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2018 (4) TMI 240 - AT - Income TaxAddition qua equipment rental service charges and sale of consumables and services rendered by assessee in connection with exploration/ prospecting/extraction of mineral oil - income arising on account of royalty/FTS letting out of equipment etc. was to be taxed u/s 44BB - Held that - Income on account of provision of equipment and services earned by the assessee company shall be taxable as per the provisions of Section 44BB of the Act. Gross receipts as per provision of Section 44BB - Service-tax does not form part of the gross receipts for computation u/s 44BB of the Act. See CIT vs Mitchell Drilling International P. Ltd. 2015 (10) TMI 259 - DELHI HIGH COURT Chargeability of interest u/s 234B - Held that - Hon ble Delhi High Court in the case of DIT vs GE Packaged Power Inc 2015 (1) TMI 1168 - DELHI HIGH COURT held that interest u/s 234B was not chargeable in the case of a non-resident whose entire income was subject to tax deduction at source u/s 195 of the Act. In view of this binding precedent we hold this issue also in favour of the assessee.
Issues Involved:
1. Taxability of income under Section 44BB of the Income-tax Act, 1961. 2. Inclusion of service tax in gross receipts under Section 44BB of the Act. 3. Chargeability of interest under Section 234B of the Act. Analysis: Issue 1: Taxability of income under Section 44BB: The case involved a company incorporated in the British Virgin Islands with operations in India related to mineral oil production. The Assessing Officer (AO) assessed the income at a higher amount, considering certain revenues as royalty or fees for technical services under Section 9(1)(vi) of the Act. However, the Commissioner of Income Tax (Appeals) deleted these additions, relying on precedents like the ONGC case and decisions of the Uttarakhand High Court. The Tribunal, following previous decisions, held that income from provision of equipment and services should be taxed under Section 44BB, not as royalty or fees for technical services. Issue 2: Inclusion of service tax in gross receipts under Section 44BB: The Tribunal addressed whether service tax should be included in gross receipts under Section 44BB. The appellant argued, citing relevant case law, that service tax, being a statutory levy, should not form part of gross receipts. The Tribunal agreed, following previous decisions, and ruled that service tax does not constitute part of gross receipts for computation under Section 44BB. Issue 3: Chargeability of interest under Section 234B: Regarding the chargeability of interest under Section 234B, the Tribunal referred to a ruling by the Delhi High Court in a similar case. The High Court had held that interest under Section 234B was not applicable to a non-resident whose entire income was subject to tax deduction at source under Section 195. Following this precedent, the Tribunal decided in favor of the assessee, stating that interest under Section 234B was not chargeable. In conclusion, the Tribunal found that all issues raised in the appeal were covered by binding decisions favoring the assessee. As a result, the appeal of the revenue was deemed meritless and dismissed.
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