DCIT, Dehradun V. M/s. Baker Hughes Asia Pacific Ltd., Dehradun

ITA 6584/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6411 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHAL MISRA CAS
• Assessee Lawyers: ANUJ ARORA
• Keywords: Presumptive income; Business income
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SH. N. K. SAINI, AM AND MS. SUCHITRA KAMBLE , JM ITA NO. 6584/DEL/2014 : ASSTT. YEAR : 2011 - 12 DEPUTY COMM ISSIONER OF INCOME TAX (INTERN ATIONAL TAXATION), CIRCL E - 1 , DEHRADUN - 248001 VS M/S BAKER HUGHES ASIA PACIFIC LTD., C/O - NANGIA & CO., CAS, 3 RD FLOOR, NCR PLAZA, NEW CANTT. ROAD, DEHRADUN - 248001 (APPELLANT) (RESPONDENT) PAN NO. A A CCB3714F CO NO. 216/DEL/2015 : ASSTT. YEAR : 2011 - 12 M/S BAKER HUGHES ASIA PACIFIC LTD., C/O - NANGIA & CO., CAS, 3 RD FLOOR, NCR PLAZA, NEW CANTT. ROAD, DEHRADUN - 248001 VS DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE - 1, DEHRADUN - 248001 (APPELLA NT) (RESPONDENT) PAN NO. AACCB3714F ITA NO. 6588/DEL/2014 : ASSTT. YEAR : 2011 - 12 DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE - 1, DEHRADUN - 248001 VS M/S BAKER HUGHES SINGAPORE PTE LTD., 852, 5 TH FLOOR, BUILDING NO. 8, SOLITAIRE CORPORATE PARK, ANDHERI - GHATKOKPAR LINK ROAD, CHAKALA, ANDHERI (EAST), MUMBAI - 400093 (APPELLANT) (RESPONDENT) PAN NO. AAACB8516F ASSESSEE BY : SH. ANUJ ARORA, CIT DR REVENUE BY : SH. AMIT ARORA & SH. VISHAL MISRA, CAS DATE OF HEARING : 0 9 .0 3 .201 7 DATE OF PRONOUNCEMENT : 21 . 0 3 .201 7 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 2 ORDER PER N. K. SAINI, AM: THE APPEAL S BY THE DEPARTMENT RELATING TO DIFFERENT ASSESSEES AND THE CROSS OBJECTION BY THE ASSESSEE ARE D IRECTED AGAINST THE SEPARATE ORDER S EACH DATED 04.09.2014 OF LD. CIT(A) - II , DEHRADUN . 2. FIRST WE WILL DEAL WITH THE APPEAL OF THE DEPARTMENT AND CROSS OBJECTION OF THE ASSESSEE IN THE CASE OF M/S BAKER HUGHES ASIA PACIFIC LTD., DEHRAUN IN ITA NO. 6584/DE L/2014 AND CO NO. 216/DEL/2015. IN THE DEPARTMENTAL APPEAL F OLLOWING GROUNDS HAVE BEEN RAISED: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE REVENUE RECEIVED BY THE ASSESSEE ON ACCOUNT OF THE PROVISION OF FACILITIES/EQUIPMENTS AND TECHNICAL SERVICES, INCLUDING PROVISION OF TECHNICAL PERSONNEL, TO VARIOUS ENTITIES WAS TAXABLE U/S 44BB OF THE INCOME TAX ACT, 1961 ('THE ACT') AS OPPOSED TO SECTION 44DA READ WITH SECTION 9(L)(VII) OF THE ACT. WHETHER ON THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN IGNORING THE EFFECT OF THE AMENDMENT BROUGHT IN VIDE FINANCE ACT, 2010 W.E.F. 01.04.2011, IN TERMS OF WHICH INCOME COVERED BY SECTION 44DA HAS BEEN SPECIALLY EXCLUDED FROM THE SCOPE OF SECTION 4 4BB FOR ASSTT YEARS 2011 - 12 (THE YEAR UNDER CONSIDERATION) ONWARDS. ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 3 2.1 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN IGNORING THE DISTINCT SCHEME OF TAXATION OF FEES FOR TECHNICAL SERVICES ('FTS') AND ROYALTY AND DISREGARD ING THE INSERTION OF PROVISO IN SECTION 44BB /44DA/115A AND THE RATIONALE BEHIND THE INTRODUCTION OF SAID AMENDMENT IN THE FINANCE BILL 2010 IN HOLDING THAT THE INCOME OF THE ASSESSEE FROM THE ABOVE SERVICES WAS COVERED UNDER THE PRESUMPTIVE PROVISIONS OF SECTION 44BB. 2.2 THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT EVEN IN TERMS OF RATIO OF THE JUDGMENT IN THE SAID OF OHM LTD [352, ITR 406 (DELHI)] CITED BY HIM, THE PROVISIONS OF SECTION 44BB ARE NOT APPLICABLE WHERE THE SCOPE OF THE SERVICE S/FACILITIES PROVIDED BY AN ASSESSEE IS GENERAL IN NATURE FALLING UNDER SECTION 44DA(1) OF THE ACT. 2.3 THE LD CIT(A) HAS ERRED IN MECHANICALLY FOLLOWING THE DECISIONS IN THE CASE OF M/S OHM LTD. WITHOUT FIRST ADJUDICATING UPON THE ISSUE AS TO WHETHER AND HOW THE SCOPE OF THE SERVICES/FACILITIES RENDERED UNDER THE CONTRACTS IS NOT GENERAL IN NATURE AND THEREFORE, DOES NOT QUALIFY AS FTS U/S 9(1 )(VII) OF THE ACT TAXABLE UNDER SECTION 44DA. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L D CIT(A) HAS ERRED IN HOLDING THAT THE INCOME EARNED BY THE ASSESSEE FOR IMPARTING OF SERVICES WAS ELIGIBLE FOR TREATMENT U/S 44BB OF THE ACT, WITHOUT ADJUDICATING THE ASPECT OF ELIGIBILITY UNDER THE SECOND LIMB OF THE EXCLUSIONARY PRO VISO (EXPLANATION TO SECTION 9(1 )(VII) OF THE I.T. ACT, 1961) I.E. 'FOR A PROJECT UNDERTAKEN BY THE RECIPIENT ' IN ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 4 TERMS OF DECISIONS OF HON'BLE DELHI HIGH COURT IN CIT VS RIO TINTO TECHNICAL SERVICES [2012 - TII - 03 - HC - UKHAND - INTL]. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN IGNORING THE DECISIONS OF JURISDICTIONAL HIGH COURT IN THE CASES OF ONGC AS AGENT OF FORAMER FRANCE AND M/S ROLLS ROYCE PVT LTD. [2007 - TII - 03 - HC - UKHAND - INTL] 5. WITHOUT PREJUDICE TO THE GENERALITY OF THE GROUND RELATI NG TO TAXATION OF ENTIRE RECEIPTS AS FTS, WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE AMOUNTS RECEIVED AS RE - IMBURSEMENT OF SERVICE TAX ARE NOT INCLUDIBLE IN GROSS TURNOVER EVEN FOR THE PURPOSE OF COMPUTING TAXABLE INCOME U/S 44BB. A. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THE PROVISIONS OF SECTION 44BB ARE A SELF - CONTAINED CODE PROVIDING FOR COMPUTATION OF PROFITS AT A FIXED PERCENTAGE OF GROSS RECEIPTS OF THE ASSESSEE AND ALL THE DEDU CTIONS AND EXCLUSIONS FROM INCOME ARE DEEMED TO HAVE BEEN ALLOWED TO THE ASSESSEE. B. WHETHER THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT ONCE THE RECEIPTS HELD AS TAXABLE U/S 44BB OF THE ACT, THERE IS NO SCOPE FOR COMPUTING OR RE COMPUTING TH E PROFITS BY EXCLUDING ANY ELEMENT OF THE RECEIPTS FROM THE TOTAL TURNOVER AS THE SAME WOULD AMOUNT TO DEFEATING THE VERY PURPOSE OF PROVIDING FOR A SCHEME OF SIMILAR MODE OF COMPUTATION OF PROFITS ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 5 U/S 44BB OF THE ACT AND OBVIATING THE NEED FOR ACCOUNTING FOR INDIV IDUAL RECEIPTS AND PAYMENTS ETC. C. WHETHER THE LD. 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 A N ASSESSEE IN THE ORDINARY COURSE OF ITS BUSINESS FORMS PART OF ITS BUSINESS RECEIPTS. OWING TO THE INHERENT SIMILARITY IN THE NATURE OF THE SALES TAX AND SERVICES TAX, THE RATIO OF THE JUDGMENT IN THE SAID CASE IS DIRECTLY APPLICABLE IN THE FACTS OF THE I NSTANT CASE. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES ON THE FACTS, THE LD. CIT(A) HAS ERRED IN REVERSING THE ACTION OF THE AO WHO, HAVING HELD THAT THE ASSESSEE'S REVENUES ON ACCOUNT OF AFORESAID SERVICES UNDER CONTRACTS WITH VARIOUS ENTITIES ARE LIABLE TO BE TAXED U/S 44DA, RIGHTLY ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING 25% RATE OF PROFIT ON GROSS RECEIPTS IN THE ABSENCE OF BOOKS OF ACCOUNTS AND DETAILS OF EXPENSES INCURRED IN PROVIDING THE SERVICES. 7. WHETHER ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN HOLDING THAT INTEREST U/S 234B OF THE INCOME TAX ACT, 1961 ('THE ACT') WAS NOT CHARGEABLE IN THIS CASE BY RELYING UPON THE CASE OF M/S MAERSK [334 ITR 79]. A. THE LD. CIT(A) HAS ERRED IN NOT APPRECIA TING THE FACT THAT THE CASE OF M/S MAERSK WAS ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 6 DISTINGUISHABLE ON FACTS AS IT DEALT WITH A CASE WHERE THE EMPLOYER FAILED TO DEDUCT TAX AT SOURCE DESPITE THE SPECIFIC PROVISIONS OF THE ACT IN TERMS OF WHICH THE EMPLOYER WAS MANDATORILY REQUIRED TO DEDUCT TA X FROM THE SALARY PAID TO THE EMPLOYEE. IN THE SAID CASE, THE HON'BLE COURT HELD THAT AN EMPLOYEE IS NOT LIABLE TO PAY ADVANCE TAX ON SALARY BECAUSE U/S 192 THERE IS AN OBLIGATION ON THE EMPLOYER TO DEDUCT TAX AT SOURCE. THE CASE DOES NOT LAY DOWN A GENERA L PROPOSITION OF LAW THAT INTEREST U/S 234B IS NOT CHARGEABLE IN ALL CASES, PARTICULARLY IN CASES WHERE THE NON - RESIDENT ASSESSEE/PAYEE/DEDUCTEE HAS PLAYED A ROLE IN INDUCIN G NON - DEDUCTION OR SHORT - DEDUCTI ON ON THE PART OF THE PAYER/DEDUCTOR. B. THE LD.CIT(A ) HAS ERRED IN FAILING TO TAKE NOTE OF THE OBSERVATIONS OF THE HON'BLE HIGH COURT IN THE CASE OF M/S MITSUBISHI [330 ITR 578, DEL] THAT THE ROLE OF THE ASSESSEE/PAYEE/DEDUCTEE IN SHORT - DEDUCTION OR NON - DEDUCTION OF TAX NEEDS TO BE ASCERTAINED BEFORE CLAIM REGARDING NON - LIABILITY TO INTEREST U/S 234B OF THE ACT IS ACCEPTED, A PROPOSITION AFFIRMED SUBSEQUENTLY IN T HE CASE OF M/S ALCATEL LUCENT (J UDGMENT OF DELHI HIGH COURT DATED 07.11.2013 IN ITA NO. 327 & ORS OF 2012). 8. THE APPELLANT PRAYS FOR LEAVE TO AD D, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 7 3. VIDE GROUND NOS. 1 TO 4 & 6, THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DIRECTION OF THE LD. CIT(A) TO ASSESS THE INCOME OF THE ASSESSEE U/S 44BB OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AS AGAINST THE SECTION 44DA R.W.S. 9(1)(VII) OF THE ACT AS AND CONSIDERED BY THE AO. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED E - RETURN ON 30.09.2011 DECLARING TOTAL INCOME OF RS .3,19,76,881/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSEE REVISED THE RETURN AND DECLARED AN INCOME OF RS.2,46,58,562/ - . DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS OFFERED THE REVENUES FROM THE FOLLOWING CONTRACTS: S NO . CONTRACT NUMB ER BRIEF SCOPE OF WORK OF THE CONTRACT SERVICE VALUE EQUIPMENT RENTAL MOB / DEMOB SERVICE TAX PROD UCT TOOLS LOST IN HOLE TOOL 1 CAIRN INDIA LIMITED (FORMERLY KNOWN AS CAIRN ENERGY INDIA PVT. LIMITED) 46 00001018 PROVISION OF WE LL BORE CLEANOUT TOOLS ALONG WITH ASSOCIATED SERVICES 135,375 - 11,041,299 - 1,151,198 - - 12,327,872 46 00001049 PROVISION OF COMPLETION EQUIPMENT, RUNNING TOOLS ON RENTAL BASIS AND ASSOCIATED SERVICES. 74,039,133 - 36,389,058 - 11, 368,226 - - 121,796 ,418 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 8 7400003232 FOR PROVIDING VARIOUS OILFIELD EQUIPMENTS ALONG WITH OPERATING PERSONNEL 1, 738, 1 77 - 70,531,281 - 1,261,9 03 - - 13,531,36 2 7400003 249 PROVISION OF TRSSV ENGINEER. 3,427,050 - - - 352,986 - - 3,780,036 7400004315 PROVIDING VARIOUS OILFIELD EQUIPMENT ON RENTAL BASIS ALONG WITH OPERATING PERSONNEL 2,367,846 - 4,1 76,804 - 697,268 - - 7,241,91 7 '7400005515 PROVISION OF TRSSSV SERVICE ENGINEER 760,736 - - - 78,356 - - 839,092 TOTAL 82,488,317 - 62,1 38,442 - 14, 909, 9 37 - - 159,516,6 97 2 OIL AND NATURAL GAS CORPORATION LIMITED MR/MM/B&S/N O M./SN/05 /10 - 11 PROVIDING LINER HANGER EQUIPMENT ON RENTAL ALONG WITH OPERATING PERSONNEL 4,200,737 - 754,047 - 510,344 - - 5,465,127 MR/MM/WS/SE R /LEVEL - 3/032/05 - 06/P66NC0600 4/ 9010008441 FOR HIRING WELL COMPLETION EQUIPMENTS ON R ENTAL ALONG WITH ASSOCIATED SERVICES - - 4,438,51 9 - - - - 4,438,519 TOTAL 4,200,737 - 5,192,5 66 - 510,344 - - 9,903,646 3 BG EXPLORATION AND PRODUCTION INDIA LIMITED 2007/B/G/D/10 48 A PROVISION OF LINER HANGER AND UPP ER COMPLETION EQUIPMENT ON RENTAL BASIS ALONG WITH OPERATING PERSONNEL 17,847,820 - 6,926, 068 - 2,551,711 - - 27,325,598 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 9 2005/B/G/D/8 9 9A PROVISION OF LINER HANGER AND UPPER COMPLETION EQUIPMENT ON RENTAL BASIS ALONG WITH OPERATING PERSONNEL 1,739,658 - - - 207, 487 - - 1,947,146 4500130971 PROVIDING COIL TUBING EQUIPMENT ON RENTAL BASIS AND RELATED SERVICES 557,290 - 752, 104 - 134,867 - - 1,444,281 4500132352 PROVIDI NG VARIOUS OILFIELD EQUIPMENTS ON RENTAL - - 175,787 - 18, 106 - - 193,893 TOTAL 20,144,767 - 7,853,959 - 2,912,171 - - 30,910,898 4 BJ SERVICES COMPANY MIDDLE EAST LIMITED 0006 300714 FOR PROVIDING VARIOUS OILFIELD EQUIPME NT ON RENTAL AND OPERATING PERSONNEL - - 2,46 6,640 - 254,064 - - 2,720,704 0006 300716 FOR PROVIDING THROUGH TUBING PLUG ON HIRE BASIS 44,6 45 - 746,339 - 75,977 - - 866,96 0 TOTAL 44,845 3, 21 2, 979 - 330,040 3, 587,66 4 5 ADVANCE D OILFIELD SPECIALISTS FZCO AOS/047 - CI/ 04/09 PROVISION OF WELL BORE CLEAN UP EQUIPMENT ON RENTAL ALONG WITH OPERATING PERSONNEL - - 908,569 - 93,582 - - 1,002,151 TOTAL - - 908,56 9 - 93,582 - 1,002,151 6 JUBILANT OIL AND GAS PRIVATE LIMITED 100007 PROVIDI NG LINER HANGER EQUIPMENT LONG WITH EQUIPMENT 747,487 - - - 76,991 - - 824,478 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 10 PERSONNEL TOTAL 747,487 - - - 7 6 ,991 - 8 24.47 8 7 GUJARAT STATE PETROL EUM CORPORATION LIMITED 4200000449 PROVIDING VARIOUS OILFIELD EQUIPMENTS ON RENTAL BASIS - - 1,900,220 - 195, 723 - - 2,095,943 4200003394 FOR PROVIDING COMPLETIONS/TE STI NG RELATED FI SHING TOOLS ON RENTAL BASIS. 819,258 - 1,523,083 - 241,262 - - 2,583,603 4200003971 PROVIDING COMPLETION SERVICE ENGINEER 3,915,317 - 56,418 68,866 416,182 - - 4,456,784 8300000480 PROVISION FOR PROVIDING MAGNET FISH ON RENTAL BASIS 177,274 - 168,842 - 35,649 - - 381,765 8300000580 PROVISION FOR PROCUREMENT OF SEAL BORE PACKER AND BRIDGE PLUG AND MECHANICAL SET PACKER ALONG WITH OPERATING PERSONNEL 739,895 - - - 76,209 - - 816, 104 8300000823 PROVISION F OR HIRING OF QUICK PICK PACKER RETRIEVING TOOLS ON RENTAL BASIS ALONG WITH OPERATING PERSONNEL - - 1,020,147 - 105,075 - - 1, 125,222 GSPC/CB/LINER HANGER SERVICE/0 5 - 06/32/650 PROVISION FOR LINER HANGER EQUIPMENT ON RENTAL ALONG WITH ASSOCIATED SERVICES 709,748 - 2,1 62, 593 - 307,737 - - 3,180,078 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 11 TOTAL 6,361,492 - 6,831, 303 68,866 1,377,837 - 14, 639,499 7 RELIANCE INDUSTRIES LIMITED OG3/85 252 PROVIDING LINER HANGER EQUIPME NT, ACCESSORIES AND TOOLS ALONG WITH OPERATING PERSONNEL 30,793,666 - 43,469,325 - 1,637,645 - - 75,900,635 2001 - GENL - E1 - DR - O - 241 - MC PROVIDING OPERATING PERSONNEL TO OPERATE LINER H A NGER EQUIPMENT 154,107 - 4,571,139 - - - - 4,725,247 OG3/355248 9 PROVIDING LINER HANGER SURFACE EQUIPMENT ON RENTAL BASIS - - 7,059,897 - - - 272,063 7,331,960 OG3/3558914 PROVIDING LINER HANGER EQUIPMENT ON RENTAL BASIS - - 7,171,179 - - - - 7,171,1 79 OG8/361438 2 PROVIDING SCSSSV EQUIPMENT ON RENTAL BASIS ALONG WITH OPERATING PERSONNEL 8,945,337 - 4,333,802 - - - - 13,279, 139 OGF/86185 PROVIDING LINER HANGER EQUIPMENT AND RUNNING TOOLS WITH ASSOCIA TED SERVICES 2,327,266 - - - - - - 2,327,266 RIL OG8/ 90308 PROVIDING OPEN HOLE GRAVEL PACK TOOLS ALONG WITH OPERATING PERSONNEL 248,097 - - - - - - 248,097 TOTAL 42,468,474 - 66,605,342 - 1, 637, 645 - 272,06 3 110,9 83,523 GROSS RECEIPTS AS PER CO/ 156,435,918 - 152,743,161 68,8 66 21,848,550 - 272,063 331,368,558 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 12 5. THE AO , HOWEVER, BY FOLLOWING THE ORDER FOR THE ASSESSMENT YEAR 2008 - 09 WORKED OUT THE TAXABLE INCOME AT RS.8,28,42,140/ - BY OBSERVIN G AS UNDER: IN RESPONSE TO THE QUERY REGARDING FURNISHING OF AUDITED ACCOUNTS FOR THE YEAR, THE ASSESSEEE SUBMITTED IN EFFECT THAT SINCE IT FILES RETURN UNDER SECTION 44BB, IT IS NOT LIABLE TO FILE AUDITED ACCOUNTS THE ASSESSE E S REPLY IN THIS REGARD IS AS UNDER: THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE FOR THREE REASONS. FIRSTLY, ITS SUPPLIES/INCOME ARE MORE THAN RS.40 LACS FOR THE YEAR CONCERNED, AS REQUIRED U/S 44AB OF IT ACT. SECONDLY, IT HAS FILED ITS RETURN UNDER 44BB, HOLDING ITSELF AS A P E, WHICH REQUIRES THE NRC TO PAY TAXES IN INDIA AFTER DUE ACCOUNTING OF ITS PROFITS IN INDIA. FURTHER, THIRDLY SINCE THE TREATMENT OF INCOME IS DISPUTED TO BE OUTSIDE THE PURVIEW OF 44 BB AND COVERED U/S 44DA OF THE INCOME TAX ACT, 1961. ACCORDINGLY INCOME OF THE ASSESSEE IS TO BE ESTIMATED WHICH IS DONE BY APPLYING DEEMED PROFIT RATE OF 25% ON GROSS RECEIPTS IN ABSENCE OF BOOKS OF ACCOUNTS AS ASSESSEE HAS FILED RETURN UNDER DEEMING PROVISIONS. PENALTY PROCEEDINGS UNDER SEC. 271B FOR FAILURE TO GET THE ACCO UNTS AUDITED ARE BEING INITIATED SEPARATELY. 10. COMPUTA TION OF INCOME IN VIEW OF ABOVE AND FOLLOWING THE DIRECTIONS OF LD. DRP IN THE CASE OF THE ASSESSEE FOR THE A. Y . 2008 - 2009, THE INCOME OF THE ASSESSEE COMPANY IS COMPUTED HEREUNDER AS: - ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 13 REVENUES AS OFFERED INCLUDING MOB - DEMOB RS. 30,92,47,945/ - ADD: EQUIPMENT LOST IN HOLE AS DISCUSSED ABOVE RS. 2, 72,063 / - ADD: SERVICE TAX AS DISCUSSED ABOVE RS.2,18, 48,550/ - GROSS REVENUE TO BE TAXED AS FTS/ROYALTY RS.33,13,68, 558/ - TOTAL INCOME @25% RS.8,28,42, 140/ - IT IS PROPOSED TO COMPLETE THE ASSESSMENT ON A TOTAL INCOME OF RS. 8,28,42,140/ - FOR WHICH DRAFT ASSESSMENT ORDER IS BEING PREPARED AND ISSUED AS PER THE PROVISIONS OF SEC. 143 (3) R.W. SEC. 144C(1) OF THE INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE DISCUSSIO N, IT IS CLEAR THAT THE ASSESSEE HAS NOT ONLY CONCEALED THE PARTICULARS OF ITS INCOME BUT HAS ALSO FURNISHED INACCURATE PARTICULARS OF ITS INCOME. PENALTY PROCEEDING UNDER SEC. 271 (1) (C) ARE PROPOSED TO BE INITIATED ALONGWITH ISSUE OF PENALTY N OTICE UNDER SECTION 271B FOR NON - MAINTENANCE OF BOOKS OF ACCOUNTS AND A UDITED ACCOUNTS. INTEREST CHARGEABLE AS PER LAW.' AS PER THE RECORDS IT IS SEEN THAT THE ASSESSEE HAS FILED LETTER DATED 09.04.2014 AR OF THE ASSESSEE HAS STATED THAT IT DOES NOT WISH TO FILE ANY OBJECTIONS AGAINST THE SAID DRAFT ORDER BEFORE THE HON'BLE DISPUTE RESOLUTION PANEL. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT IF THE SERVICES WERE DIRECTLY CONNECTED WITH OIL EXTRACTION OR EXPL ORATION THEN THOSE TO BE ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 14 ASSESSED U/S 44BB OF THE ACT AND NOT U/S 44DA OF THE ACT. THE ASSESSEE ALSO FURNISHED THE WRITTEN SUBMISSION WHICH HAS BEEN INCORPORATED BY THE LD. CIT(A) IN PARA 4.1 OF THE IMPUGNED ORDER WHICH IS REPRODUCED VERBATIM AS UNDER: 'WI TH REFERENCE TO THE APPEAL FILED WITH YOUR OFFICE AND IN CONTINUATION TO OUR SUBMISSION FILED ON AUGUST 21, 2014, WE WOULD LIKE TO SUBMIT AS UNDER. THE APPELLANT REQUESTS THAT THE BELOW MENTIONED SUBMISSIONS MAY PLEASE BE READ IN CONJUNCTION WITH THE SUBMI SSIONS FILED ON AUGUST 21, 2014. THE BELOW MENTIONED SUBMISSIONS ARE INDEPENDENT TO EACH OTHER AND WITHOUT PREJUDICE TO THE SUBMISSIONS FILED EARLIER. 1. WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE RECEIPTS ARE NOT IN THE NATURE OF 'FTS', THE APPELLANT CLAIMS THAT SPECIFIC PROVISION (SECTION 44BB) OVERRIDES GENERAL PROVISIONS (SECTION 44DA) . 1.1. THE ASSESSEE WISHES TO PLACE RELI ANCE ON THE DECISION OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX - II V S. OHM LI MITED WHER EIN THE HON 'BLE COURT UPHELD THE RULING OF THE AAR THAT SPECIFIC PROVISION (SECTION 44BB) OVERRIDES GENERAL PROVISION (SECTION 44DA). 1.2. THE INTERPLAY BETWEEN SECTION 44BB AND SECTION 44DA HAS BEEN EXAMINED IN DETAIL BY THE HON 'BLE DELHI HIGH COURT IN T HE CASE OF OHM LIMITED (SUPRA). THE HON 'BLE COURT HAS RELIED UPON THE WELL SETTLED RULE OF INTERPRETATION THAT IF A SPECIAL PROVISION IS MADE FOR A CERTAIN MATTER, THAT MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RULE WHICH IS ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 15 EXPRESSED BY THE MAXIM 'GENERALLIA SPECIALIBUS NON DEROGANT'. FURTHER, THE COURT HAS ALSO RELIED UPON ANOTHER WELL SETTLED RULE OF CONSTRUCTION THAT WHEN, IN AN ENACTMENT TWO PROVISIONS EXIST, WHICH CANNOT BE RECONCILED WITH EACH OTHER, THEY SHOULD BE SO INTERPRETED THAT, IF POSSIBLE, EFFECT SHOULD BE GIVEN TO BOTH. BASED ON THE ABOVE PRINCIPLES OF CONSTRUCT ION AND INTERPRETATION, THE HON 'BLE COURT HELD THAT INCOME FROM SERVICES WHICH ARE SPECIFIC TO THE OIL & GAS E&P SECTOR SHALL BE SUBJECT TO THE COMPUTATION PROVISIONS OF SECTION 44BB AS OPPOSED TO SECTION 44DA. 1.3. FURTHERMORE, THE APPELLAN T WISHES TO SUBMIT THAT THE HON 'BLE COURT HELD THAT IN THE INSTANCE THE SERVICES ARE 'GENERAL IN NATURE' AND CAN BE CATEGORIZED AS 'FEES FOR TECHNICAL SERVICE '' UNDER EXPLANATION 2 TO SECTION 9( 1 )(VIII), THE BENEFIT OF SECTION 44BB CANNOT BE AVAILED BY THE ASSESSEE. IN OTHER WORDS, IT HAS BEEN HELD THAT REVENUE IN THE NATURE OF 'FEES FOR TECHNICAL SERVICE ' AND EARNED FROM ACTIVITIES IN CONNECTION WITH EXPLORATION AND PRODUCTION OF M INERAL OIL ARE INCLUDIBLE IN THE REVENUE CHARGEABLE TO TAX UNDER SECTION 44BB OF THE ACT. 2. THE ACTIVITIES OF THE APPELLANT ARE NOT 'GENERAL IN NATURE' AND ARE DIRECTLY IN CONNECTION WITH THE OIL & GAS E&P . ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 16 2.1. BASED ON THE SCOPE OF WORK AWARDED TO THE ASSESSEE, THE FOLLOWING ACTIVITIES WERE PERFORMED BY THE ASSESSEE: COMPLETION EQUIPMENT; LINER HANGER TOOLS/ EQUIPMENT; COIL TUBING EQUIPMENT; THRU TUBING PLUG; THE ACTIVITIES CARRIED OUT BY THE APPELLANT ARE DETAILED IN THE EXHIBIT - 1 ATTACHED HEREWIT H. IN VIEW OF THE FOREGOING, THE APPELLANT WISHES TO ASSERT THAT THE ACTIVITIES CARRIED OUT BY THE APPELLANT ARE ACTIVITIES IN CONNECTION WITH OIL & GAS EXPLORATION & PRODUCTION ('E&P') ACTIVITIES. FURTHERMORE, THE APPELLANT WISHES TO INVITE YOUR GOODSELF' S ATTENTION TO THE FOLLOWING: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COPY OF THE ESSENTIALITY CERTIFICATES (ECS) ISSUED BY THE DIRECTORATE GENERAL OF HYDROCARBONS WERE SUBMITTED BEFORE THE LD. AO. THE ECS ARE A CONCLUSIVE PROOF THAT THE EQUIPMENT AR E USED IN OIL & GAS E&P AND THE USAGE OF THE EQUIPMENT HAS NEVER BEEN DISPUTED BY THE LD. AO IN THE ENTIRE ASSESSMENT PROCEEDINGS. THE COPY OF THE ECS, ON SAMPLE BASIS, WERE ALSO ENCLOSED WITH OUR EARLIER SUBMISSION; - THE PRODUCT BROUCHERE OF THE COMPANY D ETAILING THE VARIOUS EQUIPMENT PROVIDED AND THEIR USE IN PETROLEUM OPERATIONS WAS ALSO SUBMITTED DURING THE COURSE OF ASSESSMENT. THE COPY OF THE SAME WAS ALSO ENCLOSED WITH OUR EARLIER SUBMISSION; AND ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 17 - THE OILFIELD EQUIPMENT PROVIDED BY THE APPELLANT ARE USED IN INDIA IN THE RESPECTIVE CONTRACT AREAS AWARDED UNDER THE RESPECTIVE PRODUCTION SHARING CONTRACTS (PSCS). THIS FACT IS ON RECORD AND IS ALSO VERIFIABLE FROM THE CONTRACTS. 3. DE LHI HIGH COURT IN THE CASE OF PG S GEOPHYSICAL AS UPHELD ITS EARLIER RU LING IN THE CASE OF OHM LTD. (SUPRA) . IN THE INSTANT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING GEOPHYSICAL SERVICES INCLUDING ACQUISITION AND PROCESSING OF SEISMIC DATA. IN THE APPEAL, THE TAXPAYER DID NOT AGITATE THAT THE SCOPE OF WORK E XECUTED BY IT WAS NOT FEES FOR TECHNICAL SERVICES A S DEFINED IN SECTION 9(1 )(VII) OF THE ACT . UNDER THESE CIRCUMSTANCES, THE COURT PROCEEDED ON THE BASIS THAT THE INCOME OF THE ASSESSEE WAS WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES. THE QUESTIO N AS TO WHETHER NOT THE SERVICES WERE SPECIFIC AND ESSENTIAL FOR THE OIL & GAS E&P OPERATIONS OR WERE GENERAL FEES FOR TECHNICAL SERVICES WAS NEVER CONSIDERED BY THE COURT. IN VIEW OF THE ABOVE FACTS, THE HIGH COURT RULED THAT - THE COURT UPHELD ITS EARL IER RULING IN THE CASE OF OHM LTD (SUPRA); AND - ACCORDINGLY IT WENT ON TO HOLD THAT EVEN THOUGH THE INCOME WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES FALLING WITHIN SECTION 44DA, THE PROVISIONS OF SECTION 44BB WOULD NEVERTHELESS APPLY BECAUSE THE TAX PAYER WAS ENGAGED IN THE BUSINESS OF ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 18 PROVIDING SERVICES IN CONNECTION WITH PROSPECTING FOR MINERAL OILS. A HARMONIOUS CONSTRUCTION OF THE DELHI HIGH COURT'S DECISI ON IN THE CASE OF OHM LTD AND PG S GEOPHYSICAL AS WOULD BE THAT INCOME FROM SERVICES WHICH AR E SPECIFIC TO THE OIL & GAS E&P SECTOR SHALL BE SUBJECT TO THE COMPUTATION PROVISIONS OF SECTION 44BB AS OPPOSED TO SECTION 44DA. IN MAKING THE ASSERTION WE WISH TO SUBMIT AS UNDER: - THE HON 'BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL HAS NOWHERE D ISSENTED FROM ITS EARLIE R JUDGMENT IN THE CASE OF OHM LT D ON THE CONTRARY, THE COURT HAS CATEGORICALL Y STATED THAT IT WAS FOLLOWING IT S OWN JUDGMENT IN THE CASE OF OHM IN THE PRESENT CASE ALSO; - THE RULING IN THE CASE OF PGS GEOPHYSICAL BE THUS READ IN CON SONANCE WITH THE RULING IN THE CASE OF OHM LIMITED, WHEREIN IT HAS BEEN SPECIFICALLY HELD THAT ONLY SERVICES WHICH WERE GENERAL IN NATURE WOULD BE TAXABLE UNDER SECTION 44DA. FOR THIS REASON, SERVICES WHICH ARE SPECIFIC TO THE OIL & GAS E&P OPERATIONS WOUL D BE TAXABLE UNDER SECTION 44BB IN PREFERENCE TO SECTION 44DA; AND - AGAIN, IT IS IMPORTANT TO NOTE THAT THE SCOPE OF WORK PERFORMED BY PGS WAS NOT EXAMINED IN DETAIL BY THE HIGH COURT AND ITS ROLE IN THE E&P INDUSTRY NOT APPRECIATED BY THE COURT . IN NUTSH ELL, THE APPELLANT WISHES TO SUBMIT AS UNDER : ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 19 - THE ACTIVITIES OF THE APPELLANT ARE EXPLICITLY IN CONNECTION WITH OIL & GAS E&P; - THE HON 'BLE DELHI HIGH COURT IN THE CASE OF OHM LTD. (SUPRA) HELD THAT REVENUE FROM SERVICES WHICH ARE SPECIFIC TO THE OIL & GA S E&P SECTOR SHALL BE SUBJECT TO THE COMPUTATION PROVISIONS OF SECTION 44BB AS OPPOSED TO SECTION 44DA; - THE ABOVE PRINCIPLE HAS BEEN UPHELD BY THE HON'BLE DELHI HIGH COURT IN A SUBSEQUENT DECISION IN THE CASE OF PGS GEOPHYSICAL (SUPRA); IN VIEW OF ALL OF THE FOREGOING, THE APPELLANT SUBMITS THAT THE REVENUE IS INCLUDIBLE IN THE REVENUE CHARGEABLE TO TAX UNDER SECTION 44BB OF THE ACT. FURTHERMORE, THE SUMMARIZED GROUNDS VIS - A - VIS THE GROUNDS RAISED AND ADJUDICATED IN THE EARLIER YEAR (S) IS ALSO ENCLOSED HEREWITH AS EXHIBIT - 2 . 7. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DIRECTED THE AO TO CONSIDER THE ENTIRE QUANTUM OF RECEIPT U/S 44BB OF THE ACT. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 4.2 OF THE IMPUGNED ORDER WHICH READ A S UNDER: 4.2 THE FINDINGS OF ID. AO AND THE AVERMENTS OF ID. ARS HAVE BEEN CAREFULLY CONSIDERED. IT IS NOT IN DOUBT THAT ALL THE SERVICES RENDERED BY THE APPELLANT (AS DETAILED IN THE EXTRACT ABOVE) HAD A DIRECT NEXUS WITH OIL EXTRACTION OR EXPLORATION. THUS FOLLOWING THE DETAILED REASONING GIVEN AND INTERPRETATION OF LAW IN ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 20 THE OHM LTD. CASE (SUPRA) IT IS HELD THAT THE APPELLANT'S CASE DESERVES TO BE DEALT WITH U/S 44BB OF THE ACT FOR THE ENTIRE QUANTUM OF INCOME BECAUSE OF THE NATURE OF BUSINESS OPERATI ONS WHICH ARE SEEN TO HAVE A CLOSE NEXUS WITH OIL EXTRACTION. IT MAY ALSO BE MENTIONED THAT THE ID. AO HAS RELIED UPON THE CASE OF ONGC REPORTED IN 299 ITR 438 (UK) TO ARRIVE AT A FINDING THAT PROVISION OF PERSONNEL IS FTS. HOWEVER, THIS CASE HAS BEEN DIST INGUISHED IN PARA 10 OF THE CGG VERITAS CASE WHEREIN IT HAS BEEN MADE CLEAR THAT THE QUESTION THERE WAS WHETHER SERVICES OF PERSONNEL COULD BE 'FTS' OR 'SALARIES', WITH NO DISCUSSION ON 44BB OF THE ACT. THESE GROUNDS ARE ACCORDINGLY ALLOWED WITH THE DIRECT ION TO SUBJECT ENTIRE QUANTUM OF RECEIPTS U/S 44BB, EVEN RS.14,48,65,866/ - CLAIMED EXEMPT BEING SALES OF CONSUMABLES AND SPARES. THIS IS SO BECAUSE ALL SUCH ITEMS ARE INTIMATELY LINKED WITH PERFORMANCE OF CONTRACTS AND DISTINGUISHING VARIOUS FACETS OF ANY ONE CONTRACT WOULD BE ARTIFICIAL AND NOT IN THE SPIRIT OF LAW. 8 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATION MADE IN THE ASSESSMENT ORDER DATED 06.05.2014. 9 . IN HIS RIVAL SUBMISSIO NS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE NOW HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT FOR THE ASSESSMENT YEAR 2007 - 08 IN ITA NO. 5283/DEL/2010 VIDE ORDER DATED 11.07.2014 , THE SAID ORDER HAS BEEN AFFIRMED BY THE HON BLE UT TARAKHAND HIGH COURT IN ITA NO. 64/2014 ORDER DATED 06.08.2015 AND THAT THE HON BLE ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 21 JURISDICTIONAL HIGH COURT RELIED UPON THE DECISION OF THE HON BLE APEX COURT IN THE C ASE OF OIL AND NATURAL GAS CORPORATION LTD. VS CIT & ANOTHER (2015) 376 ITR 306. IT WAS FURTHER SUBMITTED THAT THE AO HIMSELF HAS ACCEPTED THE TAXABILITY OF REVENUE AS PER THE PROVISIONS OF SECTION 44BB OF THE ACT IN THE RECENT ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT ASSESSMENT YEARS 2013 - 14 AND 2014 - 15 (COPY OF THE SAID ORDER S WERE FURNIS HED WHICH ARE PLACED ON RECORD). THE RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE LAWS: DIT VS MITCHELL DRILLING INTERNATIONAL PVT. LTD. (2016) 380 ITR 130 (DEL.) OIL AND NATURAL G AS CORPORATION LTD. VS CIT (2015) 376 ITR 306 (SC) DIT - II VS OHM LTD. (203 ) 352 ITR 406 (DEL.) 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, THE LD. CIT(A) CATEGORICALLY STATED THAT THE ASSESSEE WAS ENGAGED IN PROVIDING THE SERVIC ES WHICH HAD DIRECT NEXUS WITH OIL EXTRACTION OR EXPLORATION. THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 IN ITA NO. 5283/DEL/2010 & 420/DEL/2012 VIDE ORDER DATED 11.07.2014. AGAINST THE SAID ORDER THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE HON BLE UTTARAKHAND HIGH COURT IN ITA NO. 64/2014 WHEREIN VIDE ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 22 ORDER DATED 06.08 .2015, T HE APPEAL OF THE DEPARTMENT WAS DISMISSED. THE HON BLE HIGH COURT RELIED UPON THE DECISION OF THE HON BLE APEX COURT IN THE C ASE OF OIL AND NATURAL GAS CORPORATION LTD. VS CIT & ANRS. R EPORTED AT 376 ITR 306. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 4 OF THE SAID ORDER WHICH READ AS UNDER: 4. IN THE LIGHT OF THE JUDGMENT OF THE HON BLE APEX COURT IN CIVIL APPEAL NO. 731 OF 2007 AND CONNECTED CASES (OIL & NATURAL GAS CORPORATION LTD. VS COMMISSIONER OF INCOME TAX & ANOTHER), THE SUBSTANTIAL QUESTIONS OF LAW RELATING TO THE ASSESSIBILITY OF THE AMOUNTS UNDER SECTION 44BB HAVE TO BE ANSWERED AGAINST THE APPELLANT/REVENUE. ACCO RDINGLY, WE ANSWER THE SAID QUESTIONS OF LAW AGAINST THE REVENUE IN THE LIGHT OF THE AFORESAID JUDGMENT OF THE HON BLE APEX COURT. 11 . ON A SIMILAR ISSUE THE HON BLE APEX COURT IN THE CASE OF OIL AND NATURAL GAS CORPORATION LTD. VS CIT (SUPRA) HELD AS UNDER: THAT THE BRIEF DESCRIPTION OF THE WORKS COVERED UNDER EACH OF THE CONTRACT S IN QUESTION WOULD INDICATE THAT THE PITH AND SUBSTANCE OF EACH OF THE CONTRACTS WAS INEXTRICABLY CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MIN ERAL OIL. THE DO MINANT PURPOSE OF EACH OF SUCH AGREEMENTS WAS FOR PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OILS THOUGH THERE MAY BE CERTAIN ANCILLARY WORKS CONTEMPLATED THERE - UNDER. IF THAT BE SO, THE PAYMENTS MADE BY THE ONGC AND RECEIVED BY THE NON - RESIDENT OR F OREIGN COMPANIES ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 23 UNDER THE CONTRACTS FOR PROVIDING VARIOUS SERVICES IN CONNECTION WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OILS WERE NOT CHARGEABLE TO TAX AS 'FEES FOR TECHNICAL SERVICES' UNDER SECTION 44D READ WITH EXPLANATION 2 TO SECTION 9( 1 )(VII) OF THE ACT BUT MORE APPROPRIATELY ASSESSABLE ON A PRESUMPTIVE BASIS UNDER SECTION 44BB OF THE AC T 12 . IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE LD. CIT(A) HAS FOLLOWED THE AFORESAID DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. WE , THEREFORE, DO NOT SEE MERIT IN THIS APPEAL OF THE DEPARTMENT ON THIS ISSUE. 13 . THE NEXT ISSUE VIDE GROUND NOS. 5 TO 5(C) RELATES TO THE TAXATION OF REIMBURSEMENT OF SERVICE TAX. 14 . AS REGARDS TO THIS ISSUE THE LD. COUNSEL FOR THE ASSESSEE AT THE VER Y OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED IN ASSESSEE S FAVOUR VIDE ORDER DATED 05 .09.2014 IN ITA NO. 6476 /DEL/2012 FOR THE ASSESSMENT YEAR 2009 - 10 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 7 & 8 OF THE SAID ORDER WHICH READ AS UNDER : 7. WE FIND THIS ISSUE TO BE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING INC. VIDE ITA NO.504/DEL/2013, WHEREIN THE ITAT HELD AS UNDER: - 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL PLACED BEFORE US. WE FIND THAT THIS ISSUE IS ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 24 COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEE S OWN CASE FOR AY 2008 - 09 DATED 29 TH JUNE, 2012 VIDE ITA NO.5284/DEL/2011, WHEREIN THE ITAT HELD AS UNDER: - THE SERVICE TAX IS A STA TUTORY LIABILITY LIKE CUSTOM DUTY. HON BLE UTTARAKHAND HIGH COURT IN THEIR DECISION IN SCHLUMBERGER 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 AN Y ELEMENT OF PROFIT AND ACCORDINGLY, THE SAME COULD NOT BE INCLUDED IN THE TOTAL RECEIPTS FOR 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 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. THEREFORE, 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 ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 25 COURT HAS BEEN POIN TED 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 INCOME UNDER SECTION 44BB OF THE INCOME - TAX ACT, 1961. ACCORDINGLY, GROUND NOS. 1 & 2 OF THE ASSESSEE S APPEAL ARE ALLOWED. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF ITAT AND THE DECISION OF HON BLE UTTARAKHAND H IGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) AND ANOTHER VS. SCHLUMBERGER ASIA SERVICES LTD. [2009] 317 ITR 156, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE SERVICE TAX FROM THE GROSS RECEIPT FOR THE PURPOSE OF DETERMINING THE INCOME UNDER SECTION 44BB OF THE INCOME - TAX ACT, 1961. ACCORDINGLY, GROUND NOS. 3 & 4 OF THE ASSESSEE S APPEAL ARE ALLOWED. 15 . SIMILARLY THE HON BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS MITCHELL DRILLING INTERNATIONAL PVT. LTD. (2016) 380 ITR 130 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 RECEIPT S 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 T O THE GOVERNMENT. ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 26 16 . SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS INVOLVED IN ASSESSMENT YEAR 2009 - 10, SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 05.09.2014 IN ASSESSEE S OWN CASE IN ITA NO. 6476/DEL/20 12 , WE DO NOT SEE ANY MERIT IN THE DEPARTMENTAL APPEAL ON THIS ISSUE. 17 . AS REGARDS TO THE ISSUE RAISED VIDE GROUND NO. 7 RELATING TO CHARGING OF INTEREST U/S 234B OF THE ACT. IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN N ATURE. WE ORDER ACCORDINGLY. 18 . GROUND NO. 8 IS GENERAL IN NATURE SO WE DO NOT REQUIRE ANY COMMENTS ON OUR PART. 19 . AS REGARDS TO CO NO. 216/DEL/2015, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE HAS THE DIRECTION NOT TO PRESS THIS CROSS OBJECTIO N AND GAVE IN WRITING AS UNDER: NOT PRESSED SD/ - ( ..) 20 . IN VIEW OF THE ABOVE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. ITA NOS. 6584 & 6588 /DEL /2014 CO NO. 216/DEL/2015 BAKER HUGHES ASIA & SINGAPORE LTD. 27 21 . IN ITA NO. 6588/DEL/2014, THE ISSUE RAISED BY THE DEPARTMENT ARE SIMILAR AS WERE INVOLVED IN I TA NO. 6584/DEL/2014 IN THE CASE OF BAKER HUGHES ASIA PACIFIC LTD. DEHRADUN (SUPRA), SO THE RELEVANT FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT ALSO. 22 . IN THE RESULT, THE APPEAL S OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ( ORDER PRON O UN CED IN THE COURT ON 21 /0 3 /2017 ) SD/ - SD/ - ( SUCHITRA KAMBLE ) (N. K. SAINI) JUDICIAL ME MBER ACCOUNTANT MEMBER DAT ED: 21 /0 3 /2017 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR