2015 (4) TMI 301 - HC - Income Tax

Fees from technical services - assessee is foreign company incorporated under the laws of Norway engaged in the activities relating to acquisition of 3D sesismic data under contracts with Reliance Industries Ltd. and ONGC - Tribunal held that the mobilization/demobilization fee received by the appellant on account of services provided/vessel operated outside India were to be included in calculating the aggregate amount referred to in sub-section (2) of Section 44BB - Held that - As clear from the provision of sub-section (3) of Section 44BB, as sub-section (3) of Section 44BB provides that it is open to the assessee to claim lower profits and gains, if he keeps and maintains such books of account and other documents as required under sub-section (2) of Section 44AA and gets the accounts audited and furnish a report. There is no case for the appellant that the appellant is invoking the aid of sub-section (3) of Section 44BB. In view of the admitted position that the appellant does not claim the benefit of sub-section (3) of Section 44BB, we do not see how the appellant can be heard to argue that the amount which he has received by way of mobilization advance outside India should not be included for the purpose of calculating the income under section 44BB in the teeth of the clear provision contained in sub-section (2) of Section 44BB. On our understanding, the provisions contained in Section 5 (2) of the Act will not stand on the way of the Authorities insisting on the amount of mobilization advance received by the appellant outside India being included. The provisions contained in sub-section (2) of Section 44BB, clearly provides for reckoning the amount received outside India also for calculating the amount. - Decided against assessee.

Summary

Issues Involved:
1. Interpretation of Section 44BB of the Income-Tax Act, 1961 regarding taxation of a foreign company's income.
2. Whether income received outside India can be taxed under Section 44BB.
3. Determination of whether the Tribunal's findings were perverse.

Issue 1: Interpretation of Section 44BB:
The case involved a foreign company incorporated in Norway engaged in acquiring 3D seismic data under contracts with Indian companies. The company filed its income tax return under Section 44BB of the Act, but its claim was rejected, and its income was taxed as fees from technical services. The Dispute Resolution Panel affirmed this decision, leading to an appeal before the High Court. The appellant argued that the computation section (Section 44BB) cannot go against the charging section (Section 5) of the Act. The Court analyzed the provisions of Section 44BB which provide a special scheme for taxation of non-residents engaged in specific activities. It concluded that the amounts received by the non-resident, whether in India or outside India, must be included for calculating income under Section 44BB. The Court held that the appellant, being a non-resident, could avail of the special provisions of Section 44BB or choose to be governed by other sections. Since the appellant did not claim the benefit of lower profits under sub-section (3) of Section 44BB, the Court ruled that the income received outside India should be included for tax calculation under Section 44BB. The Court found no merit in the appellant's argument and dismissed the appeal.

Issue 2: Taxation of Income Received Outside India:
The primary contention revolved around whether income received outside India by the foreign company could be taxed under Section 44BB. The appellant argued that the mobilization advance received outside India should not be included in the tax calculation under Section 44BB. However, the Court held that the provisions of Section 44BB explicitly state that amounts received or payable to a non-resident, whether in India or outside India, must be considered for computing income under this section. The Court emphasized that Section 44BB provides a specific mechanism for taxation of non-residents engaged in certain activities, and the appellant could choose to follow this special provision or opt for regular assessment under other sections. As the appellant did not claim the benefit of lower profits under sub-section (3) of Section 44BB, the Court concluded that the income received outside India should indeed be included for tax calculation purposes under Section 44BB.

Issue 3: Allegation of Perverse Findings by the Tribunal:
The appellant raised concerns about the Tribunal's findings being perverse. However, the Court examined the arguments presented by both parties and concluded that the Tribunal's decision was in line with the provisions of Section 44BB and the specific scheme outlined for taxation of non-residents. The Court found no merit in the appellant's contention regarding the Tribunal's decision being perverse and dismissed the appeal accordingly.

In summary, the High Court of Uttarakhand clarified the interpretation of Section 44BB of the Income-Tax Act, 1961, emphasizing that a non-resident's income, whether received in India or outside, should be considered for tax calculation under this section. The Court dismissed the appeal, rejecting the appellant's argument against including income received outside India for taxation under Section 44BB.