2012 (11) TMI 584 - AT - Income Tax

Taxability of mobilization revenue attributable to the operation of the vessel beyond 200 nautical miles from the Indian costline. - Payments made to assessee outside India Following the decision of court in case of SEDCO FOREX INTERNATIONAL INC.(formerly known as Forex Neptune International Inc.) Versus CIT 2007 (9) TMI 196 - UTTARAKHAND HIGH COURT held that - Mobilization charges paid to assessee by ONGC had no nexus with the actual amount incurred by assessee for transportation of drilling units of rigs to India thus, mobilization charges weren t reimbursement of expenditure in view of fictional taxing provision u/s 44BB, AO is justified in adding the amount received by assessee towards mobilization charges for the purpose of imposing income tax - grievance sought to be raised by the assessee is rejected - In the result, appeal filed by the assessee is dismissed.

Summary

Issues:
Taxability of mobilization revenue beyond 200 nautical miles from the Indian coastline under Section 44BB of the IT Act and the Indo-Norway DTAA.

Analysis:

Issue 1: Taxability of mobilization revenue beyond 200 nautical miles

The appeal was filed against the order confirming the taxability of mobilization revenue beyond 200 nautical miles from the Indian coastline. The assessee, a non-resident company, argued that mobilization revenue from operations outside India should not be taxed in India, citing provisions of the IT Act and the Indo-Norway DTAA. The Assessing Officer, however, included the mobilization fee as taxable income under Section 44BB of the Act. The Ld. CIT(A) upheld this decision, leading to the current appeal.

Analysis of Issue 1:
The assessee contended that mobilization charges are not taxable in India as they pertain to activities conducted outside Indian waters. They argued that the mobilization charges do not accrue or arise in India and should not be deemed taxable. The assessee relied on the Indo-Norway DTAA, stating that profits are only taxable in India if attributable to a permanent establishment. However, the Ld. CIT(A) and the Assessing Officer relied on the decision in Sedco Forex International Inc., which held that mobilization charges are taxable in India. The tribunal upheld this decision, emphasizing the binding nature of the Sedco Forex International Inc. judgment by the Uttarakhand High Court, the jurisdictional High Court in this case. As no contrary decision was presented, the tribunal dismissed the appeal, affirming the taxability of mobilization revenue beyond 200 nautical miles.

In conclusion, the tribunal upheld the taxability of mobilization revenue beyond 200 nautical miles from the Indian coastline under Section 44BB of the IT Act, based on the precedent set by the Sedco Forex International Inc. judgment. The appeal was dismissed, affirming the decision of the Ld. CIT(A) and the Assessing Officer.