2023 (10) TMI 311 - AT - Income Tax

Determination of income on presumptive basis - Income of the assessee as subjected to tax in terms of section 44BB - AO concluded that the services performed under both the contracts are in the nature of Fees For Technical Services (FTS) as defined u/s 9(1)(vii) of the Act as according to him, the services rendered are technical in nature - HELD THAT - As evident that the services provided by the assessee are in connection with prospecting/ extraction/ production of mineral oil and hence, its activities would be squarely covered within the ambit of provision of section 44BB of the Act. We also find similar services were rendered by the assessee in the past and the same had been subject matter of adjudication of this Tribunal for AY 2007-08 to 2009-10 wherein, this tribunal had categorically observed that the services rendered by the assessee would be falling under the ambit of provision of section 44BB of the Act. As stated supra, the Tribunal in AY 2009-10 in assessee s own case had already held that income of the assessee would have to be determined in accordance with the provision of section 44BB of the Act and not section 44DA of the Act. Hence, the entire contract receipts derived by the assessee would have to be determined for the purpose of taxability only in accordance with the provisions of section 44BB of the Act. The assessee in the instant case has reported consolidated profit in its profit and loss account and business income under normal provisions of the Act in the income tax which works to 24.36% of gross receipts Whether the assessee though falling under the ambit of provisions of section 44BB of the Act, but earning income above the presumptive rate of 10% fixed u/s 44BB(1) of the Act, would be eligible for showing income in terms of section 44BB(1) of the Act / - In order to understand this issue, it would be pertinent to look at the same in the event of assessee s incurring losses. If the assessee is incurring losses, still it has to offer income at the presumptive rate of 10% on gross receipts as per section 44BB(1) of the Act. As a corollary, if an assessee earns income more than 10% on gross receipts actually, then still its income would be determined only in terms of section 44BB(1) of the Act. In view of non obstante clause of section 44BB(1) of the Act, all other disallowances made by the ld AO either u/s 37(1) of the Act or section 40(a)(i) of the Act would not survive. Similarly, the adjudication of additional ground for claim of income tax depreciation u/s 32 of the Act also would become academic. In our considered opinion, even though the assessee has offered more income in its return than the income u/s 44BB(1), still it is not estopped from pointing out a mistake in the assessment though such mistake is on account of submission by the taxpayer. It is trite law that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to prevail. Further, it is also settled law that there is no estoppel against the statute. In any case, the elaborate circular has been issued by the CBDT vide Circular No. 14 (SL-35) dated 11.04.1955 wherein, it has been specifically observed by CBDT that the purpose of this circular is merely to emphasis that Income Tax Officer should not take advantage of assessee s ignorance to collect more tax out of him than his legitimate due from him. We hold that income of the assessee should be determined on presumptive basis as per section 44BB(1) of the Act in the peculiar facts and circumstances of the case. Accordingly, the various disallowances made by the ld AO in the assessment would be liable for deletion. Accordingly, the ground nos. 2 to 11 raised by the assessee are allowed and additional ground raised by the assessee is allowed. Seeking correct credit for TDS , the same requires factual verification and hence Ld AO is directed to give credit for TDS in accordance with law.

Summary

Issues Involved:
1. Assessment of income under Section 44BB of the Income-tax Act.
2. Disallowance of expenses under various sections of the Income-tax Act.
3. Credit for Tax Deducted at Source (TDS).
4. Initiation of penalty proceedings under Sections 271G and 271BA.

Summary:

1. Assessment of Income under Section 44BB:
The core issue was whether the assessee's income should be taxed under Section 44BB of the Income-tax Act. The assessee, a non-resident company, argued that its income from contracts with ONGC and Petrogas E&P LLC should be computed under Section 44BB, which deals with the business of providing services or facilities in connection with the prospecting, extraction, or production of mineral oil. The Tribunal found that the nature of services provided by the assessee fell within the ambit of Section 44BB. It was held that the income should be determined on a presumptive basis as per Section 44BB(1), and not under the normal provisions of the Act.

2. Disallowance of Expenses:
The AO made several disallowances under various sections:
- Chemical Purchase: Disallowed Rs. 9,41,400 due to lack of invoice.
- Clearing and Forwarding Expenses: Disallowed Rs. 8,273 for lack of bill.
- Payments to Utkal Auto: Disallowed Rs. 1,22,689 for non-deduction of tax at source.
- Payments to NOV Brandt Oilfield Services: Disallowed Rs. 5,41,080 for non-deduction of tax at source.
- Payments to Global Marine Technologies: Disallowed Rs. 20,22,921 for non-deduction of tax at source.
- Salary to Kameshwar Shukla: Disallowed Rs. 39,86,242 as bogus expenses.

The Tribunal held that due to the non-obstante clause in Section 44BB(1), all these disallowances would not survive.

3. Credit for Tax Deducted at Source (TDS):
The assessee contended that proper credit for TDS was not given. The Tribunal directed the AO to verify and allow the correct credit for TDS in accordance with the law.

4. Initiation of Penalty Proceedings:
The ground regarding the initiation of penalty proceedings under Sections 271G and 271BA was dismissed as these are separate and distinct proceedings not connected with the present appeal.

Conclusion:
The appeal was partly allowed for statistical purposes, with the Tribunal directing the AO to compute the income under Section 44BB and to verify the TDS credit. The various disallowances made by the AO were deleted due to the applicability of Section 44BB. The initiation of penalty proceedings was dismissed as not relevant to the current appeal.