2016 (2) TMI 267 - AT - Income Tax

Inclusion of demobilization revenue in gross receipts for the purpose of computing tax u/s 44BB - Held that - The view taken by the AO that the demobilisation revenue pertaining to the entire period of 36 days is includible in the revenue u/s 44BB of the Act is supported by the two decisions EMGS Project Office Vs. DDIT 2012 (11) TMI 584 - ITAT DELHI and CIT Vs. Sedco Forex International Drilling Inc 2007 (9) TMI 196 - UTTARAKHAND HIGH COURT . Accordingly, we do not find any infirmity in the decision taken by him on this issue and accordingly affirm the same. Rejection of claim for deduction of credit note issued - Held that - We are of the view that the assessee is not entitled to claim deduction of ₹ 11.65 crores from the gross amount of the contract, since it is a case of adjustment of payments receivable/payable between the parties. Though it is stated that the deduction has been claimed to the extent of ₹ 7.96 crores, we notice that the assessee has actually claimed deduction of ₹ 11.65 crores. The claim of the assessee may be admissible, if the income is computed u/s 28 to sec. 43 of the Act. Since the income is computed as per the provisions of sec. 44BB of the Act and since the said section provides a deeming fiction for computing the profits and gains of provisions, the claim of the assessee is not admissible. Accordingly, we do not find any merit in the contentions of the assessee and accordingly reject the same. Interest u/s 234B and 234C - Held that - We set aside this matter to the file of the assessing officer with the direction to compute the interest u/s 234B and 234C of the Act in accordance with the ratio laid down by the jurisdictional High Court in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ).

Summary

Issues:
1. Inclusion of demobilization revenue in gross receipts.
2. Rejection of claim for deduction of credit note issued.
3. Charging of interest u/s 234B and 234C of the Act.

Inclusion of Demobilization Revenue:
The appeal challenged the assessment order under sections 143(3) and 144C of the Act for the assessment year 2010-11. The dispute centered on the inclusion of demobilization revenue in gross receipts for tax computation under section 44BB of the Act. The AO and DRP held that the entire demobilization revenue for all transit days should be considered as gross contract amount. The Tribunal affirmed this decision based on precedents, including the case of Sedco Forex International Drilling Inc.

Rejection of Claim for Deduction of Credit Note:
The rejection of the claim for deduction of a credit note issued by the assessee to M/s Allseas was another key issue. The assessing officer considered the credit note as a reimbursement of freight charges, thus includible in gross revenue. The assessee argued that the credit note was issued for fuel supplied by M/s Allseas and should be deductible. However, the Tribunal held that under section 44BB of the Act, which deems profits at 10% of the gross contract amount without allowing deductions, the claim for deduction of the credit note was not permissible.

Charging of Interest u/s 234B and 234C:
Regarding the issue of charging interest under sections 234B and 234C of the Act, the Tribunal referred to the decision in the case of DIT Vs. NGC Network Asia LLC and directed the assessing officer to compute the interest in line with the Bombay High Court's ruling in that case. Consequently, the appeal was partly allowed, with the Tribunal's decision pronounced on 8th January 2016.