Deepwater Pacific 1 Inc, New Delhi V. DDIT (International Taxation), Dehradun

ITA 620/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3661 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Assessee Lawyers: VISHAL MISRA
• Keywords: Presumptive income; Business income; Maximum Marginal Rate; Permanent establishment

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 620/DEL /2016 ASSESSMENT YEAR: 2011-12 DEEPWATER PACIFIC 1 INC C/O NANGIA & COMPANY, SUITE 4A, PLAZA M-6, OFFICE, SUBHASH ROAD, JASOLA, NEW DELHI-110025 (PAN: AADCD1582A) VS DDIT , (INTERNATIONAL TAXATION), INCOME TAX OFFICE, SUBHASH ROAD, DEHRADUN. (APPELLANT) (RESPONDENT) ITA NO. 621/DEL /2016 ASSESSMENT YEAR: 2012-13 TRANSOCEAN DISCOVERER 534 LLC C/O NANGIA & COMPANY, SUITE 4A, PLAZA M-6, OFFICE, SUBHASH ROAD, JASOLA, NEW DELHI-110025 (PAN: AABCT9505F) VS DCIT , (INTERNATIONAL TAXATION), CIRCLE-2, DEHRADUN. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VISHAL MISRA, CA RESPONDENT BY : SHRI G.K. DH ALL, CIT DR DATE OF HEARING: 29.01.2018 DATE OF PRONOUNCEMENT : 31.01.2018 ORDER PER BENCH BOTH THESE APPEALS HAVE BEEN PREFERRED BY THE ASSES SEES. ITA NO. 620/DEL/2016 HAS BEEN FILED AGAINST ORDER D ATED 19.11.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX(A)-2, ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 2 NOIDA FOR ASSESSMENT YEAR 2011-12 WHEREAS ITA 621/D EL/2016 HAS BEEN FILED AGAINST ORDER DATED 23.11.2015 PASSE D BY LD. COMMISSIONER OF INCOME TAX(A)-II, NOIDA FOR ASSESSM ENT YEAR 2012-13. SINCE BOTH THE APPEALS INVOLVE IDENTICAL ISSUES, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROU GH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WITH REGARD TO ITA NO. 621/DEL/2016 IN THE CASE OF M/S DEEPWATER PACIFIC 1 INC, THE LD. AR FAIRLY CONCEDED THAT GROUND NO. 1 PERTAINING TO MOBILIZATION CHARGES RECEIVED B Y THE ASSESSEE AMOUNTING TO RS. 488,429,832/- AND PERTAINING TO MO BILIZATION OF RIGS DDKG1AND DDKG2 OUTSIDE INDIAN TERRITOR IAL WATERS AND INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') BY THE ASS ESSING OFFICER AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (A) WAS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE R EVENUE BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF S EDCO FOREX INTERNATIONAL INC. VS. CIT & ANOTHER REPORTED IN 39 9 ITR 1 (SC). SIMILARLY, FOR GROUND NO. 2, THE LD. AR FAIRLY CONC EDED THAT THIS WAS ALSO COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE UTTARAKHAND HIGH COU RT IN THE CASE OF CIT VS HALLIBURTON OFFSHORE SERVICES INC. ( 2008) 300 ITR ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 3 265 (UTTARAKHAND) WHEREIN THE UTTARAKHAND HIGH COUR T HAD HELD THAT REIMBURSEMENT OF EXPENSES WERE INCLUDIBLE IN T HE GROSS RECEIPTS FOR PURPOSES OF DETERMINATION OF INCOME U/ S 44BB OF THE ACT. 3. WITH RESPECT TO ITA NO. 621/DEL/2016 IN THE CASE OF TRANSOCEAN DISCOVERER 534 LLC, THE LD. AR AGAIN FAI RLY CONCEDED THAT GROUND NOS. 1 AND 2 WERE AGAIN COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF THE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS HALLIBURTON OFFSHO RE SERVICES INC. (2008) 300 ITR 265 (UTTARAKHAND) WHERE THE HON BLE UTTARAKHAND HIGH COURT HAD HELD THAT REIMBURSEMENT RECEIPTS WERE INCLUDIBLE IN THE REVENUE TAXABLE U/S 44BB OF THE ACT. WITH RESPECT TO GROUND NO. 3 PERTAINING TO RECEIPTS ON A CCOUNT OF DEMOBILIZATION OF THE RIG OUTSIDE INDIAN TERRITORIA L WATERS, IT WAS CONCEDED BY THE LD. AR THAT THIS ISSUE WAS ALSO COV ERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT BY THE JUDGMENT OF THE APEX COURT IN THE CASE OF SEDCO FOREX INTERNATI ONAL INC. VS. CIT & ANOTHER REPORTED 399 ITR 1 (SC). WITH RESPECT TO GROUND NO.4 PERTAINING TO INTEREST RECEIVED ON INCOME TAX REFUND TAXED BY THE LOWER AUTHORITIES AT MAXIMUM MARGINAL RATE, IT WAS SUBMITTED THAT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 4 BY THE ORDER OF ITAT DELHI BENCH IN THE CASE OF CLO UGH ENGINEERING LTD. VS ACIT (OSD) DEHRADUN IN ITA NO. 4771 AND 4896/DEL/2017 WHEREIN VIDE ORDER DATED 13.4.2017, T HE ITAT DELHI BENCH HAD HELD THAT INTEREST ON INCOME TAX RE FUND IS NOT EFFECTIVELY CONNECTED WITH PERMANENT ESTABLISHMENT EITHER ON THE BASIS OF ASSETS TEST OR ACTIVITY TEST AND, THEREFOR E, INTEREST ON INCOME TAX REFUND WAS HELD TO BE TAXABLE UNDER PARA GRAPH NO. 2 OF ARTICLE 11 OF INDO-AUSTRALIA DOUBLE AVOIDANCE AG REEMENT. 4. LD. SR. DR DID NOT NEGATE THE CONTENTIONS OF THE LD. AR AND SUBMITTED THAT THE ISSUES HAD BEEN RIGHTLY POINTED OUT AS COVERED BOTH IN FAVOUR AND AGAINST THE REVENUE IN BOTH THE APPEALS BY THE LD. AR. 5. WE HAVE HEARD THE LD. AR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE HAVE ALSO NOTED THE SUBMISS IONS OF THE LD. CIT DR THAT THERE WAS NO OBJECTION OF THE DEPAR TMENT TO THE AVERMENTS OF THE LD. AR. ACCORDINGLY, THE ISSUES A RE DECIDED AS UNDER: 5.1 WITH RESPECT TO GROUND NO. 1 IN ITA NO. 620/DEL /2016 WHICH PERTAINS TO AMOUNT RECEIVED FOR MOBILISATION OF RIGS OUTSIDE INDIAN TERRITORIAL WATERS, RESPECTFULLY FOLLOWING T HE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF SEDCO FOREX I NTERNATIONAL ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 5 INC VS CIT & ANOTHER (SUPRA), WE DISMISS THIS GROUN D RAISED BY THE ASSESSEE AS IN THIS JUDGMENT, THE HONBLE APEX COURT HAS HELD THAT MOBILISATION FEE IS INCLUDIBLE IN DEEMED PROFITS FOR THE PURPOSE OF PRESUMPTIVE TAXATION. 5.2 WITH RESPECT TO GROUND NO. 2 IN ITA NO. 620/DEL /2016 PERTAINING TO THE ISSUE OF INCLUDING REIMBURSEMENT FOR EXPENSES IN THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINAT ION OF INCOME U/S 44BB OF THE INCOME TAX ACT, 1961, THE SAME IS A LSO DISMISSED BY PLACING RELIANCE ON THE JUDGMENT OF TH E HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS HALLIB URTON OFFSHORE SERVICES INC REPORTED IN 300 ITR 265 (UTTARAKHAND). 5.3 THUS, ITA NO. 620/DEL/2016 STANDS DISMISSED. 6. AS FAR AS ITA NO. 621/DEL/2016 IS CONCERNED, GRO UND NOS. 1 AND 2 PERTAINING TO REIMBURSEMENT RECEIPTS AND HELD AS TAXABLE U/S 44BB OF THE ACT BY THE DEPARTMENT ARE AGAIN HEL D AGAINST THE ASSESSEE BY PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS HALLIB URTON OFFSHORE SERVICES (SUPRA). HENCE, GROUND NOS. 1 AND 2 ARE DISMISSED. ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 6 6.1 AS FAR AS GROUND NO. 3 PERTAINING TO RECEIPTS I N RESPECT OF DEMOBILISATION OF RIG IS CONCERNED, THE SAME IS ALS O HELD AGAINST THE ASSESSEE BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING CO. LTD. VS CIT & ANOTHER (SUPRA). 6.2 GROUND NO. 4 PERTAINING TO TAXING INTEREST INCO ME ON INCOME TAX REFUND AT MAXIMUM MARGINAL RATE IS DECID ED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE COORDINATE BENCHS ORDER IN CLOUGH ENGINEERING LTD. VS ACIT (OSD) DEHRADUN IN I TA NO. 4771 AND 4986/DEL/2007 WHEREIN ITAT DELHI BENCH HAD FOLLOWED THE ORDER OF THE SPECIAL BENCH DATED 29.02 .2012 BY HOLDING IN PARA 11.4 AS UNDER:- '......HOWEVER, WE MAY ADD THAT WE DO NOT VENTURE TO SAY THAT THE INTEREST INCOME HAS TO BE NECESSARILY BUSINESS INCOME IN THE NATURE FOR ESTABLISHING THE EFFECTIVE CONNECTION WITH THE PE B ECAUSE THAT WOULD RENDER PROVISION CONTAINED IN PARAGRAPH 4 OF ARTICLE XI REDUNDANT. THUS, THERE MAY BE CASES WHER E INTEREST MAY BE TAXABLE UNDER THE ACT UNDER THE RESIDUARY HEAD AND YET BE EFFECTIVELY CONNECTED WIT H THE PE. THE BANK INTEREST IN THIS CASE IS AN EXAMPLE OF EFFECTIVE CONNECTION BETWEEN THE PE AND THE INCOME AS THE INDEBTEDNESS IS CLOSELY CONNECTED WITH THE FUND S OF THE PE. HOWEVER, THE SAME CANNOT BE SAID IN RESPECT OF INTEREST ON INCOME TAX REFUND. SUCH INTEREST IS NOT EFFECTIVELY CONNECTED WITH PE EITHER ON THE BASIS O F ASSET TEST OR ACTIVITY TEST. ACCORDINGLY, IT IS HELD THAT THIS PART OF INTEREST IS TAXABLE UNDER PARAGRAPH NO. 2 OF ART ICLE XI.' ITA NO. 620 & 621/DEL/2016 ASSESSMENT YEAR 2011-12 & 2012-13 7 6.2.1 ACCORDINGLY, WE HOLD THAT INTEREST ON INCOME TAX REFUND IS NOT TO BE INCLUDED IN THE PRESUMPTIVE INC OME AND IS TO BE CHARGED TO TAX @ 15% AS PRESCRIBED BY ARTICLE XI OF THE INDO US DOUBLE TAXATION AVOIDANCE AGREEMENT. THUS, GROU ND NO. 4 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 6.3 IN THE RESULT, ITA NO. 621/DEL/2016 IS PARTLY A LLOWED. 7. IN THE RESULT, ITA NO. 620/DEL/2016 IS DISMISSED WHEREAS ITA 621/DEL/2016 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DT. 31ST JANUARY 2018 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR