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TMI Blog2011 (11) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 20th July, 2010 of the Assessing Officer[AO in short] read with order dated 30th June, 2010 of Dispute Resolution Panel-I[DRP] u/s 144C of the Income-tax Act ,1961('Act'), raises the following grounds:- 1. "Based on the facts and circumstances of the case, the learned Assessing Officer has erred in law and in fact, in holding that the assessee's income from services rendered is not covered by the provisions of section 44BB of the Act. Based on the facts and circumstances of the case, the learned Assessing Officer erred in law and on facts in holding that the provisions of section 44BB of the Act are not applicable to the services and facilities provided by the appellant to BG Exploration and Production India Limited in respect of offshore installation of pipelines as a part of overall construction project in connection with extraction and production of mineral oils. The appellant respectfully submits that the provisions of section 44BB of the Act are applicable to the nature of services rendered during the year and the Assessing Officer be directed to tax the income on 10 percent deemed profit basis u/s 44BB of the Act. 2. Without prejudice to the above, base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44BB of the Act, the assessee having laid down merely a pipeline and did not render any services for exploration of mineral oils. Since the assessee was building infrastructure used in exploration, the AO while rejecting the applicability of provisions of section 44BB of the Act, estimated the income @25% of the gross revenues amounting to Rs. 35,68,98,347/-, resulting in addition of Rs. 8,92,24,587/-, vide draft order dated 30th December, 2009. The assessee, thereafter, filed detailed objection before the DRP. After considering the objections of the assessee, the DRP concluded as under:- "Objection No.1: The objection of the assessee has been considered at length. We have perused the draft order. This is a fact that the assessee is laying pipelines. The contract awarded to the assessee is for laying of pipelines. This amounts to creation of an infrastructure. Section 44BB is applicable for services and not for creation of infrastructure for such services. The contract executed by the assessee is a works contract and not a service contract and, therefore, not covered under the provisions of section 44BB of the Income-tax Act, 1961 ('the Act'). Therefore, we are inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent assessment year 2008-09 .We find that the DRP after considering the nature of activities specified in the relevant agreement applicable for the subsequent AY 2008-09 and the findings of the AO concluded regarding applicability of provisions of sec. 44BB of the Act and estimation of profits, as under:- "5.4.2 The Panel has considered carefully the submissions made by the assessee in this regard which have been summarized in para 4.II above. It is clear from the scope of the work to be performed by the assessee under the contract with BG that it has elements of construction and assembly project as laying down of a pipeline includes both these activity. The Explanation 2 to Sec.9(1)(vii) which defines the term 'fees for technical services' provides that it does not include "consideration for any construction, assembly, mining or like project undertaken by the recipient". The Panel is of the view that the activity undertaken by the assessee i.e. laying down a pipe-line would fall under the scope of the terms 'construction' as well as 'assembly or like project'. Following this it logically follows that the nature of the work executed by the assessee is not in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Hon'ble jurisdictional High Court in their decision in Vodafone Essar Ltd. v. Dispute Resolution Panel-II (Delhi) held that when a quasi-judicial authority deals with a lis, it is obligatory on its part to ascribe cogent and germane reasons as the same is the heart and soul of the matter and further, the same also facilitates appreciation when the order is called in question before the superior forum. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. We may reiterate that a 'decision' does not merely mean the 'conclusion'. It embraces within its fold the reasons forming basis for the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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