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2019 (6) TMI 924 - AT - Income TaxTaxability under Article 23(4) of India - computing profits and gains in connection with the business of exploration, etc., of mineral oils u/s 44BB - Norway DTAA - assessee provided a vessel i.e. tugboats for ONGC work - HELD THAT - As decided in assessee's own case for A.Y. 2005-06 the assessee provided a vessel i.e. tugboats for ONGC work. Assessing Officer has given a very restricted meaning of Article 23(4) by ignoring the second of the two limbs of the Article. It amply covers the tugboats services provided by the assessee to ONGC. In our view CIT(A) has rightly considered the issue allowing the relief to the assessee, which we uphold. CIT(A) rightly held that Article 23(4) of the Norway DTAA speaks of a case whereby transportation of personnel or materials to an oil drilling site would attract lesser rates of tax. The Assessing Officer wrongly placed reliance on the isolated clause (d) of the contract with M/s GSPC to deny the benefit to the assessee. In fact the entire contract should have been considered properly by the Assessing Officer which he failed to do so. Therefore, in light of the decision of the Tribunal which is having identical facts in the present year as well, this issue is decided in favour of the assessee. Computation of profits - whether Service Tax would not form part of gross receipts for the purpose of computation of profits under the presumptive provisions u/s 44BB ? - HELD THAT - As decided in MITCHELL DRILLING INTERNATIONAL PVT. LTD. 2015 (10) TMI 259 - DELHI HIGH COURT purpose of Section 44BB, the service tax collected by the Assessee on the amount paid to it for rendering services is not to be included in the gross receipts in terms of Section 44BB(2) read with Section 44BB(1). Besides that the CIT(A) also held that the issue is covered in favour of the assessee due to the cases of M/s Sedco Forex 2012 (7) TMI 250 - ITAT, DELHI allowed this ground with direction to exclude service tax from the purview of computation of income u/s 44BB. Ground No. 2 of the Revenue s appeal is dismissed. Liability to pay interest u/s 234B - HELD THAT - As decided in MAERSK CO. LTD. 2011 (4) TMI 886 - UTTARKHAND HIGH COURT stage for making payment of tax could only arise at the stage of self-assessment which is to be made in a later assessment year as is clear from section 190 of the Act, whereas advance tax is liable to be paid in a financial year only and not thereafter. We are consequently of the view that if the employer fails to deduct the tax at source while paying any income chargeable under the head Salaries , would be responsible for payment of interest under section 201(1A) of the Act. The assessee would not be liable to pay interest under section 234B of the Act since he was not liable to pay advance tax under section 208 of the Act - Ground No. 3 of the Revenue s appeal is dismissed.
Issues:
1. Interpretation of Article 23(4) of India-Norway Double Taxation Avoidance Agreement (DTAA) 2. Inclusion of Service Tax in gross receipts for computation of profits under Section 44BB of the Income Tax Act, 1961 3. Liability to pay interest under Section 234B of the Income Tax Act, 1961 Interpretation of Article 23(4) of DTAA: The appeal concerned the interpretation of Article 23(4) of the India-Norway DTAA for the Assessment Year 2010-11. The Revenue contended that the income of the assessee should be taxable under Article 23(4), while the CIT(A) held in favor of the assessee. The Tribunal referred to a previous decision for A.Y. 2005-06 with similar facts, where it was held that transportation services provided by the assessee were covered under Article 23(4). The Tribunal found that the Assessing Officer had wrongly interpreted the contract, and the entire contract should have been considered. Consequently, the issue was decided in favor of the assessee, dismissing the Revenue's appeal. Inclusion of Service Tax in gross receipts under Section 44BB: Regarding the inclusion of Service Tax in gross receipts for computation of profits under Section 44BB, the Revenue argued that the CIT(A) erred in excluding Service Tax from gross receipts. The CIT(A) based its decision on the Hon'ble Delhi High Court's ruling in a similar case, stating that Service Tax collected by the assessee should not be included in gross receipts under Section 44BB. The Tribunal upheld the CIT(A)'s decision, emphasizing that the purpose of Section 44BB is to compute profits at a fixed percentage of gross receipts, excluding Service Tax. The Tribunal dismissed the Revenue's appeal, citing the Delhi High Court's decision and other relevant cases. Liability to pay interest under Section 234B: The issue of the assessee's liability to pay interest under Section 234B was also addressed. The Revenue contended that the assessee should pay interest, while the CIT(A) ruled in favor of the assessee based on a decision by the Hon'ble Uttarakhand High Court. The High Court's decision clarified that the assessee was not liable to pay advance tax under Section 208 as the tax was required to be deducted at the source. Therefore, the CIT(A) correctly decided in favor of the assessee, following the High Court's ruling. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision regarding interest payment under Section 234B. In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, affirming the decisions made by the CIT(A) in favor of the assessee. The judgment provided clarity on the interpretation of DTAA provisions, inclusion of Service Tax in gross receipts under Section 44BB, and the assessee's liability to pay interest under Section 234B.
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