2023 (4) TMI 104 - AT - Income Tax

Addition as royalty u/s 9(1)(vi) r.w.s.115A - Characterisation of receipts - receipts on giving on hire vessels for use or to be used in prospecting for, or exploration or production of mineral oils - whether the disputed receipts are taxable as business profits of the assessee under section 44BB of the Act or are in the nature of royalty as defined in Explanation 2 (iva) to section 9(1)(vi) ? - assessee is a non-resident corporate entity incorporated under the laws of Singapore and is a tax resident of Singapore - Whether the activities of seismic duties and transport of coated pipes would be covered under the provisions of section 44BB ? - HELD THAT - The language employed in section 44BB is wide enough to encompass the aforesaid activities. In fact, the decisions relied upon by learned counsel for the assessee clearly support the aforesaid view. In case of Valentine Maritime (Gulf) LLC Vs. ADIT 2017 (1) TMI 1208 - ITAT MUMBAI has held that receipt from giving on hire tugs and barges to be used in prospecting for, or extraction or production of mineral oils would come within section 44BB of the Act. The same view was expressed in case of Larson Toubro Ltd. 2022 (3) TMI 84 - BOMBAY HIGH COURT Western Geco International Ltd. has expressed the view that the seismic data services and mining projects are inextricably linked to activities covered under section 44BB. Thus, we hold that the receipts are covered under section 44BB Since the assessee did not have any PE in India, section 44BB would not apply - On a careful reading of section 44BB of the Act, we do not find any such requirement as has been pointed out by learned DRP. Section 44BB applies to a non-resident entity carrying on business in connection with prospecting for, or extraction or production of mineral oils. The provision, unlike section 44DA, does not put any mandatory condition of existence of PE for the applicability of the provision. We do not agree with the view expressed by the AO and DRP. Accordingly, we direct the AO to tax the receipts under section 44BB of the Act. This ground is allowed. Double counting of the revenue - As alleged that the assessee failed to provide the bank statements and summary reconciliation sheets in terms with the direction of learned DRP - HELD THAT - Considering the fact that the assessee itself has furnished copy of bank statements and summary reconciliation sheets before learned DRP, we do not see any reason, why they could not be furnished before the Assessing Officer. We direct the assessee to furnish requisite documents before the Assessing Officer, in which case, the Assessing Officer shall examine them and rectify the mistake of double addition, in case it is there. However, the assessee must be provided an opportunity of being heard before deciding the issue. Credit of TDS - HELD THAT - As we direct the AO to factually verify assessee s claim and allow credit of TDS in accordance with law.

Summary

Issues Involved:
1. Addition of Rs.23,85,90,034/- as royalty under section 9(1)(vi) read with section 115A of the Act.
2. Double counting of revenue.
3. Non-granting of credit of TDS amounting to Rs.57,12,356/-.
4. Levy of interest under section 234A and 234B.

Summary:

1. Addition of Rs.23,85,90,034/- as Royalty:
The assessee, a non-resident corporate entity incorporated in Singapore, did not file any return of income despite receiving payments from Larson & Toubro Ltd. and Polarcus DMCC. The Assessing Officer (AO) reopened the assessment under section 147 and treated the receipts as royalty/FTS, bringing them to tax under section 115A. The Dispute Resolution Panel (DRP) upheld this, stating the receipts were in the nature of royalty as per Explanation 2(iva) to section 9(1)(vi) and that section 44BB would not apply due to the absence of a Permanent Establishment (PE) in India. However, the Tribunal found that the receipts for hiring vessels for seismic support and transportation of coated pipes related to mineral oil exploration activities fall under section 44BB. The Tribunal noted that section 44BB does not require a PE in India and directed the AO to tax the receipts under section 44BB, not as royalty.

2. Double Counting of Revenue:
The assessee claimed that the AO had doubled the revenue amount, taking Rs.23,85,90,034/- instead of Rs.11,92,95,017/- as per Form 26AS. The DRP acknowledged a prima facie case of double counting but directed the assessee to provide complete bank statements and reconciliation sheets. The AO reiterated the higher amount due to the alleged non-provision of documents by the assessee. The Tribunal directed the assessee to furnish the requisite documents to the AO for reconciliation and correction of any double addition.

3. Non-granting of Credit of TDS:
The assessee raised the issue of not being granted TDS credit amounting to Rs.57,12,356/-. The Tribunal directed the AO to verify the claim and allow the credit of TDS in accordance with the law.

4. Levy of Interest under Section 234A and 234B:
This issue was deemed consequential and did not require adjudication. Ground no. 7 was dismissed as premature.

Conclusion:
The appeal was partly allowed, with directions for the AO to re-assess the taxability under section 44BB, verify the double counting of revenue, and grant TDS credit after verification. The interest levy issues were deemed consequential.