Sundowner Offshore International (Bermuda) Ltd., New Delhi V. ADIT, Dehradun

ITA 6475/DEL/2012

• Counselvise Citation: 647520114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: AMTI ARORA
• Keywords: Presumptive income; Double taxation relief; Permanent establishment
• Section: 143(3); 142(1)

Judgement Text

ITA NO. 6475/ DEL/ 201 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. N O. 6 475 /DEL/201 2 A.Y . : 200 9 - 10 M/S SUNDOWNER OFFSHORE INTERNATIONAL (BERMUDA) LTD., C/O NANGIA & COMPANY, SUITE 4A, PLAZA M - 6, JASOLA, NEW DELHI 110 025 (PAN: AAHCS0550M) VS. ASSTT. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, INCOME TAX OFFICE, SUBHASH ROAD, DEHRADUN - 248001 UTTRAKHAND (APPELLANT) (RESPONDENT) ASSESSEE BY : S H. AMTI ARORA, CA DEPARTMENT BY : SH. BRR KUMAR, SR. DR DATE OF HEARING : 04 - 0 6 - 201 5 DATE OF ORDER : 0 5 - 0 6 - 201 5 ORDER PER H.S. SIDHU : J M ASSESSEE HAS FILED THIS A PPEAL AGAINST THE IMPUGNED ORDER DATED 25 . 10 .201 2 PASSED BY THE LD. CIT(A) - II , NEW DELHI RELEVANT TO ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS: - BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, YOUR APPELLANT RESPECTFULLY SUBMITS THE FOLLOWING GROUNDS WHICH ARE WITHOUT PREJUDICE TO EACH OTHER: GROUND NO. 1 THAT BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - II, DEHRADUN ERRED IN UPHOLDING THE ORDER OF THE AO THAT RECEIPTS OF RS. 100,803,172/ - ON ACCOUNT OF SERVICE TAX WER ITA NO. 6475/ DEL/ 201 2 2 INCLUDIBLE IN THE GROSS RECEIPTS FOR THE PURPO SE OF DETERMINING INCOME UNDER SECTION 44BB OF THE INCOME TAX ACT, 1961. GROUND NO. 2 THAT BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT ERRED IN NOT FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL INCOME TAX APPELLATE TRIBUNAL, DELHI G BENCH IN ITA NO. 5284/DEL/2011 IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILING INC. VS. ADDL . DIRECTOR OF INCOME TAX WHEREIN IT WAS HELD THAT SERVICE TAX RECEIPTS WERE NOT INCLUDIBLE IN THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING INCOME UNDER SECTION 44BB OF THE INCOME TAX ACT, 1961. YOUR APPELLANT PRAYS THAT THE ERRONEOUS ORDER BE CANCELL ED AND APPROPRIATE RELIEF MAY BE GRANTED TO THE APPELLANT. YOUR APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND, VARY, OMIT, SUBSTITUTE OR DELETE ANY OF THE AFOREMENTIONED GROUNDS OF APPEAL OR ADD A NEW GROUND OR GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF INCOME WAS FILED BY THE ASSESSEE, ELECTRONICALLY ON 28.9.2009 DECLARING TOTAL INCOME OF RS. 9,20,28,446/ - . THE CASE WAS PROCESSED UNDER SECTION 143(3) ON 30.3.2011, AN D A REFUND OF RS. 78,51,490/ - WAS DETERMINED AND ISSUED TO THE ASSESSEE. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. ACCORDINGLY, NOTICE UNDER SECTION 143(2) OF THE I.T. ACT WAS ISSUED ON 15.9.2010 BY THE ADIT INTERNATIONAL TAXATION, DEHRADUN. NOTIC E UNDER SECTION 142(1) OF THE I.T. ACT ALONGWITH QUESTIONNAIRE WAS ISSUED BY THE AO. IN PURSUANCE TO THE VARIOUS NOTICES AND DUE OPPORTUNITIES OF HEARING, THE AUTHORIZE REPRESENTATIVE OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME ITA NO. 6475/ DEL/ 201 2 3 A ND SUBMITTED THE REPLIES. AFTER HEARING THE ASSESSEE AND PERUSING THE SUBMISSIONS OF THE ASSESSEE, AO WAS OF THE VIEW THAT THE ADDRESS OF THE COMPANY IS GIVEN IN THE RETURN OF INCOME AS 332, AMBAJI SADAN, NANDA PATKAR ROAD, VILLE PARLE (E), MUMBAI WHICH HAS BEEN ADMITTED TO BE THE PERMANENT ESTABLISHMENT IN INDIA BY THE ASSESSEE NRC. DURING THE PREVIOUS YEAR, THE ASSESSEE HAS RECEIVED REVENUES ON ACCOUNT OF THE CONTRACT ENTERED WITH OIL AND NATURAL GAS CORPORATION LIMITED. THE ASSESSEE NRC HAS A PE I N INDIA. FOR AVAILING THE BENEFIT OF SECTION 44BB, THE ASSESSEE IS HAVING A P E IN INDIA THROUGH WHICH IT IS CARRYING OUT BUSINESS IN INDIA. SINCE THE ASSESSEE HAS NOT CLAIMED ANY BENEFIT UNDER THE DTAA AND HAS NOT FILED ANY TAX RESIDENCY CERTIFICATE, T HE CASE WAS ASSESSED UNDER THE PROVISIONS OF THE INDIAN INCOME TAX ACT. THE ASSESSEE HAS CLAIMED THAT THE TAXABLE INCOME ON THE REVENUES DURING THE YEAR TO BE COMPUTED ONLY IN TERMS OF SECTION 44BB OF THE INCOME TAX ACT, 1961 CLAIMING TO BE ENGAGED IN TH E PROVIDING OF SERVICES AND ON FACILITIES, IN CONNECTION WITH, OR SUPPLY PLANT AND MACHINERY ON HIRE USED, OR TO BE USED IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF MINERAL OILS. THE COPIES OF CONTRACT ON WHICH THE AFORESAID REVENUES WERE EAR NED WERE WITH THE AO. 2.1 THE ASSESSEE HAS FILED THE RETURN OF INCOME UNDER SECTION 44BB(1) AND HAS COMPUTED ITS TAXABLE INCOME AT 10 PER CENT OF THE GROSS REVENUES TAKING RS. 92,02,84,456/ - . BUT AS PER THE DETAILS AND REVENUE BREAKUP SUBMITTED BY T HE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS NOT OFFERED TO TAX GROSS RECEIPTS ON ACCOUNT OF REIMBURSEMENT ON ACCOUNT OF SERVICE TAX RECEIPTS. THE INCOME OF THE ASSESSEE IS TAXABLE IN INDIA IN VIEW OF THE FAC T THAT IT IS ACCRUING AND ARISING IN INDIA UNDER SECTION 5 OF THE INCOME TAX ACT, 1961. SINCE THE ACTIVITY ITA NO. 6475/ DEL/ 201 2 4 OF ASSESSEE IS FIRST LEG ACTIVITY THAT PERTAINS TO THE CONTRACT WITH CONSORTIUM / PSCS, RECEIPTS FROM CHARTER HIRE OF RIG OF THE ASSESSEE IS TAXABLE IN INDIA UNDER SECTION 44 BB OF THE I.T. ACT, 1961. T HE ASSESSEE HAS ALSO RECEIVED REVENUE IN THE FORM OF REIMBURSEMENTS ON ACCOUNT OF SERVICE TAX, AS MENTIONED ABOVE, WHICH HAVE NOT BEEN INCLUDED BY THE ASSESSEE IN ITS GROSS RECEIPTS. THE ASSESSEE WAS ACCORDINGLY ASKED TO SUBSTANTIATE ITS CLAIM OF THE SAID AMOUNTS VIDE QUESTIONNAIRE / SHOW CAUSE LETTER DATED 26.7.2011 AND 20.10.2011 AND NOTE SHEET QUERIES ISSUED FROM TIME TO TIME. ASSESSEE FURTHER ASKED AS TO WHY SERVICE TAX MAY NOT BE INCLUDED IN TH E TOTAL INCOME AND THE TAX ACCORDINGLY. IN RESPONSE THERETO, ASSESSEE FILED ITS REPLIES/ SUBMISSIONS. AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND AFTER RELYING UPON THE VARIOUS JUDGMENTS HAS HELD THAT THE AMOUNTS RECEIVED BY THE ASSESSEE BY WA Y OF REIMBURSEMENT OF EXPENSES, MOBILIZATION AND DEMOBILIZATION CHARGES AND FEES, HANDLING CHARGES ARE TO BE INCLUDED IN THE AMOUNTS SPECIFIED IN SUB - SECTION (2) OF SECTION 44BB, TO DETERMINE THE DEEMED PROFIT OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE R ECEIPTS ON ACCOUNT OF REIMBURSEMENT OF EXPENSES ARE TAKEN INTO ACCOUNT TO DETERMINE DEEMED PROFIT OF 10% OF THE GROSS RECEIPTS OF THE ASSESSEE DURING THE YEAR AS PER SECTION 44BB OF INCOME TAX ACT, 1961. THE REIMBURSEMENT OF SERVICE TAX TOO, IS TO BE IN CLUDED IN THE GROSS RECEIPTS AND TAKEN INTO ACCOUNT TO DETERMINE DEEMED PROFIT OF 10% OF THE GROSS OF THE ASSESSEE DURING THE YEAR AS PER SECTION 44BB OF THE INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE, THE INCOME OF THE ASSESSEE COMPANY WAS COMPUTED AS UN DER: - - TOTAL REVENUES : RS. 92,02,84,456/ - - ADD:SERVICE TAX REIMBURSEMENT : RS. 10,08,03,172/ - - GROSS REVENUE : RS. 102,10,87,628/ - ITA NO. 6475/ DEL/ 201 2 5 TAXABLE INCOME U/S. 44BB : RS. 10,2 1,08,763 2.2 ACCORDINGLY, IT WAS PROPOSED TO COMPLETE THE ASSESSMENT ON A TOTAL INCOME OF RS. 10,21,08,763/ - FOR WHICH DRAFT ASSESSMENT ORDER IS BEING PREPARED AND ISSUED AS PER THE PROVISIONS OF SECTION 143(3) OF THE I.T. ACT. THEREAFTER, THE AO FINALIZED THE ASSESSMENT AT A TOTAL INCOME OF RS. 10,21,08,763/ - AS PER THE PROVISIONS OF SECTION 143(3) RWS 144C(3)(A) OF THE I.T. ACT VIDE HIS ORDER DATED 06.1.2012. 3 . AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 25 . 10 .201 2 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4 . AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 5. SHRI AMTI ARORA, LD. A.R. O F THE ASSESSEE STATED THAT THE ISSUE IN DISPUTE IS SIMILAR TO THE ISSUE INVOLVED IN THE CASE OF ENSCO MARITIME LIMITED VS. ASSTT. DIRECTOR OF INCOME TAX (INT. TAXATION) IN ITA NO. 5482 /DEL/20 13 (A.Y. 20 10 - 11 ) IN WHICH THE COORDINATE B BENCH, ITAT, NEW DELHI VIDE ORDER DATED 05 . 9 .2015 HAS DECIDED THE SIMILAR AND IDENTICAL ISSUE IN FAVOUR OF T HE ASSESSEE . HE ALSO FILED THE COPY OF THE ORDER DATED 5.9.2015, AS AFORESAID. 6. ON THE OTHER LD. DR RELIED UPON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH AND ESPECIALLY THE ORDER DATED 05 . 9 .2015 PASSED BY THE ITAT, DELHI B BENCH, NEW DELHI IN ITA NO. 5482 /DEL/201 3 A.Y. 20 10 - 1 1 IN THE CASE OF ENSCO MARITIME LIMITED VS. ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) , WE ARE OF THE VIEW THAT THE ISSUE INVOLVED IN DISPUTE IS SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH, ITAT , NEW DELHI ITA NO. 6475/ DEL/ 201 2 6 IN THE AFORESAID CASE IN WHICH ONE OF THE JUDICIAL MEMBER WAS THE PARTY. THE RELEVANT PARA NO. 9 TO 9.1 FROM PAGES 7 TO 11 OF THE AFORESAID ORDER IS REPRODUCED BELOW: - 9. WITH REGARD TO GROUND NO. 3 REGARDING SERVICE TAX CHARGED AMOUNTING TO RS. 155,062,604/ - IS CONCERNED, LD. COUNSEL OF THE ASSESSEE DURING THE HEARING HAS FILED A COPY OF THE DECISION OF THE ITAT, BENCH G , NEW D ELHI PASSED IN ITA NO. 5284/DEL/2011 (A.Y. 2008 - 09) IN THE CASE OF M/S SEDCO FOREX INTERNATIONAL DRILLING INC. VS. ADDITIONAL DIT (INTT. TAXATION), DEHRADUN VIDE ORDER DATED 29.6.2012 AND SUBMITTED THAT THE ISSUE IN THE PRESENT CASE IS SQUARELY COVERED B Y THE AFORESAID DECISION IN FAVOR OF THE ASSESSEE. WE FIND THAT THE THIS DECISION HAS ALSO BEEN FOLLOWED EARLIER BY THE TRIBUNAL IN ITA NO. 504/DEL/2013 (A.Y. 2009 - 10) IN THE CASE OF THE SAME ASSESSEE VIDE WHICH THE TRIBUNAL HAS DECIDED THE ISSUE IN F AVOR OF THE ASSESSEE VIDE ITS ORDER DATED 02.8.2013. THE RELEVANT PARAS 3 TO 4 ARE REPRODUCED HEREUNDER: - 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECI SION OF ITAT IN ASSESSEE S OWN CASE FOR AY 2008 - 09 DATED ITA NO. 6475/ DEL/ 201 2 7 29 TH JUNE, 2012 VIDE ITA NO.5284/DEL/2011, WHEREIN THE ITAT HELD AS UNDER: - THE SERVICE TAX IS A STATUTORY LIABILITY LIKE CUSTOM DUTY. HON BLE UTTARAKHAND HIGH COURT IN THEIR DECISION IN SCHLUM BERGER ASIA SERVICES LTD. (SUPRA) CONCLUDED THAT REIMBURSEMENT OF CUSTOM DUTY PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. FOLLOWING THE VIEW IN THIS DECISION, MUMBAI BENCH IN THEIR DECISION IN ISLAMIC REPUBLIC OF IRAN SHIPPING LINES (SUPRA) HELD THAT SERVICE TAX BEING A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMENT OF PROFIT AND ACCORDINGLY, THE SAME COULD NOT BE INCLUDED IN THE TOTAL RECEIPTS FO R DETERMINING THE PRESUMPTIVE INCOME. IN THE LIGHT OF VIEW TAKEN BY THE MUMBAI BENCH, ESPECIALLY WHEN THE LD. DR DID NOT PLACE ANY MATERIAL BEFORE US CONTROVERTING THE AFORESAID ITA NO. 6475/ DEL/ 201 2 8 FINDINGS OF THE LD.CIT(A) SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION, WE ARE OF THE OPINION THAT SERVICE TAX PAID BY THE ASSESSEE COULD NOT FORM PART OF AMOUNT FOR THE PURPOSE OF DEEMED PROFITS U/S 44BB UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. THEREFOR E, GROUND NO.3 IN THE APPEAL IS ALLOWED. 4. FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DECIDED THE ABOVE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AND ANOTHER VS. SCHLUMBERGER ASIA SERVICES LTD. [2009] 317 ITR 156 (UTTARAKHAND). NO CONTRARY DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN POINTED OUT. IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON 'BLE JURISDICTIONAL HIGH COURT AND ALSO THE DECISION OF ITAT IN ASSESSEE S OWN CASE CITED SUPRA, DIRECT THE ASSESSING OFFICER TO EXCLUDE SERVICE TAX FROM THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING THE ITA NO. 6475/ DEL/ 201 2 9 INCOME UNDER SECTION 44BB OF THE INCOME - TAX ACT, 1961. ACCORDINGLY, GROUND NOS.1 & 2 OF THE ASSESSEE S APPEAL ARE ALLOWED. 9.1 FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT DECIDED THE ABOVE ISSUE IN FAVOR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AND ANOTHER VS. SCHLUMBERGER ASIA SERVICES LTD. [2009] 317 ITR 156 (UTTARAKHAND). NO CONTRARY DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT HAS BEEN POINTED BY THE LD. DR. IN VIEW OF THE ABOVE, WE RES PECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE HIGH COURT OF UTTARAKHAND AND ALSO THE DECISION OF THE ITAT DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE. 8 . KEEPING IN VIEW OF THE AFORESAID ORDER DATED 05 . 9 .2015 PASSED BY THE ITAT, DELHI B BENCH, NEW DELHI IN ITA NO. 5482 /DEL/201 3 A.Y. 20 10 - 1 1 IN THE CASE OF ENSCO MARITIME LIMITED VS. ASSTT. DIRECTOR OF INCOME TAX (INT. TAXATION) IN WHICH ONE OF THE MEMBER S W AS THE PART Y WHEREIN THE ISSUE IN DISPUTE WAS DECIDED IN FAVOR OF THE ASSESSEE. RESPECTFULLY, FOLLOWING THE PRECEDENT OF THE COORDINATE BENCH AS AFORESAID, WE QUASH THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO EXCLUDE SERVICE TAX FROM THE GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING THE INCOME UNDER SECTION 44BB OF THE I NCOME TAX ACT, 1961 AND DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE BY ALLOWING THE APPEAL OF THE ASSESSEE. ITA NO. 6475/ DEL/ 201 2 10 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE O PEN C OURT ON 0 5 / 6 /20 1 5 . S D / - S D / - [ R.S. SYAL ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 0 5 / 6 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES