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2018 (3) TMI 1599 - AT - Income TaxAssessment of appellant on a protective basis - AOP - Liability for Claims among the Members - taxabilty of consortium members - reference to Dispute Resolution Panel (DRP) - whether the consortium members constitutes an AOP and its taxability u/s 44BB? - Held that - Consortium Agreement dated 04/05/03 is the basis on which the entire scope of work has been executed by consortium members. The entire relationship between the consortium members are governed by Consortium Agreement dated 04/05/03, whereas MoU dated 28/05/03 has been executed by consortium members solely for ONGC and is as per format of ONGC, therefore contained clauses relevant only for the sake of application of bid with ONGC. In our considered opinion in case of any differences between the consortium members the agreement dated 04/05/03 are enforceable independently. Each consortium member raised separate invoices, on which ONGC shall honor both the invoices independently. It is also observed that both the members have agreed to maintain separate books of accounts which further emphasises their independent role of work with ONGC though work has to be performed jointly. Further it is also observed that no member had any role to play in respect of the scope of work allocated to the other member and neither of the consortium members shared any costs nor risk and had managed their own deliverables. Following the decision of AG, LINDE ENGINEERING DIVISION AND ANOTHER VERSUS DEPUTY DIRECTOR OF INCOME TAX 2014 (4) TMI 975 - DELHI HIGH COURT - we hold that Consortium Agreement dated 04/05/03 between Slumberger Asia Services Ltd and Transocean Offshore Deepwater Drilling Pvt. Ltd., do not constitute an AOP. As on date, regarding prospecting for or extraction or production of mineral oil is not to be treated as technical services for the purposes of Explanation 2 to section 9 (1) (vii) and would rather be covered by section 44 BB of the Act. Transocean Offshore Deepwater Drilling Inc. being consortium member has rightly offered to tax the receipts u/s 44BB in the return of income. Disallowing the reimbursement of expenses - Held that - These are payments related to the services rendered by assessee, and forms part of the receipts. Respectfully following the decision of Hon ble Supreme Court in case of Sedco Forex 2017 (11) TMI 78 - SUPREME COURT we hold that these payments are to be included while computing income u/s.44 BB of the Act. Levy of interest u/s.234B - Held that - Assessee cannot be levied with the interest under section 234B of the Act. SEE DIT, Intl.Tax.-I vs. G.E.Parts INC. 2016 (8) TMI 1357 - SUPREME COURT
Issues Involved:
1. Protective Assessment 2. Association of Persons (AOP) Status 3. Inclusion of Reimbursements in Taxable Income 4. Levy of Interest under Section 234B 5. Levy of Interest under Section 234D 6. Reopening of Assessment Detailed Analysis: 1. Protective Assessment: The assessee challenged the assessment on a protective basis, arguing that the order passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 was bad in law and void ab initio. The tribunal found merit in the assessee's argument, noting that the Dispute Resolution Panel (DRP) failed to issue necessary directions to the Assessing Officer (AO) under section 144C. 2. Association of Persons (AOP) Status: The key issue revolved around whether the consortium of Transocean Offshore Deepwater Drilling Inc. (TODDI) and Schlumberger Asia Services Ltd. (SASL) constituted an AOP under the Income Tax Act. The tribunal analyzed the consortium agreement dated 04/05/03 and the Memorandum of Understanding (MoU) dated 28/05/03. It concluded that the consortium agreement governed the relationship between the parties, and the MoU was executed solely for the purpose of the bid with ONGC. The tribunal found that the consortium did not constitute an AOP as there was a clear demarcation of work, separate invoicing, and no sharing of profits or losses. The tribunal relied on the decision of the Hon'ble Delhi High Court in the case of Linde AG Linde Engineering Division vs. DDI (365 ITR 1) and Circular No. 7/2016 issued by CBDT, which provided guidelines for not treating certain consortium arrangements as AOPs. 3. Inclusion of Reimbursements in Taxable Income: The AO included reimbursements of fuel charges and material recharge in the taxable income under section 44BB of the Act. The tribunal referred to the Supreme Court's decision in M/s. Sedco Forex Intl. Drilling Inc. vs. DCIT (87 Taxmann.com 29), which held that reimbursements related to services rendered form part of the receipts. Consequently, the tribunal upheld the inclusion of reimbursements in the taxable income. 4. Levy of Interest under Section 234B: The assessee contested the levy of interest under section 234B. The tribunal referred to the Supreme Court's decision in DIT, Intl. Tax.-I vs. G.E. Parts INC. (73 Taxmann.com 186), which upheld the Delhi High Court's ruling that no interest is leviable under section 234B if the payer failed to determine the tax liability under section 195(1). The tribunal ruled in favor of the assessee, holding that interest under section 234B was not chargeable. 5. Levy of Interest under Section 234D: The assessee also challenged the levy of interest under section 234D. The tribunal noted that this issue was consequential in nature and dismissed the ground raised by the assessee. 6. Reopening of Assessment: The cross objections filed by the assessee challenged the reopening of assessment and the assumption of jurisdiction by the AO under sections 147 and 148 of the Act. However, since the tribunal decided the issues on merits and dismissed the revenue's appeals, the cross objections became infructuous and were dismissed. Conclusion: The tribunal allowed the appeals filed by the assessee in part, particularly on the issues of protective assessment, AOP status, and levy of interest under section 234B. It upheld the inclusion of reimbursements in taxable income and dismissed the grounds related to interest under section 234D and the cross objections challenging the reopening of assessment. The revenue's appeals were dismissed, and the tribunal's decision was pronounced in the open court on 26/03/2018.
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