2009 (2) TMI 46 - HC - Income Tax

Assessee, non-resident company had contract with ONGC for charter hire of one light modular work over rig - Whether receipts on account of mobilization of the rig from outside India should be included in the gross revenue u/s 44BB - mobilization fee is not the reimbursement of expenditure - ONGC was liable to pay a fixed sum as stipulated in the contract regardless of actual expenditure - Assessing Officer rightly added the said amount as per provisions of S. 44BB and imposed the tax thereon

Summary

Issues:
1. Interpretation of Section 44BB of the Income Tax Act regarding the taxation of mobilization charges.
2. Determination of the proportionate revenue taxable in India for a non-resident company.
3. Applicability of legal precedents in similar cases involving mobilization charges.
4. Assessment of the correctness of the ITAT's decision on the taxation of specific charges.
5. Admissibility of appeals against judgments of lower tribunals.

Analysis:
1. The High Court considered an Income Tax Appeal under Section 260-A of the Income Tax Act filed by the Commissioner of Income Tax against the judgment of the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the appeal of the Revenue Department, holding that the proportionate receipts were taxable in India under Section 44BB of the Act. The dispute centered on the taxation of mobilization charges received by a non-resident company outside India.

2. The Court examined the facts of the case where a non-resident company entered into a contract with an Indian company for charter hire. The Assessing Officer included the mobilization charges in the gross revenue under Section 44BB. However, the CIT (A) ruled that charges attributed to the transportation of rigs outside Indian waters were not taxable under Section 44BB. The CIT (A) determined the proportionate revenue taxable in India based on the percentage of voyage conducted in Indian territorial waters.

3. The Court referred to prior legal decisions, including the case of Saipem SPA Vs. CIT, to analyze the applicability of legal precedents in similar cases involving mobilization charges. The Division Bench cited previous judgments where the ITAT's decisions were set aside, emphasizing the completeness of Section 44BB as a legal framework for taxing non-resident companies engaged in specific activities.

4. The Division Bench scrutinized the ITAT's decision and disagreed with its interpretation of Section 44BB. The Court emphasized that the Assessing Officer was correct in adding the mobilization charges to the gross revenue, as they were received by the non-resident company for services provided in connection with oil exploration activities in India. The Court held that the ITAT erred in taking a contrary view and upheld the Assessing Officer's decision to tax the mobilization charges.

5. Ultimately, the High Court allowed the appeal filed by the Revenue Department, setting aside the ITAT's judgment. The Court ruled in favor of the Revenue Department, emphasizing the correctness of taxing the mobilization charges under Section 44BB. The judgment highlighted the importance of legal clarity and adherence to statutory provisions in determining tax liabilities for non-resident companies.