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TMI Blog2016 (8) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO as to the holding the assessee’s revenue on account of equipment rent under contract with non-PSC Partners taxed u/s 44DA of the Act. So, we are of the considered view that the contracts entered into between the assessee and other parties, known as second leg contracts are eligible for benefits of tax treatment u/s 44BB of the Act. - Decided against revenue - ITA No.5864/Del./2013, ITA No.5927/Del./2013 - - - Dated:- 29-6-2016 - SHRI N.K. SAINI, ACCOUNTANT MEMBER and SHRI KULDIP SINGH, JUDICIAL MEMBER For The Assessee : Shri Amit Arora, CA For The Revenue : Ms. Anupama Anand, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The aforesaid cross appeals qua the assessment year 2010-11 are being disposed off with consolidated order to avoid repetition of discussion. 2. The Appellant, Tidewater Marine International Inc., (hereinafter referred to as the assessee ) in ITA No.5864/Del/2013 by filing the present appeal sought to set aside the impugned order dated 26.08.2013 passed by the Commissioner of Income-tax (Appeals)-II, New Delhi qua the assessment year 2010-11 on the ground that :- That the Ld. CIT (A) has erred on facts and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 44BB. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that proviso to section 44DA brought about by the Finance Act 2010 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling v/s CIT. 4. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the decision of jurisdictional High court in the cases of a GC 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 of the case, the Ld. CIT (A) has erred in reversing the action of the AO who, having held that the assessee revenues on account of equipment rental under contracts with Non- PSC partners are liable to be taxed u/s 44DA, rightly estimated the income 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. 4. Briefly stated facts of this case ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contracts where payments received by non-resident company from another non-resident (not a member of production sharing contract) (PSC) for supplying plant and machinery on hire used or to be used by a third party for the activities specified in section 44BB (1) of the Act and found the same not eligible for claim under the provisions of section 44BB (1) as that would be against the mandate of section 44BB and observed that such receipt would constitute equipment royalty in terms of section 9(1)(vi) of the Act. AO came to the conclusion that benefit of section 44BB would not be applicable to those cases and computed the total income at ₹ 25,14,61,030/-, later on rectified u/s 154 of the Act at ₹ 19,14,54,330/-. 6. The assessee carried the matter before the ld. CIT (A) by way of challenging the assessment order who has partly allowed the appeal. Feeling aggrieved, both the revenue as well as assessee approached the Tribunal by way of filing separate appeals by challenging the impugned order passed by the ld. CIT (A). 7. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. There is no dispute on applicability of this section to the business of the assessee. Only limited issue before us is whether supplying plant or machinery on hire to a company which in turns provides services or facility to the company which is engaged in the specified business is eligible for claim of concessional rate of taxation u/s 44BB of the act or not. This is in common parlance referred to as Second Leg ‟ Contracts. The plant supplied by the assessee are vessels and therefore they cover in the definition of plant which is also not in dispute. 23. Coordinate bench of ITAT in SBS Marine Limited v ADIT [ITA 107/Del/2012 dated 13.2.2015] after considering the decisions of honourable supreme court in case of UOI V Gosalia Shipping Pvt. Limited [113 ITR 307] Poomphur Shipping corporation Limited V ITO [360 ITR 257], both of which are heavily relied by the revenue has decided this issue. Further this decision of Coordinate bench has also been upheld by honourable Uttarakhand High court vide order dated 6.8.2015 in ITA No 36/2015 applying judgement of Honourable Supreme court in case of Oil And natural Gas Coorp. Limited V CIT [376 ITR 306 ( SC)]. There is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be directly provided to the said person alone. We have already given a finding of fact that the services and facilities provided by the assessee along with plant and machinery are used in offshore 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. 24. Therefore in view of the decision of SBS Marine Limited V ADIT (Supra) we hold that even second leg contracts are also eligible for the benefit of tax treatment provided u/s 44BB of the Act. 25. Second Contention raised was that amendment in section 44BB and 44DA should be read as retrospective. Honourable uttarakhand High court in assessee s own case in 339 ITR 169 has held that As stated earlier, the combined effect of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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