9911796707
TMI Blog2015 (3) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... t; (ii) On the Facts, in law and in the circumstances of the case, the DRP/AO erred in assessing the income earned by the appellant as fees for technical services/royalty as per the provisions of section 9(1)(vii)/ (iii) On the Facts, in law and in the circumstances of the case, the DRP/AO erred in assessing the income received, on account of reimbursements as royalty as against u/s 44BB of the Act; (iv) On the Facts, in law and in the circumstances of the case, the AO erred in not granting credit for TDS, aggregating to Rs. 5,17,866/-; (v) On the Facts, in law and in the circumstances of the case, the AO erred in levying interest u/s 234B of the Act; (vi) On the Facts, in law and in the circumstances of the case, the AO erred in levying interest u/s 220 of the Act; (vii) On the Facts, in law and in the circumstances of the case, the AO erred in levying interest u/s 234C of the Act." 3. The facts of the case, in brief, are as follows: The assessee is a Non-resident Company based in Aberdeen, United Kingdom. It is engaged in the business of providing offshore supply and allied vessels on hire. For the year under consideration, the assessee had filed the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that it is not undertaking the activities specified in section 44BB itself. It is only supplying 'plant and machinery' on hire to a person, who further leases the same to the operators for putting to use for the purposes as specified in section 44BB. The intention of this provision was to provide benefit to the persons supplying 'plant and machinery' on hire to the entities involved in business of prospecting for or extracting or production of mineral oil exploration itself. [para 4.6] (v) If the interpretation put forth by the assessee is adopted it would mean that an owner/ lessor of plant and machinery, which is ultimately used in prospecting for, extraction or production of mineral oil will be eligible for claiming benefit of provisions of presumptive taxation u/s 44BB even if such owner / lessor is removed from the actual activity of prospecting for or extracting or production of mineral oil by any number of steps. Such an interpretation would be abuse of the tax provisions and there is no scope for extending the provision beyond hirers, for the benefit of sub-hirers in the statute. [para 4.6] (vi) Income by way of FTS or royalties covered under section 115A is excluded fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income should be computed under section 44BB. The learned DR has also filed the written arguments and decisions justifying the AO's action in taxing the gross receipts at 10% under section 115A. The learned AR and the learned DR argued the matter at length. 10. We have considered the rival contentions and perused the material on record. The dispute in the present case is regarding the applicability or otherwise of section 44BB of the Act. The said section as applicable during the year under consideration is reproduced hereunder. "(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee's arguments is that it is engaged in providing services or facilities in connection with prospecting for, or extraction or production of, mineral oils and hence covered by section 44BB. The revenue on the other hand contends that the assessee is not providing any service or facility, it is not undertaking the activities specified in section 44BB itself, it is only supplying 'plant and machinery' on hire to a person, who further leases the same to the operators for putting to use for the purposes as specified in section 44BB. It is contended that the intention of section 44BB was to provide benefit to the persons supplying 'plant and machinery' on hire directly to the entities involved in business of prospecting for or extracting or production of mineral oil exploration itself. It is also contended by the learned DR that section 44BB would apply to assessee had the assessee directly entered into agreement with ONGC. It is argued that the scope of the words 'in the' in the expression 'supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils' is much more limited than the words 'in connection with' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be restricted to the services as stated in box 18 and to voyages between any good and safe port or place and any place or offshore unit where the vessel can safely lie always afloat within the area of operation as stated in box 17 of the contract. Para 5 of Part II of Contracts in respect of vessels viz., SBS Torrent, SBS Typhoon and SBS Cirrus further states that the vessel shall perform the services as described in box 18 for Transocean Offshore International Ventures Ltd (operator of rigs, JT Angel & Randolph Yost), and / or Sedco Forex International Drilling Inc. (operator of rig, Trident 2) and / or R & B Falcon (A) Pty. Ltd (operator of rig, Ron Tappmeyer), and / or Triton Holdings Ltd (operator of rig, Trident 12) Para 6 and 7 of Part II of all five contracts deals with the responsibilities of the assessee as a owner of the vessel. As per this clause, the operation and management of the vessel including control and command of the master, officers and crew is undertaken by the assessee as an owner of the vessel and not by the charterers. Following clauses are relevant in this connection and the same is reproduced hereunder. "6. Master and Crew (a)(i) The Master shall car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered as requested by the charterers subject always to the exclusive right of the owners or the master of the vessel to determine whether operation of the vessel may be safely undertaken. In the performance of the charter party, the owners are deemed to be an independent contractor, the charterers being concerned only with the results of the services performed." 7. Owners to Provide (a) The owners shall provide and pay for all provisions, wages and all other expenses of the master, officers and crew; all maintenance and repair of the vessel's hull, machinery and equipment as specified in Annex A, also, except as otherwise provided in this Charter Party, for all insurance on the vessel, all dues and charges directly related to the vessel's flag and / or registration, all deck, cabin and engine room stores, all hose connectors and adapters, all bulk hoses to allow transfers between vessel and other offshore supply vessels of water, fuel and bulk supplies, all lubricants, cordage required for ordinary ship's purposes mooring alongside in harbor, and all fumigation expenses and de-ratisation certificates. The owner's obligations under this clause extend to cover all liabilities fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essels on a shared basis between the aforesaid companies to provide marine logistics services, inclusive of towing services as part of their scope of work. It may also be noted that the vessels though chartered by any one or more of the companies i.e., Transocean Offshore International Ventures Ltd, Sedco Forex International Drilling Inc, R&B Falcon (A) Pty Ltd, and / or Triton Holdings Limited, all the vessels shall render service as described in the scope of work at the agreed rates and prices and charter hire, to all of the aforesaid four companies and their rigs, namely, JT Angel, Randolph Yost, Ron Tappmeyer, Trident 2 & Trident 12. The aforesaid 4 companies shall share the services of the boats chartered, and the charter hire shall be shared and paid by the operators of the rigs which are operational for the time being in force, in equal proportion. 15. Section 3 - common for all 5 agreements read as follows: "Owner will ensure marine logistics support in the event of any operational emergencies within the least response time in event of failure. 1. Responsibilities of Vessel Owner / operator: 1.1 To carry personnel & materials between base and offshore installations, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with ONGC. The location of operation of vessel is mentioned as ONGC Deepwater blocks East and West Coast of India and ONGC locations in coastal India. There is no dispute to the fact that the services / facilities and the vessels provided by the assessee are used in offshore drilling operations. In fact, the draft assessment order itself at para 2 states that the vessels are used to support offshore drilling operations undertakes in connection with oil and gas exploration activities. It is, thus, further evident that the assessee has provided services / facilities and the vessels on hire which are used by the charterers in the process of prospecting for or extraction or production of mineral oils. In view of the above, we are of the view that the requirement of section 44BB that the services or facilities should be in connection with the prospecting or extraction or production of mineral oil is satisfied in the present case. 19 There is no merit in the revenue's contention that it was not a case of hiring of a vessel for a stipulated period on terms which gave the charterer possession and control of the ship, including the right to appoint the master and crew. In contrast, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of mineral oil. 21. In Lloyd Helicopters International Pty. Ltd., In re (249 ITR 162), the Authority for Advance Ruling ruled that the consideration received by the assessee from Command Petroleum India Pty. Ltd. by way of a charter hire for providing helicopters for transporting men and material to an offshore location would be governed by the provisions of section 44BB. In WavefieldInsesis ASA In re: (320 ITR 290), the Authority for Advance Ruling held that the charter hire payable by Wavefield to P.F. Thor for taking on hire a chase vessel which was used by Wavefield in providing seismic services to ONGC would have to be assessed in terms of section 44BB and, therefore, Wavefield would be justified in deducting taxes at source from payment made to P.F.Thor at the rate of 4.23%. Similarly, in Siem Offshore Inc. In re: (337 ITR 207)the Authority for Advance Ruling held that the consideration received for providing marine logistic services have to be dealt under section 44BB. 22. The revenue has unduly stressed on the word 'in the' forming part of the expression 'supplying plant and machinery on hire used, or to be used, in the prospecting for or extraction or production o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oping, operating and maintaining any infrastructure facility has to enter into an agreement with the Central Government of a State Govt. or a local authority etc. In the absence of any requirement in section 44BB that the person providing services, facilities or plant and machinery on hire should have directly entered into a contract or agreement with the person actually engaged in prospecting for or extraction or production of, mineral oils, one cannot curtail the scope or applicability of section 44BB to second leg contractors whose contracts or agreements are with first leg contractors but whose services or facilities or plant and machinery are used in connection with prospecting for or extraction or production of, mineral oils as required under section 44BB. The Hon'ble Supreme Court in ICDS Ltd v CIT [2013] 350 ITR 527 held that the assessee leasing the vehicles to others who use the said vehicles in their business of running them on hire is entitled for higher rate of depreciation on the vehicles given on lease. It was held by the Hon'ble Supreme Court that the lessor need not himself use the vehicles in the business of running them on hire. The rationale of the aforesaid dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are of the type which do not fall under that section, but are more general in nature so as to fall under section 44DA . Similarly, the second proviso to sub-section (1) of section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section read with Explanation 2 to section 9(1)(vii) , an assessee rendering such services as provided in section 44BB cannot claim the benefit of being assessed on the basis that 10 per cent. of the revenues will be deemed to be the profits as provided in section 44BB . In other words, the amendment made by the Finance Act, 2010, with effect from April 1, 2011, in both sections, cannot have the effect of altering or effacing the fundamental nature of the provisions or their respective spheres of operation or to take away the separate identity of section 44BB . If a special provision is made in respect of a certain matter, that matter is excluded from the general provision. When, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both." 27. It was also held that if section 44DA covers all ty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire charge paid under a time charter was a payment on account of carriage of goods. In this context, the Hon'ble Supreme Court held at page-311 that in order that it may be said that amount was payable on account of the carriage of goods, it would be necessary to show that one is the consideration for other, that is to say, that the payment which the charterers had agreed to make to the owners of the ship was in consideration of the carriage of goods. It was observed that if the charterers were liable to pay the amount irrespective of whether they carry the goods or not, it would be difficult to say that the amount was payable on account of carriage of goods. It was held that the character of the payment cannot change according to the use to which the charterers put the ship or according as to whether the ship is loaded with goods in a port in India. 30. In the present case, the issue as to whether the payment made by the assessee's customers was on account of carriage of goods does not arise. The issue, that arises, is whether the assessee is rendering a service, providing a facility or giving a plant on hire. In fact, the Supreme Court observes at page-311 that one must have re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court in DIT v. Alcatel Lucent USA Inc. (264 CTR 240) wherein it was held that a non-resident assessee which does not admit income chargeable to tax must be inferred to have induced the Indian payer not to deduct TDS and so it is liable for interest under section 234B. It is argued by the learned DR that despite this addition being made year after year the assessee has not paid advance tax at the correct rate. However, the assessee has relied on the decision of the Delhi High Court in DIT v. Jacobs Civil Incorporated (330 ITR 578) wherein, it was held that a non-resident whose entire income was subject to deduction of tax at source and if the payer who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. It was held that, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. 35. In the present case, the Transocean entities as well as their affiliates have deducted tax at source on the payments made to the assessee on the basis that section 44BB would apply to assessee on their understandin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
