2009 (5) TMI 863 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the interpretation of provisions u/s 44BB of the Income-tax Act regarding the taxability of specific receipts related to services provided in connection with exploration and extraction of mineral oils. The key issues include the treatment of reimbursements for expenses and losses, including service tax, repair of machinery, airfare, and cost of tools lost in hole.

Reimbursement of Expenses and Losses:
The Appellate Tribunal considered the case of a non-resident company engaged in providing services to ONGC and receiving reimbursements totaling Rs 4,40,25,412. The Assessing Officer contended that these receipts were chargeable to tax u/s 44BB. However, the CIT (Appeals) held that these amounts should not be taxed under section 44BB, citing a previous decision. The Tribunal, after hearing both parties, ruled that certain reimbursements, including service tax, repair of machinery, and airfare, are to be included in the total amount liable to be taxed u/s 44BB based on relevant case law.

Reimbursement of Cost of Tools Lost:
The Tribunal further deliberated on the reimbursement of Rs. 3,57,52,830 for the cost of tools lost in a hole, received by the company from ONGC. The Departmental Representative argued that this amount should be included u/s 44BB(2) as any sum received is chargeable to tax under this provision, irrespective of its nature. The representative emphasized that the connection with services rendered is the determining factor for taxability. On the other hand, the company's representative contended that such reimbursement is a capital receipt and should not be taxed u/s 44BB. Referring to a previous decision, the Tribunal agreed with the company's stance, stating that capital receipts need not be considered for computing income u/s 44BB.

Conclusion:
After considering the arguments presented, the Tribunal partially allowed the revenue's appeal. It upheld the inclusion of certain reimbursements in the taxable amount u/s 44BB but excluded the reimbursement for the loss of tools, deeming it as a capital receipt not subject to tax under the said provision. The Tribunal relied on the decision of the jurisdictional High Court in a similar case to support its conclusion.