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TMI Blog2016 (9) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 44BB of the Act." 3. The appellant, Addl. Director of Income-tax, International Taxation, Dehradun (hereinafter referred to as 'the revenue'), by filing the aforesaid appeal being ITA No.1634/Del/2014, sought to set aside the impugned order dated 23.12.2013 passed by Dispute Resolution Panel-II, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :- "1. Whether on the facts and circumstances of the case, the Hon'ble Dispute Resolution Panel 'DRP') has erred in directing the Assessing Officer to exclude an amount of Rs. 89,57,794/- received by the assessee on account of "equipment lost in hole" from gross revenues received from M/s ONGC Limited for the purpose of computation of profits under the presumptive provisions of section 44BB of the Income Tax Act, 1961 ("The Act"). 2. Whether on the facts and circumstances of the case, the Hon'ble Dispute Resolution Panel C DRP') has erred in directing the Assessing Officer to exclude an amount of Rs. 5,09,7941- received by the assessee on account of "Communication Immersat Charges" from gross receipts received from M/s ONGC Limited for the purpose of computation of profits under the presumptive pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the impugned order dated 27.12.2013 passed by Dispute Resolution Panel-II, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :- "1. Whether on the facts and circumstances of the case, the Hon'ble Dispute Resolution Panel ('DRP') has erred in directing the Assessing Officer to apply the deemed profit rate of 10 % u/s 44BB of the Income Tax Act, 1961 ('The Act') on the revenues earned by the assessee from a non- resident company, M/s Pride Foramer (a French Company), on account of provision of offshore drilling rig on hire for executing contracts with M/s ONGC. 2. Whether on the facts and in the circumstances of the case, the Hon'ble Dispute Resolution Panel ('DRP') has erred in holding that the amount received by the assessee from M/s Pride Foramer, on account of the provision of drilling rig under charter agreement was not in the nature of Royalty as defined u/s 9(1)(vi) of the Act and was not taxable under the provisions of section 44DA r.w.s. 115A of the Act. 3. Whether on the facts and in the circumstances of the case, the Hon'ble Dispute Resolution Panel ('DRP') has erred in holding that the revenues earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Dispute Resolution Panel (' DRP') has erred in ignoring the distinct scheme of taxation of Royalty / Fees For Technical Services and disregarding the insertion of provisos in section 44BB/44DA/115A and the rationale behind the introduction of said clarificatory proviso in the Finance Bill 2010 in holding that the income of the assessee company was covered under the provisions of section 44BB. 8. Whether on the facts and in the circumstances of the case the Hon'ble Dispute Resolution Panel ('DRP') has erred in not appreciating that since sections 44DA/115A are special provisions for taxation of income in the nature of royalties and FTS and if a special provision is made respecting a certain matter that matter is excluded from the general provision under the rule of "Generallia S pecialibus non Derogant". 9. Whether on the facts and circumstances of the case, the Hon'ble Dispute Resolution Panel ('DRP') has erred in holding that the provisions of section 44BB of the Act are more special provisions which shall prevail over the provisions of section 9(1)(vi) read with sections 44DA and IISA of the Act, not appreciating the fact that both se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immersat charges, a sum of Rs. 13,82,40,973/- on account of reimbursement of service-tax and a sum of Rs. 63,62,945/- on account of catering during the year under assessment. Assessee was called upon to show cause as to why the sum received by assessee on account of reimbursement should not be included in the amounts referred in section 44BB and included in the gross receipt to tax accordingly. Finding the reply by the assessee not tenable, AO came to the conclusion that the reimbursement is intricately linked to the service/work rendered by the assessee and arises due to the related receipts and as such, it is to be treated as part of taxable gross receipts and thereby assessed the total income of the assessee at Rs. 45,08,70,660/-. 6. Assessee carried the matter before the Dispute Resolution Panel-II, New Delhi who has partly accepted the objections raised by the assessee and directed the AO to correct the figures for computation stated to have been added twice. Feeling aggrieved, the assessee has come up before the Tribunal by way of challenging the order passed by AO as well as DRP denying the claim of non-taxability of reimbursement of service tax of Rs. 13,82,40,973/- in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. ITA NO.1405/DEL/2014 & ITA NO.1634/DEL/2014 12. Ld. AR for the assessee challenging the impugned order passed by AO/DRP contended that the issue in controversy is covered by the order passed by ITAT, Delhi Bench in assessee's own case cited as Pride Foramer SAS vs. Addl. Commissioner of Income-tax, International Taxation - (2014) 43 taxmann.com 381 (Delhi - Trib.). However, on the other hand, ld. DR challenging the impugned order qua excluding the amount of Rs. 89,57,794/- received by the assessee on account of "equipment lost in hole" from gross revenue received by the assessee for the purpose of computation of profit and excluding an amount of Rs. 5,09,794/- received by the assessee on account of "Communication Immersat Charges" from gross receipts received from M/s. ONGC Ltd. for the purpose of computation of profit under the presumptive provisions of section 44BB of the Act by the DRP relied upon the draft order passed by AO. GROUND NO.1 OF ITA NO.1405/DEL/2014 13. Now, the question arises for determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India, (c) received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India and (d) deemed to be received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. The service tax is a statutory liability like custom duty. Hon'ble Uttarakhand High Court in their decision in Schlumberger Asia Services Ltd.(supra) concluded that reimbursement of custom duty paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement. Following the view in this decision, Mumbai Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for the purpose of computation of profit. So, consequently ground no.1 is determined in favour of the revenue. 19. The next question arises for determination in this case is :- "as to whether amount of Rs. 5,09,794/- received by the assessee on account of "Communication Immersat Charges" are required to be included for the purpose of computation of profit under the presumptive provision of section 44BB of the Act as alleged by the revenue?" 20. This issue has already been dealt with by the coordinate Bench of the Tribunal in assessee's own case cited as ACIT vs. Pride Foramer France SAS - (2008) 22 SOT 204 (Delhi) qua AY 2002-03 and decided in favour of the assessee by returning the following findings :- 20. No doubt that section 44BB is a code in itself and it starts with non obstantive clause which excludes application of sections 28 to 41 and sections 43 and 43A of the Act but at the same time, to assess any sum under that section, the activity must fall within the activity described in sub-section (2) of section 44BB of the Act. Supply of Dry Fruits and recovery of communication expenses specifically do not find mentioned in subsection (2) of section 44BB as these activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1986-87 and amount worth Rs. 64,64,530 for the assessment year 1987-88 received by the assessee towards mobilization charges for the purpose of imposing income-tax and CIT(A) and ITAT were also right in upholding the order of the Assessing Officer.' [Emphasis supplied] 21. From the above observations it is clear that mobilization fee was not considered reimbursement on the ground that this was not in the nature of reimbursement; therefore, the same could not be brought to tax under the provisions of section 44BB of the Act. Their lordships in the said case have considered section 44BB, section 4, section 5(2) and section 9 and section 98 also and after analyzing of these sections it has been concluded that mobilization fees was to be considered under section 44BB on the ground that ONGC was liable to pay a fixed sum, as stipulated in the contract regardless of actual expenditure which may be incurred by assessee company for the purpose. It is, therefore, the mobilization fee was considered liable for taxation under section 44BB. In the present case, payments received by the assessee were not a fixed sum as stipulated in the contract. It was based on actual expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /25 taxmann.com 77 (AAR - New Delhi) has come to the conclusion that the amounts received by the assessee during the year under consideration on account of hire charges of the drilling rig should be brought to tax by applying the deemed profit ratio of 10% u/s 44BB of the Act. The Ld. DRP has accordingly directed the AO to decide the issue as such while allowing the objection raised by the assessee. The learned CIT(DR) has reproduced the relevant para No. 12 of the decision of the Hon'ble Authority of Advance Ruling in the case of Spectrum Geo Ltd. (supra) as under :- "12. The inquiry now is whether the income derived by the applicant from performing its contract with the UAE Company would be assessable to tax as, fees for technical services under section 440, 44DA, or 115A of the Act. Admittedly, the income derived by the applicant Is from a UAE company and not from the Government or an India concern. In other words, income derived by the applicant is from a nonresident company of foreign company. On the wording of these sections, the income cannot be brought within their purview, because they only speak of Income by way of fees for technical services received from Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 15. We, however, find that the decision dated 09.07.2014 of Hon'ble Delhi High Court in the case of PGS Geophysical AS (supra) has not been cited before the ITAT in the case of Louis Dreyfus Armateures SAS (supra). Hon'ble Delhi High Court in the case of PGS Geophysical AS (supra) vide para No. 20 of the judgment has been pleased to hold that the receipt of the assessee can be taxed under sec. 44BB of the Income-tax Act, 1961 only (i) if the assessee has a PE in India during the relevant period and (ii) the contract entered into by the assessee in India was effectively connected with that PE in India. In the present case before us, the Assessing Officer at page No.4 para No.5 had himself noted that the assessee had got PE in India, thus, first condition of getting benefit under sec. 44BB of the Act as laid down by the Hon'ble High Court in the above cited case is fulfilled. So far as the second condition that the contract entered into by the assessee in India was effectively connected with that PE in India is concerned, the dispute in this regard remained that the assessee being subcontractor as per the Authorities below was not eligible for the benefit of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings returned by the coordinate Bench of the Tribunal in assessee's own case cited as Pride Offshore International LLC vs. Addl.DIT, International Taxation (supra), grounds raised by the revenue by way of present appeal are not sustainable and the findings returned by the DRP directing the AO to apply the deemed profit rate of 10% u/s 44BB of the Act on the revenue earned by the assessee from a nonresident company, M/s Pride Foramer on account of provision of offshore drilling rig on hire for executing contracts with M/s. ONGC; and treating the amount received by the assessee from M/s. Pride Foramer on account of the provisions of drilling rig under Charter Agreement not in the nature of royalty as defined u/s 9(1)(vi) of the Act and not taxable under the provisions contained u/s 44DA read with section 115A of the Act and that DRP has rightly not applied the distinct scheme of taxation of royalty/fee for technical services while entering the provisions contained u/s 44BB / 44DA / 115A, hence appeal filed by the revenue is hereby dismissed. 27. In view of what has been discussed above, appeal bearing ITA No.1405/Del/2014 filed by the assessee is hereby allowed, appeal bear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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