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2024 (6) TMI 981 - AT - Income TaxIssues Involved: 1. Applicability of Section 40(a)(i) for non-deduction of TDS. 2. Taxability of bareboat charter charges under Section 44BB. 3. Permanent Establishment (PE) status of Deep Drilling 8 Pte Ltd. in India. 4. Applicability of DTAA between India and Singapore. 5. Relevance of judicial precedents cited by the assessee. Summary: 1. Applicability of Section 40(a)(i) for non-deduction of TDS: The Ld. Counsel for the assessee argued that the jurisdictional issue regarding the applicability of Section 40(a)(i) of the Act for making disallowance of expenses for non-deduction of TDS is covered in favor of the assessee by the Tribunal's orders for the immediate preceding year, A.Y 2019-20. The A.O had disallowed the bareboat charter charges paid to Deep Drilling 8 Pte Ltd., Singapore, by invoking provisions of Section 40(a)(i) of the Act amounting to Rs. 55,12,69,200/- due to non-deduction of TDS. 2. Taxability of bareboat charter charges under Section 44BB: The Tribunal noted that the assessee is covered under the provisions of Section 44BB of the Act, which deals with the income arising from the exploration, extraction, ship, or machinery used in such activities. As per the Tribunal's decision in the assessee's own case for the preceding year, the assessee is not liable to deduct TDS u/s. 195 of the Act. The payment made by the assessee to Deep Drilling 8 Pte Ltd. does not constitute income taxable in India under Section 44BB of the Act. 3. Permanent Establishment (PE) status of Deep Drilling 8 Pte Ltd. in India: The Tribunal found that Deep Drilling 8 Pte Ltd. does not have a Permanent Establishment (PE) in India. Therefore, the payment made by the assessee is not taxable in India as per the DTAA between India and Singapore. 4. Applicability of DTAA between India and Singapore: The Tribunal emphasized that according to Article 7 read with Article 5 of the India-Singapore DTAA, the income of Deep Drilling 8 Pte Ltd. is not taxable in India due to the absence of a PE. Consequently, the provisions of Section 195 of the Act for TDS deduction do not apply. 5. Relevance of judicial precedents cited by the assessee: The Tribunal considered various judicial precedents, including decisions from the Hon'ble Supreme Court and ITAT, which supported the assessee's claim that the payments made to Deep Drilling 8 Pte Ltd. are not taxable in India. The Tribunal concluded that the facts and circumstances of the instant case are distinct from the precedents cited by the Revenue. Conclusion: The Tribunal set aside the orders of the lower authorities and deleted the addition made by the A.O. The appeal of the assessee was allowed, confirming that the assessee is not liable for deduction of TDS u/s. 195 of the Act, and no disallowance u/s. 40(a)(i) is warranted. The order was pronounced on 29th May, 2024.
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