1999 (3) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Mobilisation Fee as Income u/s 44BB.
2. Reimbursement of Catering and Other Expenses.
3. Boat and Helicopter Charges Withheld by ONGC.
4. Levy of Interest u/s 234B.
5. Conversion of Foreign Currency Receipts.

Summary:

1. Mobilisation Fee as Income u/s 44BB:
The primary issue was whether the mobilisation fee received by the appellant from ONGC should be considered income under section 44BB of the Income-tax Act, 1961. The appellant argued that the mobilisation fee was a reimbursement of expenses and not income. However, the Tribunal upheld the CIT(A) and Assessing Officer's findings that the mobilisation fee should be included in the gross receipts for computing deemed profit at 10% u/s 44BB. The Tribunal emphasized that the mobilisation fee was a fixed sum irrespective of actual expenditure and was part of the indivisible contract for providing services and facilities.

2. Reimbursement of Catering and Other Expenses:
The appellant contended that reimbursements for catering and other expenses should not be included in the aggregate payments for computing income u/s 44BB. The Tribunal agreed with the appellant that actual reimbursement of expenses should not be considered part of the contract receipts. However, handling charges on supplies were considered part of the contract receipts and included for computing taxable profit at 10% u/s 44BB.

3. Boat and Helicopter Charges Withheld by ONGC:
The appellant argued that boat and helicopter charges withheld by ONGC should not be included in the gross contract receipts. The Tribunal upheld the CIT(A)'s decision that the gross amount of contract receipts should be considered without deducting the withheld charges. The Tribunal noted that the amounts withheld were disputed and would be taxed in the year of receipt if refunded. The Assessing Officer was directed to ensure no double taxation occurs if the amounts are refunded and taxed in subsequent years.

4. Levy of Interest u/s 234B:
The appellant contested the levy of interest u/s 234B, arguing that as a non-resident, tax was deductible at source by ONGC, and no advance tax was payable. The Tribunal agreed with the appellant, citing that the non-resident was not liable to pay advance tax if tax was deductible at source. The Tribunal directed the Assessing Officer to cancel the interest charged u/s 234B.

5. Conversion of Foreign Currency Receipts:
The appellant raised a new ground regarding the conversion of foreign currency receipts into rupees at the rate prevailing on the date of credit rather than the year-end rate. The Tribunal entertained this ground, citing the Supreme Court's decision in Chowgule & Co. Ltd. and held that the conversion should be based on the rate prevailing on the date of credit. The Assessing Officer was directed to verify the correctness of the exchange rates and adjust the taxable income accordingly.

Conclusion:
The Tribunal upheld the inclusion of mobilisation fees in gross receipts u/s 44BB, excluded actual reimbursements of expenses, included handling charges, confirmed the inclusion of withheld boat and helicopter charges, cancelled interest u/s 234B, and allowed conversion of foreign currency receipts at the rate prevailing on the date of credit.