2012 (7) TMI 250 - AT - Income Tax

Determination of Presumptive profit u/s 44BB - addition of reimbursement of fuel recharge received to gross receipts - assessee(foreign company) having PE in India reflected income u/s 44BB in terms of contracts with ONGC - Held that - It has been held in case of Halliburton Offshore Services Inc ( 2007 (9) TMI 230 (HC)) that it is clear from perusal of Section 44BB that all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive. This amount is the basis of determination of deemed profits and gains of the assessee @ 10 %. S44BB is a complete code in itself. Following aforesaid decision, action of addition of reimbursement of fuel recharge to gross receipts is upheld - Decided in favor of Revenue. Addition of reimbursement of Service tax - Held that - Service tax which is a statutory liability, would not involve any element of profits and a service provider is collecting the same from its customers on behalf of the Government and, accordingly, same cannot be included in the total receipts for determining the presumptive income. See Islamic Republic of Iran Shipping Lines(2011 (4) TMI 637 (Tri)) - Decided against Revenue

Issues Involved:

1. Completion of assessment under sections 144C/143(3) of the Income-tax Act, 1961.
2. Addition of reimbursement of actual expenses to gross receipts under section 44BB.
3. Addition of service tax to gross receipts under section 44BB.
4. Levy of interest under section 234B of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Completion of Assessment under Sections 144C/143(3):

The assessee, a foreign company with a permanent establishment in India, filed its e-return declaring an income of Rs. 28,24,41,510/-. The Assessing Officer (AO) completed the assessment at an income of Rs. 30,44,74,660/-. The AO observed that the assessee's receipts from integrated services on the rig were not intricately linked to the hired rig and should be treated as fee for technical services under section 9(1)(vii) of the Act rather than under section 44BB.

2. Addition of Reimbursement of Actual Expenses to Gross Receipts under Section 44BB:

The AO added Rs. 123,163,495/- to the gross receipts, treating it as taxable under section 44BB. The assessee contended that this amount represented reimbursement of actual expenses incurred on behalf of ONGC. The Dispute Resolution Panel (DRP) upheld the AO's decision, citing the jurisdictional High Court's ruling in CIT Vs. Halliburton Offshore Service Inc. (300 ITR 265), which held that reimbursement of expenditure is includible in taxable income under section 44BB.

The Tribunal noted that the assessee conceded the issue, acknowledging that reimbursement of fuel recharge is taxable under section 44BB, as per the jurisdictional High Court's decision. Consequently, the Tribunal upheld the AO's addition of Rs. 123,163,495/- to the gross receipts under section 44BB.

3. Addition of Service Tax to Gross Receipts under Section 44BB:

The AO also added Rs. 97,167,971/- to the gross receipts, treating it as taxable under section 44BB. The assessee argued that service tax should not be included in the gross receipts as it is a statutory liability. The DRP, however, directed the AO to include the service tax in the gross receipts.

The Tribunal referred to the ITAT Delhi Bench's decision in Technip Offshore Contracting BV, which included service tax in the total receipts for determining presumptive profit under section 44BB. However, the Tribunal also considered the Uttarakhand High Court's decision in DIT & Anr. Vs. Schlumberger Asia Services Ltd. (317 ITR 156), which excluded reimbursement of custom duty from deemed profits under section 44BB. Following this reasoning, the Tribunal concluded that service tax, being a statutory liability, should not be included in the gross receipts for determining presumptive income under section 44BB. Therefore, the Tribunal allowed the assessee's appeal on this ground.

4. Levy of Interest under Section 234B:

The ground relating to the levy of interest under section 234B was not pressed by the assessee. Consequently, the Tribunal dismissed this ground.

Conclusion:

The Tribunal partly allowed the appeal, upholding the AO's addition of reimbursement of actual expenses to gross receipts under section 44BB but excluding service tax from the gross receipts for determining presumptive income under section 44BB. The ground relating to the levy of interest under section 234B was dismissed, as it was not pressed by the assessee.

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