Transocean Offshore International Ventures Ltd., New Delhi V. DCIT (International Taxation), Dehradun

ITA 623/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4738 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• 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
• Keywords: Transfer pricing; Deemed to accrue or arise in india
• Section: 143(3); 92

Judgement Text

ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 623/DEL/2016 ASSESSMENT YEAR: 2011-12 TRANSOCEAN OFFSHORE INTERNATIONAL VS. DCIT, VENTURES LTD., (INTERNATIONAL TAXATION) , C/O NANGIA & COMPANY, CIRCLE-2, DEHRADUN. SUITE 4A, PLAZA M-6, JASOLA, NEW DELHI-110025 (PAN: AABCT7316B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT ARORA, CA RESPONDENT BY : SHRI G.K. DHALL, CIT(DR) DATE OF HEARING: 27.08.2018 DATE OF PRONOUNCEMENT : 29.10.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E FINAL ASSESSMENT ORDER PASSED U/S 143(3) R/W SECTION 144C (1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') FOR ASSESSMENT YEAR 2011-12. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS INCORPORATED UNDER THE LAWS OF CAYMAN ISLANDS AND T HE SERVICES BEING PROVIDED ENTAIL PROVIDING OFFSHORE DRILLING U NITS AND OTHER ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 2 EQUIPMENT ALONG WITH PERSONNEL TO OPERATE SUCH EQUI PMENT AND OTHER ALLIED SERVICES IN RELATION TO THE DRILLING O PERATIONS. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE UNDER TH E PROVISIONS OF SECTION 44BB(1) OF THE ACT, DECLARING TOTAL INCOME OF RS. 125,22,46,882/-. AFTER INITIAL PROCESSING OF RETUR N U/S 143(1) OF THE ACT, THE CASE WAS PICKED UP FOR SCRUTINY. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE HAD ENTERED INTO AN INTERNATIONAL TRANSAC TIONS WITH ASSOCIATED ENTERPRISES (AE) DURING THE YEAR AND, AC CORDINGLY, THE CASE WAS REFERRED TO THE TRANSFER PRICING OFFICER ( TPO) U/S 92 CA(1) OF THE ACT. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CARRIED OUT BUSINES S ACTIVITIES WITH REGARD TO PROVIDING DRILL RIGS AND INTEGRATED SERVICES IN CONNECTION WITH EXPLORATION AND PROVISION OF MINERA L OIL. IN ALL, THE ASSESSEE HAD PROVIDED SEVEN RIGS DURING THE ASS ESSMENT YEAR FOR THE PURPOSE OF EXECUTING OFFSHORE DRILLING CONT RACTS IN INDIA. ALL THE SEVEN RIGS WHICH WERE PROVIDED DURING THE Y EAR WERE CONTINUING FROM EARLIER YEAR CONTRACTS I.E. THEY WE RE ONGOING CONTRACTS. THE COMPANY PROVIDED DRILLING OPERATION S UNDER CONTRACTS TO RELIANCE INDUSTRIES LTD. AND OIL & NAT URAL GAS CORPORATION OF INDIA DURING THE YEAR UNDER CONSIDER ATION. IN VIEW ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 3 OF THE PROVISIONS OF SECTION 44BB OF THE ACT, THE A SSESSEE OFFERED 10% OF ITS GROSS RECEIPTS AS INCOME CHARGEABLE TO T AX. THE GROSS REVENUE DURING THE YEAR AMOUNTED TO RS. 1246,15,886 /- IN RESPECT OF ALL THE CONTRACTS. HOWEVER, THE AO NOTI CED THAT, WHILE COMPUTING THE GROSS REVENUES, THE ASSESSEE HAD EXCL UDED THE FOLLOWING REVENUES RECEIVED FROM THESE CONTRACTS:- I. REIMBURSEMENTS ON ACCOUNT OF MATERIAL RS.3,46,7 8,179/- II. REIMBURSEMENT OF FUEL RS.44,18,34,292/- III. SERVICE TAX RECEIPTS RS.107,41,11,953/- IV. MOBILIZATION RECEIPTS RS.20,81,27.148/- 2.1 ON BEING ASKED TO SHOW CAUSE AS TO WHY THE ABOV E RECEIPTS/REIMBURSEMENTS SHOULD NOT BE INCLUDED IN T HE GROSS RECEIPTS, IT WAS THE CONTENTION OF THE ASSESSEE THA T SINCE THE RECEIPTS WERE PURELY IN THE NATURE OF REIMBURSEMENT S AND NOT ON ACCOUNT OF ANY SERVICE RENDERED, THE SAME WERE NOT TAXABLE. SIMILARLY, WITH RESPECT TO MOBILIZATION RECEIPTS, I T WAS SUBMITTED THAT ONLY PROPORTIONATE REVENUES RELATABLE TO ACTIV ITIES IN INDIA WERE INCLUDED AND THOSE RELATABLE TO ACTIVITIES OUT SIDE INDIA WERE EXCLUDED. HOWEVER, THE ASSESSING OFFICER, AFTER CO NSIDERING THE SUBMISSION OF THE ASSESSEE, PROCEEDED TO INCLUDE AL L ABOVE FOUR AMOUNTS IN THE TOTAL TAXABLE GROSS RECEIPTS AND THE REBY COMPUTED THE GROSS RECEIPTS AT RS. 136,81,02,102/- . APART FROM ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 4 THIS, THE ASSESSING OFFICER ALSO ADDED THE GROSS RE CEIPT FROM TDSIPL AMOUNTING TO RS. 15,94,96,140/- TO THE INCOM E OF THE ASSESSEE WITHOUT GIVING THE BENEFIT OF PROVISION OF SECTION 44BB. 2.2 AGGRIEVED, THE ASSESSEE FILED ITS OBJECTIONS BE FORE THE LEARNED DISPUTE RESOLUTION PANEL (DRP). THE LD. DRP HELD T HAT AS FAR AS THE CONSIDERATION RECEIVED BY THE ASSESSEE FROM CON TRACT WITH TDSIPL WAS CONCERNED, THE SAME WAS ALSO TO BE TAXED AS PER PROVISIONS OF SECTION 44BB. SIMILARLY, WITH RESPEC T TO THE SERVICE TAX ELEMENT WHICH HAD BEEN CLUBBED BY THE ASSESSING OFFICER WITH THE GROSS RECEIPTS FOR THE PURPOSE OF COMPUTIN G TAXABLE PROFITS U/S 44BB, THE LD DRP DIRECTED THE ASSESSING OFFICER TO DELETE THE ELEMENT OF SERVICE TAX FROM THE GROSS RE CEIPTS. WITH RESPECT TO REIMBURSEMENT OF EXPENSES WHICH HAD BEEN INCLUDED BY THE ASSESSING OFFICER IN THE GROSS RECEIPTS, THE LD. DRP DIRECTED THAT REIMBURSEMENT OF EXPENSES WAS BUSINES S RECEIPT WHICH WAS TO BE INCLUDED FOR THE PURPOSE OF COMPUTI NG THE TAXABLE INCOME AND FURTHER NO DEDUCTION FOR EXPENSE S WAS ALLOWABLE IN VIEW OF THE SCHEME OF PRESUMPTIVE TAXA TION. WHILE ISSUING SUCH DIRECTIONS, THE LD. DRP PLACED RELIANC E ON THE JUDGMENT OF THE HONBLE HIGH COURT OF UTTARAKHAND, WHICH IS THE JURISDICTIONAL HIGH COURT FOR THE ASSESSEE, IN THE CASE OF CIT VS. ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 5 HALLIBURTON OFFSHORE SERVICES INC REPORTED IN 300 I TR 265 (UTTARAKHAND). WITH REGARD TO THE MOBILIZATION FEE, THE LD. DRP REJECTED THE ASSESSEES CONTENTION ON THE GROUND TH AT THE ASSESSEE DID NOT FURNISH ANY PARTICULARS IN THIS RE GARD. 2.3 SUBSEQUENTLY, THE FINAL ASSESSMENT ORDER WAS PA SSED ON 29.12.2015 AND NOW THE ASSESSEE IS BEFORE THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- GROUND NO. 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED ON FACTS AND IN LAW IN HOLDING THA T THE SUM OF INR. 208,127,148/- RECEIVED BY THE APPEL LANT TOWARDS FEE FOR MOBILIZATION/DEMOBILIZATION OF THE RIG OUTSIDE INDIA, IS TO BE INCLUDED IN THE GROSS RECEI PTS U/S 44BB OF THE ACT WITHOUT APPRECIATING THAT THE SAID AMOUNT DOES NOT ACCRUE OR ARISE TO THE APPELLANT IN INDIA IN TERMS OF S.5(2) READ WITH S.9 OF THE ACT. GROUND NO. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO/DRP HAS ERRED ON FACTS AND IN LAW IN HOLDING THA T THE AMOUNTS AGGREGATING TO INR. 476,513,071/-, RECEIVED BY THE APPELLANT FROM ITS CUSTOMERS AS REIMBURSEMENT OF ACTUAL EXPENSES(MATERIAL AND FUEL EXPENSES) INCURRED BY THE APPELLANT ON THEIR BEHALF , IS TO BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE I NCOME TAX ACT, 1961 (THE ACT). YOUR APPELLANT PRAYS THAT THE ERRONEOUS ORDER BE CANCELLED AND APPROPRIATE RELIEF MAY BE GRANTED TO THE APPELLANT. ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 6 3.0 AT THE OUTSET, THE LD. AR FAIRLY ADMITTED THAT BOTH THE ISSUES RAISED BY THE ASSESSEE ARE COVERED AGAINST THE ASSE SSEE BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ITA NO. 5286/DEL/2011. THE LD AR PLACED A COPY OF THE ITAT ORDER BEFORE THE BENCH AND SUBMITTED THAT THE SAME MAY BE FOLLOWED. 4.0 THE LD. CIT DR HAD NO OBJECTION TO THE PROPOSIT ION OF THE LD. AR. 5.0 HAVING HEARD BOTH THE PARTIES AND ALSO AFTER HA VING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEES GROUND NO.1 CHALLENGING THE DIRECTION OF THE LD. DRP IN HOLDING THAT THE AMOUNT OF 208,127,148/- RECEIVED BY THE ASSESSEE TO WARDS FEE FOR MOBILIZATION/DEMOBILIZATION OF THE RIG/S OUTSIDE IN DIA, IS TO BE INCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE ACT, IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 WHE REIN IN PARA 6, THE ISSUE HAS BEEN DEALT WITH AND THE COORDINATE BENCH OF THE TRIBUNAL HAS FOLLOWED THE ORDER OF THE HONBLE UTTA RAKHAND HIGH COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRIL LING LTD. REPORTED IN 299 ITR 238 (UTTARAKHAND). THE RELEVANT OBSERVATIONS OF THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE O F SEDCO FOREX INTERNATIONAL DRILLING LTD.(SUPRA) ARE AS UNDER:- ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 7 HELD, DISMISSING THE APPEAL, THAT THE PAYMENT MADE TO THE ASSESSEE WAS OUTSIDE INDIA AND THE MOBILIZATION CHARGES PAID TO THE ASSESSEE BY ONGC HAD NO NEXUS WITH THE ACTUAL AMOUNT INCURRED BY THE ASSESSEE FOR TRANSPORTATION OF DRILLING UNITS OF RIGS TO THE SPE CIFIED DRILLING LOCATIONS IN INDIA. THUS, THE MOBILIZATION CHARGES WERE NOT REIMBURSEMENT OF EXPENDITURE. ONGC WAS LIA BLE TO PAY A FIXED SUM AS STIPULATED IN THE CONTRACT REGARDLESS OF THE ACTUAL EXPENDITURE WHICH MIGHT BE INCURRED BY THE ASSESSEE FOR THE PURPOSE. IN VIEW O F THE FICTIONAL TAXING PROVISION CONTAINED U/S 44BB, THE ASSESSING OFFICER WAS RIGHT IN ADDING THE AMOUNT OF RS. 99,04,000/- FOR THE ASSESSMENT YEAR 1986-87 AND THE AMOUNT OF RS. 64,64,530/- FOR THE ASSESSMENT YEAR 1 987- 88 RECEIVED BY THE ASSESSEE TOWARDS MOBILIZATION CHARGES FOR THE PURPOSE OF IMPOSING INCOME TAX AND THE CIT(A) AND THE TRIBUNAL WERE ALSO RIGHT IN UPHOLDIN G THE ORDER OF ASSESSING OFFICER.' 5.1 ACCORDINGLY, ON IDENTICAL FACTS AND RESPECTFULL Y FOLLOWING THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THIS REGA RD, WE DISMISS GROUND NO. 1 OF ASSESSEES APPEAL. 5.2 AS FAR AS GROUND NO. 2 WHICH CHALLENGES THE DIR ECTION OF THE LD. DRP IN HOLDING THAT THE AMOUNTS AGGREGATING TO RS. 476,513,071/-, RECEIVED BY THE ASSESSEE FROM ITS CU STOMERS AS REIMBURSEMENT OF ACTUAL EXPENSES(MATERIAL AND FUEL EXPENSES) INCURRED BY THE ASSESSEE ON THEIR BEHALF IS TO BE I NCLUDED IN THE GROSS RECEIPTS U/S 44BB OF THE INCOME TAX ACT IS CO NCERNED, WE FIND THAT THIS ISSUE IS ALSO COVERED AGAINST THE AS SESSEE BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 8 2008-09 WHEREIN THE COORDINATE BENCH HAD FOLLOWED T HE JUDGMENT OF THE HONBLE UTTARAKHAND HIGH COURT IN T HE CASE OF CIT VS. HALLIBURTON OFFSHORE SERVICES INC (SUPRA). IT IS ALSO TO BE NOTED THAT AN IDENTICAL ISSUE WAS HELD AGAINST THE ASSESSEE IN ASSESSMENT YEAR 2007-08 ALSO. THE RELEVANT OBSERVA TIONS OF THE COORDINATE BENCH IN THIS REGARD ARE REPRODUCED AS U NDER:- 'S. 44BB OF THE INCOME TAX ACT, 1961 IS A COMPLETE CODE IN ITSELF. IT PROVIDES BY A LEGAL FICTION THE PROFITS AND GAINS OF A NON RESIDENT ASSESSEE ENGAGED IN THE BUS INESS OF OIL EXPLORATION AT 10% OF THE AGGREGATE AMOUNT SPECIFIED IN SUB SEC. (2). CLAUSE (A) OF SUB SECTIO N (2) REFERS TO THE AMOUNTS, (A) PAID TO THE ASSESSEE (WH ETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SER VICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT & MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPEC TING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS I N INDIA AND (B) PAYABLE TO THE ASSESSEE (WHETHER IN OR OUT OF INDIA) ON ACCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLANT AND MACHINER Y ON HIRE USED, OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERALS OILS IN INDIA . CLAUSE (B) OF SUB SECTION (2) REFERS TO THE AMOUNTS (A) RE CEIVED BY ASSESSEE IN INDIA ON ACCOUNT OF THE PROVISION OF SE RVICES AND FACILITIES IN CONNECTION WITH, OR SUPPLY OF PLA NT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPEC TING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS O UTSIDE INDIA. THUS IT IS CLEAR FROM A PERUSAL OF SECTION 4 4BB THAT ALL THE AMOUNTS EITHER PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) ARE MUTUALLY INCLUSIVE. THIS AMOUNT IS TH E BASIS OF DETERMINATION OF DEEMED PROFITS AND GAINS OF THE ASSESSEE AT 10%. THE AMOUNT PAID OR RECEIVED REFERS TO THE TOTAL PAYMENT TO THE ASSESSEE OR PAYABLE TO THE ASSESSEE OR DEEMED TO BE RECEIVED BY THE ASSESSEE, WHEREAS INCOME HAS BEEN DEFINED U/S 2(24) OF THE IN COME TAX ACT, 1961 AND SECTION 5 AND 9 DEAL WITH THE INC OME AND ACCRUED INCOME AND THE DEEMED INCOME. ITA NO. 623/DEL/2016 ASSESSMENT YEAR 2011-12 9 FACTS BEING THE SAME, RESPECTFULLY FOLLOWING THE ABOVE CITED ORDER OF HON'BLE UTTRAKHAND HIGH COURT, WE DISMISS GROUND NO 1(2) OF APPEAL. GROUND NO. L (1) BEING GENERAL IN NATURE DO NOT REQUIRE ANY ADJUDICATION. ' 5.3 ACCORDINGLY, ON IDENTICAL FACTS AND RESPECTFULL Y FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HALLIBORTON OFFSHORE SERVICES I NC (SUPRA), WE DISMISS GROUND NO. 2 ALSO. 6.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL M EMBER DATED: 29 TH OCTOBER , 2018 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR