2015 (3) TMI 1250 - AT - Income Tax

Mobilization fee paid to non-resident - computing income under section 44BB - Held that - The Ground decided against the assessee in view of the decision of Hon ble Uttrakhand High Court in the case of Sedco Forex International Inc. v. CIT 2007 (9) TMI 196 - UTTARAKHAND HIGH COURT wherein it has been held that mobilization fee , if paid to non-resident assessee by the ONGC which had no nexus with the actual amount incurred by the assessee company for transportation of drilling unit of rigs to the specified drilling location in India and which was not reimbursement of expenditure had to be taken into account for the purpose of computing income under section 44BB.

Summary

Issues Involved:
1. Taxability of Mobilisation/Demobilisation charges.
2. Taxation of revenues from Charter Hire of Tug Boat under Section 44BB vs. Business Income under DTAA.
3. Taxation of reimbursement of survey charges.
4. Deletion of interest under Section 234B.
5. Eligibility for DTAA benefits between India and UAE.
6. Assessment of income under Section 44BB vs. Fees for Technical Services (FTS).

Detailed Analysis:

1. Taxability of Mobilisation/Demobilisation charges:
The assessee contended that Mobilisation/Demobilisation charges received from Engineers India Ltd. for activities outside India were not taxable under the Income Tax Act, 1961. However, the CIT(A) confirmed their taxability. The Tribunal upheld the CIT(A)'s decision, referencing the Hon'ble Uttrakhand High Court's ruling in Sedco Forex International Inc. v. CIT, which stated that mobilization fees paid to a non-resident by ONGC, unrelated to actual transportation costs and not a reimbursement, must be included for computing income under Section 44BB.

2. Taxation of revenues from Charter Hire of Tug Boat:
The assessee argued that revenues earned from Arcadia Shipping Limited for the Charter Hire of Tug Boat Valentine III should be taxed as Business Income under Article 7 of the DTAA between India and UAE, rather than under Section 44BB. The CIT(A) ruled in favor of the assessee, recognizing the benefits under the DTAA and noting the absence of a Permanent Establishment (PE) in India. The Tribunal upheld this decision, emphasizing that the issue was covered by its previous ruling in the assessee's favor for the assessment year 1998-99.

3. Taxation of reimbursement of survey charges:
The assessee contended that the reimbursement of survey charges received from Arcadia Shipping Limited, not earned within India's territorial waters, should not be taxed under the Act. The Tribunal did not explicitly address this issue in the detailed analysis, implying that it was dismissed along with the other grounds of the assessee's appeal.

4. Deletion of interest under Section 234B:
The Revenue challenged the CIT(A)'s direction to delete interest under Section 234B. The Tribunal dismissed this ground, referencing the Hon'ble Bombay High Court's decision in DIT (International Taxation) vs. NGG Network Asia LLC, which held that no interest could be imposed on the payee under Section 234B when the duty to deduct tax at source was on the payer.

5. Eligibility for DTAA benefits between India and UAE:
The Revenue's additional ground questioned the CIT(A)'s direction to treat the assessee as eligible for DTAA benefits. The Tribunal dismissed this ground, aligning with its earlier decision in the assessee's favor for the assessment year 1999-2000, which recognized the assessee's qualification for DTAA benefits based on a certificate from the UAE's Ministry of Finance and Industry.

6. Assessment of income under Section 44BB vs. Fees for Technical Services (FTS):
The Revenue contended that a portion of the gross receipts should be taxed as FTS under Section 9(1)(vii) rather than under Section 44BB. The Tribunal rejected this, referencing its previous decision for the assessment year 2005-06, which concluded that the entire income from the turnkey project for laying and installation of pipelines should be taxed under Section 44BB, as the services provided were integral to the business of prospecting for or extraction of mineral oils.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-appeal, upholding the CIT(A)'s decisions on all contested grounds. The Tribunal's rulings were consistent with its previous decisions in the assessee's favor and relevant High Court judgments. The order was pronounced in the open court on 19/03/2015.