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2006 (12) TMI 256 - AT - Income TaxPresumptive income u/s 44BB - Receipt of the mobilization charges - Taxing the entire amount or attributable to the activities carried out in India - Inclusion of the amount reimbursement of expenses in the receipts for the purpose of section 44BB? - HELD THAT - The assessee is a non-resident person and therefore u/s 5(2) only such income which is received or is deemed to be received in India or accrues or arises or is deemed to accrue or arise in India can be included in the total income. In this case the payments were made outside India and substantial activity of mobilization etc. was carried out outside India. Therefore the Hon ble Tribunal came to the conclusion that only such part of the income which is attributed to the activities carried on in India can be subjected to tax in the hands of the assessee as the income was received outside India. We find no reason to differ with this decision of the Hon ble ITAT in the case of Saipem SPA 2003 (12) TMI 280 - ITAT DELHI-B being the decision of the Third Member which part takes the character of the decision of the Special Bench. Therefore respectfully following the aforesaid decision it is held that only that part of the receipt of the mobilization charges which is attributable to the activities carried out in India is liable to be included in the receipts for the purpose of computing presumptive income u/s 44BB of the Act. Insofar as ground Nos. 5 and 6 are concerned the decision of the aforesaid cases is that reimbursement of expenses is not includible in the receipts for computing presumptive income u/s 44BB of the Act. Respectfully following those decisions it is held that the amounts reimbursed to the assessee cannot be included in the amounts referred to in section 44BB of the Act. In result the appeal of the assessee is allowed.
Issues:
1. Taxability of demobilization charges under section 44BB of the Income-tax Act, 1961. 2. Taxability of mobilization charges under section 44BB of the Income-tax Act, 1961. 3. Inclusion of reimbursement of expenses in the receipts for computing presumptive income under section 44BB of the Act. Issue 1: Taxability of Demobilization Charges The Assessing Officer considered the entire amount received by the assessee from Cairn Energy India Pvt. Ltd., including demobilization charges, as taxable under section 44BB of the Act. The assessee contended that only the part of the charges attributable to activities in Indian territorial waters should be taxed. The CIT(A) confirmed the Assessing Officer's decision. However, the ITAT, following precedent, held that only the portion of demobilization charges related to activities in India should be taxed, as the income was received outside India. Issue 2: Taxability of Mobilization Charges The Assessing Officer included the entire mobilization charges in the assessee's receipts for computing presumptive income under section 44BB of the Act. The CIT(A) upheld this decision. The ITAT, relying on precedent, determined that only the portion of mobilization charges attributable to activities in India should be taxed under section 44BB, as the income was received outside India. Issue 3: Inclusion of Reimbursement of Expenses The Assessing Officer included amounts reimbursed to the assessee for expenses in the receipts for computing presumptive income under section 44BB of the Act. The CIT(A) supported this inclusion. However, the ITAT, following established decisions, ruled that reimbursement of expenses should not be considered in the receipts for computing presumptive income under section 44BB of the Act. In conclusion, the ITAT allowed the appeal of the assessee, holding that only the portion of demobilization and mobilization charges attributable to activities in India should be taxed under section 44BB. Additionally, the ITAT ruled that reimbursement of expenses should not be included in the receipts for computing presumptive income under the Act.
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