2018 (4) TMI 247 - AT - Income Tax

Mobilization charges received by the assessee - Held that - Issue covered against the assessee and in favour of the revenue by the judgment of the Hon ble Apex Court in the case of Sedco Forex International Inc. Vs. CIT & Another reported (2017 (11) TMI 78 - SUPREME COURT) Receipt of mobilization of rigs DDKG1 and DDKG2 outside Indian territorial waters and included in the gross receipts u/s 44BB Uttarakhand High Court in the case of CIT vs Halliburton Offshore Services Inc. (2007 (9) TMI 230 - UTTARAKHAND HIGH COURT) wherein the Uttarakhand High Court had held that reimbursement of expenses were includible in the gross receipts for purposes of determination of income u/s 44BB of the Act. Interest received on income tax refund taxed by the lower authorities at maximum marginal rate - Held that - Interest on income tax refund is not to be included in the presumptive income and is to be charged to tax @ 15% as prescribed by Article XI of the Indo US Double Taxation Avoidance Agreement. See Asstt. CIT Versus Clough Engineering Ltd. 2011 (5) TMI 562 - ITAT, DELHI . Thus, ground is allowed in favour of the assessee.

Summary

Issues:
- Appeal against orders dated 19.11.2015 and 23.11.2015 passed by Ld. Commissioner of Income Tax(A)-2, Noida for assessment years 2011-12 and 2012-13.
- Identical issues in both appeals.
- Mobilization charges received by the assessee.
- Inclusion of reimbursement of expenses in gross receipts.
- Receipts on account of demobilization of rig outside Indian territorial waters.
- Taxing interest received on income tax refund at maximum marginal rate.

Analysis:
1. Mobilization Charges Issue:
- In ITA No. 621/Del/2016, the appellant conceded that the issue of mobilization charges was covered against them by the judgment of the Hon’ble Apex Court in Sedco Forex International Inc. Vs. CIT & Another. The appeal was dismissed based on this precedent.

2. Inclusion of Reimbursement of Expenses:
- The appellant also conceded that the inclusion of reimbursement of expenses in gross receipts was covered against them by the judgment of the Uttarakhand High Court in the case of CIT vs Halliburton Offshore Services Inc. The appeal was dismissed based on this ruling.

3. Demobilization Receipts Issue:
- Regarding receipts on account of demobilization of rig outside Indian territorial waters, the appellant admitted that this issue was covered against them by the judgment of the Hon’ble Apex Court. The appeal was dismissed in line with this precedent.

4. Taxation of Interest on Income Tax Refund:
- The issue of taxing interest received on income tax refund at the maximum marginal rate was decided in favor of the assessee. The ITAT Delhi Bench had previously ruled that interest on income tax refund is not effectively connected with Permanent Establishment and should be taxed at 15% as per the Indo-US Double Taxation Avoidance Agreement.

5. Conclusion:
- ITA No. 620/Del/2016 was dismissed, while ITA No. 621/Del/2016 was partly allowed. Grounds related to mobilization charges, reimbursement of expenses, and demobilization receipts were dismissed, whereas the ground concerning interest on income tax refund was allowed in favor of the assessee.

This judgment highlights the importance of legal precedents in tax matters and how judgments from higher courts can influence decisions in similar cases. The analysis provides a detailed breakdown of each issue raised in the appeals and the specific legal reasoning behind the decisions made by the ITAT Delhi.