and hence ITA No.6178/Del/2017 Baker Hughes Singapore Pte. 2 includible in the gross revenue for the purpose of computation of profits as per the provisions of section 44BB of the Act in accordance with the spirit of the ratio of the judgment of Hon'ble Uttarakhand High Court in the case of CIT Vs. Halliburton offshore Services Inc. (300 ITR 265). (iii) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in holding that receipts on account of VAT & Service tax are not includible in gross revenue of the assessee for the purpose of computation of profits under the provisions of section 44BB of the I.T. Act, 1961. (iv) Whether the CIT (A) has erred in not appreciating the fact that section 44BB of the Act is a self-contained code providing for computation of profit at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from the gross receipts are deemed to have been allowed to the assessee. (v) Whether the CIT (A) has erred in not appreciating the fact that once the receipts are offered to tax u/s 44BB of the Act which provides for computation of profits on gross basis, there is no scope for computing or re-computing the profits by excluding any part of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a presumptive scheme of taxation u/s 44BB of the Act and obviating the need for maintaining accounts for individual receipts, payments etc. (vi) Whether the CIT (A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P) Ltd. (82 ITR 542, SC) wherein the Hon’ble Apex Court has held that the Sales Tax collected by an assessee in the ordinary course of its business forms part of its business receipts. Owing to the inherent similarity in the nature of sales tax and service tax, the ratio of the judgment in the said case is directly applicable to the instant case.” ITA No.6178/Del/2017 Baker Hughes Singapore Pte. 3 3. Baker Hughes Singapore Pte. is a non-resident non- domestic company engaged in the business of providing services and facilities in connection with exploration, exploitation and production of mineral oil in India. The assessee was filed return of income on 30.11.2012 declaring total income of Rs.38,74,26,711/-. Out of the total receipts of Rs.4,16,07,64,000/-, the assessee reduced the receipts on account of service tax, VAT and equipment lost in hole and offered Rs.3,85,11,79,600/- to tax u/s 44BB of the Income Tax Act, 1961 applying dividend profit rate of 10%. The AO made addition on account of service tax, VAT and equipment lost in hole to be treated as part of the gross receipts. Equipment Lost in Hole: 4. The AO brought an amount of Rs.1,81,76,500/- being the equipment lost in hole deducted from the gross turnover by the assessee, brought the same to taxation @10% u/s 44BB. 5. Before the ld. CIT(A), the assessee submitted that the reimbursement received on account of equipment Lost in Hole is in the nature of capital receipt and therefore not to be included as part of gross receipts for the purpose of section 44BB of the Act. The assessee submitted before the ld. CIT(A) that as the name signifies, Lost in Hole means destruction and loss of capital assets like drilling equipment which are provided by the assessee to oil exploration and production companies and therefore, the amount received on account of loss of equipment does not form part of income in the hands of the assessee, rather it is a mere reimbursement of the cost of equipment destroyed in the process of oil extraction. We find that the ld. CIT(A) duly appreciated the contentions of the assessee and by placing reliance on the decision of Hon’ble ITA No.6178/Del/2017 Baker Hughes Singapore Pte. 4 Uttarakhand High Court in the case of CIT vs. Schlumberger Asia Services Ltd reported in 317 ITR 156 decided the issue in favour of the assessee. 6. Since, the decision of the ld. CIT(A) is based on the established jurisprudence, we decline to interfere with the order of the ld. CIT(A) on this issue. VAT & Service Tax u/s 44BB: 7. The AO held that the receipts on account of service tax and VAT are in the nature of royalty/FTS u/s 9(1)(vi)/9(1)(vii). We have examined the issue of inclusion of service tax and VAT with reference to the provisions of Section 44BB in the light of the judgment of Hon’ble Delhi High Court in the case of Pr. CIT Vs. Mitchell Drilling International Pvt. Ltd. 380 ITR 130 which held as under: “that for the purposes of computing the presumptive income of the assessee for the purposes of Section 44BB the service tax collected by the assessee on the amount paid to it for rendering services was not to be included in the gross receipts in terms of Section 44BB(2) read with Section 44BB(1). The service tax is not an amount paid or payable, or received or deemed to be received by the assessee for the services rendered by it. The assessee only collected the service tax for passing it on to the Government.” 8. Since, the decision of the ld. CIT(A) is based on the established jurisprudence, we decline to interfere with the order of the ld. CIT(A) on this issue. ITA No.6178/Del/2017 Baker Hughes Singapore Pte. 5 9. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 08/02/2022. Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 08/02/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR