2018 (10) TMI 1503 - AT - Income Tax

Payments made to assessee outside India - Amount received by the assessee towards fee for mobilization/demobilization of the rig/s outside India, is to be included in the gross receipts u/s 44BB - gross revenue - Held that - Issue to be covered against the assessee by the order of the ITAT Delhi Bench in assessee s own case for assessment year 2008-09 wherein in Para 6, the issue has been dealt with and the Coordinate Bench of the Tribunal has followed the order in the case of Sedco Forex International Drilling Ltd.(2007 (9) TMI 196 - UTTARAKHAND HIGH COURT). Gross receipts u/s 44BB - amount received by the assessee from its customers as reimbursement of actual expenses(material and fuel expenses) incurred by the assessee on their behalf - Held that - Direction of the DRP in holding that the amounts aggregating to ₹ 476,513,071/-, received by the assessee from its customers as reimbursement of actual expenses(material and fuel expenses) incurred by the assessee on their behalf is to be included in the gross receipts u/s 44BB of the Income Tax Act is concerned, we find that this issue is also covered against the assessee by the order of the ITAT in assessee s own case for assessment year 2008-09 wherein the Coordinate Bench had followed the judgment in the case of CIT vs. Halliburton Offshore Services Inc (2007 (9) TMI 230 - UTTARAKHAND HIGH COURT). It is also to be noted that an identical issue was held against the assessee in assessment year 2007-08 also.

Summary

Issues:
1. Inclusion of specific receipts in gross income under section 44BB.
2. Taxability of mobilization fee and reimbursement of expenses.

Analysis:

Issue 1: Inclusion of Specific Receipts in Gross Income under Section 44BB
The appeal involved the assessment order passed under section 143(3) read with section 144C(1) of the Income Tax Act, 1961 for the assessment year 2011-12. The assessee, a company incorporated in the Cayman Islands, provided offshore drilling units and related services in India. The Assessing Officer included certain receipts like reimbursements and mobilization fees in the gross receipts for tax computation under section 44BB. The Dispute Resolution Panel (DRP) directed the exclusion of service tax from gross receipts but upheld the inclusion of reimbursements as business receipts. The DRP also rejected the contention regarding mobilization fees. The ITAT, considering previous rulings and the specific nature of the receipts, dismissed the appeal, upholding the inclusion of the contested amounts in the gross income under section 44BB.

Issue 2: Taxability of Mobilization Fee and Reimbursement of Expenses
Regarding the mobilization fee and reimbursement of expenses, the ITAT relied on previous judgments and the provisions of section 44BB to determine the taxability. The ITAT dismissed the appeal challenging the inclusion of the mobilization fee in gross receipts, citing precedents and the specific nature of the payment. Similarly, the appeal contesting the inclusion of reimbursements of actual expenses in gross receipts was dismissed by the ITAT, following previous rulings and the legal provisions under section 44BB. The ITAT emphasized the completeness of section 44BB as a code for determining profits and gains in such cases, leading to the dismissal of the appeal on these grounds.

In conclusion, the ITAT upheld the assessment order, dismissing the appeal of the assessee and affirming the taxability of the mobilization fee and reimbursements as part of the gross income under section 44BB. The decision was based on the specific nature of the receipts, previous rulings, and the provisions of the Income Tax Act, 1961.