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TMI Blog2016 (7) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... noring the fact that the receipts from non-PSC partners on account of provision of equipment on hire ('equipment rental') and provision of technical services ('technical services'), are in respect of contracts which are entered into with companies not directly engaged in Oil Production and Exploration and, therefore, not eligible for treatment under the presumptive provisions of section 44BB of the IT Act, 1961 ('Act'). 1(a) The ld.CIT(A) has erred in holding that the receipts of the assessee from 'non-PSC partners' on account of 'equipment rental' and 'technical services', including related receipts on account of 'sale of consumables' & 'reimbursement' of service tax etc., were taxable under section 44BB of the Act as opposed to Section 44DA read with Section 9(1)(vi)/9(1)(vii) applicable to Royalties and Fee for Technical Services ('FTS')." 3. We have heard both the parties and have perused the material placed before us. We find this issue to be covered in favour of the assessee by the decision of ITAT in the case of SBS Marine Ltd. Vs. Additional DIT in ITA No.107/Del/2012, dated 13th February, 2015, wherein the ITAT held as under:- "23. Further, there is no requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drilling operations i.e., the activity of prospecting for or extraction or production of mineral oils. Consequently, the requirements of section 44BB are satisfied in the present case. 24. In view of the above, there is no merit in the contentions of the revenue that the assessee is not an eligible assessee under section 44BB since it has not directly entered into contract with the ONGC and it is not undertaking the activities specified in section 44BB itself and being second leg contractors they are not eligible under section 44BB." 4. The facts of the case under appeal are similar because in this case also, the Assessing Officer denied the benefit of Section 44BB to the assessee on the ground that the assessee has not entered into an agreement directly with Central Government but is only a second leg contractor. The identical issue has been considered and decided by the ITAT in the above mentioned case. Therefore, the ratio of the above decision would be squarely applicable. It was also pointed out by the learned counsel that the above decision of ITAT has been upheld by Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s SBS Marine Limited vide Income Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case, the ld.CIT(A) has erred in ignoring the decisions of Jurisdictional High Court in the cases of ONGC as Agent of Foramer France and M/s Rolls Royce Pvt Ltd [2007-TII-03- HC-UKHAND-INTL]. 5. Whether on the facts and circumstances on the facts, the ld CIT(A) has erred in reversing the action of the AO who, having held that the assessee's revenues on account of 'equipment rental' and 'services' under contracts with Non-PSC Partners is liable to be taxed u/s 44DA, rightly estimated the income of the assessee by applying 25% rate of profit on gross receipts in the absence of books of accounts and details of expenses incurred in providing the services." 6. At the time of hearing before us, it was pointed out by the learned counsel that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Apex Court in assessee's own case which is reported in 278 CTR 153. It was also stated that there were group of appeals before Hon'ble Apex Court in which the lead case was of ONGC and various other assessees which included the assessee under appeal before us. In the above mentioned case, Hon'ble Apex Court held as under:- "A careful r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting and exploration of mineral oils, exhaustively referred to earlier, it is abundantly clear that drilling operations for the purpose of production of petroleum would clearly amount to a mining activity or a mining operation. Viewed thus, it is the proximity of the works contemplated under an agreement, executed with a non- resident assessee or a foreign company, with mining activity or mining operations that would be crucial for the determination of the question whether the payments made under such an agreement to the non-resident assessee or the foreign company is to be assessed under Section 44BB or Section 44D of the Act. The test of pith and substance of the agreement commends to us as reasonable for acceptance. Equally important is the fact that the CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding for computation of profits at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from income are deemed to have been allowed to the assessee. 6(b) Whether the ld.CIT(A) has erred in not appreciating the fact that once the receipts held as taxable u/s 44BB of the Act, there is no scope for computing or re-computing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits u/s 44BB of the Act and obviating the need for accounting for individual receipts and payments etc. 6(c) Whether the ld.CIT(A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P) Ltd. (82 ITR 542, SC) wherein the Hon'ble Apex Court has held that the Sales Tax collected by an assessee in the ordinary course of its business forms part of its business receipts. Owing to the inherent similarity in the nature of the sales tax and service tax, the ratio of the judgment in the said case is directly applicable in the facts of the instant case." 9. We have heard both the parties and peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employer was mandatorily required to deduct tax from the salary paid to the employee. In the said case, the Hon'ble Court held that an employee is not liable to pay advance tax on salary because u/s 192 there is an obligation on the employer to deduct tax at source. The case does not lay down a general proposition of law that interest u/s 234B is not chargeable in all cases, particularly in cases where the Non-Resident assessee/payee/deductee has played a role in inducing non-deduction or short-deduction on the part of the payer/deductor. b. The ld.CIT(A) has erred in failing to take note of the observations of the Hon'ble High Court in the case of M/s Mitsubishi [330 ITR 578, Del] that the role of the assessee/payee/deductee in short-deduction or nondeduction of tax needs to be ascertained before claim regarding non-liability to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgment of Delhi High Court dated 7.11.2013 in ITA No.327 & Ors of 2012)." 12. We find that learned CIT(A) has decided this issue in favour of the assessee following the decision of Hon'ble Jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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