2010 (5) TMI 453 - HC - Income Tax

Reimbursement of expenses - deduction u/s 44BB - Held that - deduction of an amount received on account of reimbursement of mobilization charges by the NRC in respect of the transportation of rigs outside territorial waters of India is answered in favour of the Revenue and against the assessee in Sedco Forex International Inc. Vs. Commissioner of Income Tax & another, (2007 -TMI - 3679 - UTTARAKHAND HIGH COURT) The reimbursed amount (under reference) was the amount paid to the respondent on account of supply of plant and machinery to be used in the prospecting for, or extraction, or production of mineral oils in India. - the same is squarely covered, in favour of the Revenue and against the respondent / assessee, in view of the judgment rendered in Sedco Forex International Inc. s case (2007 -TMI - 3679 - UTTARAKHAND HIGH COURT).

Summary

Issues:
1. Whether the ITAT was justified in allowing the reimbursement of mobilization charges outside India without considering operations in India?
2. Whether the ITAT was correct in allowing reimbursement of expenses under Sec. 44BB(2)(a)?

Analysis:

Issue 1:
The first question of law in the appeal questioned the ITAT's decision to allow reimbursement of mobilization charges by the NRC outside India without considering operations in India. The judgment referred to Sedco Forex International Inc. Vs. Commissioner of Income Tax & another, (2008) 299 ITR 238, where a similar issue was decided in favor of the Revenue. The court examined the arguments presented and concluded that the reimbursed amount was indeed paid for the supply of plant and machinery to be used in India for mineral oil activities. Therefore, the first question was answered in favor of the Revenue.

Issue 2:
The second question of law revolved around the ITAT's decision to allow reimbursement of expenses under Sec. 44BB(2)(a). The court analyzed the provisions of Sec. 44BB, which pertains to non-resident assesses providing services in connection with mineral oils. The court referred to specific clauses in the judgment of Sedco Forex International Inc. to determine the applicability of the reimbursed amount to the provisions of Sec. 44BB. It was established that the reimbursed amount fell within the scope of Sec. 44BB(2)(a) as it was paid for the provision of services and facilities in connection with mineral oils in India. Consequently, the second question was also answered in favor of the Revenue.

In conclusion, the court allowed the appeal, ruling in favor of the Revenue on both questions of law. The judgment of the ITAT was set aside, affirming the correctness of the decisions based on the interpretations of the relevant provisions and previous case law.