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TMI Blog2017 (1) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... ced in the Paper Book at pages 1 to 4. In the absence of any cogent material brought out by the Revenue, we hereby affirm the said finding of CIT(A) and accordingly, Revenue fails on this aspect. In respect to the earnings from M/s. Leigthton Contractors India Pvt. Ltd. for hiring of barge JU-251 following the phraseology of Sec. 44BB of the Act, in our considered opinion, even the earnings from hiring of barge JU-251 to M/s. Leigthton Contractors India Pvt. Ltd. are eligible for assessment u/s 44BB of the Act. In coming to such a conclusion, we are also conscious of the stand of Assessing Officer as manifested in the assessment order for Assessment Year 2008-09, wherein hiring receipts from M/s. Leigthton Contractors India Pvt. Ltd. on account of hire of barge JU-251 in terms of same contract have been accepted to be assessable u/s 44BB of the Act. Therefore, considering the facts and circumstances of the case, we allow the additional Ground raised by assessee that the amount of ₹ 11,77,55,535/- received from M/s. Leigthton Contractors India Pvt. Ltd. is also liable to be taxed in terms of Sec. 44BB of the Act. Thus, assessee succeeds on its additional Ground of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) on the above ground be set aside and that of the Assessing Officer restored. 3. Notably, in this case assessee as well as Revenue have preferred additional Grounds of appeal also, which are as under :- Assessee s additional Ground of appeal :- The learned CIT(A) was not justified in holding that the amount of ₹ 11,77,55,535 received from Leighton Contractor (I) Private Limited was not taxable u/s. 44 BB of the Income Tax Act, 1961. Revenue s additional Grounds of appeal :- 1. On the facts and in the circumstances of the case and in law, whether the Id. CIT (A) has erred in direction the assessing officer to treat the assessee as eligible for the benefit of DTAA between India and UAE. 2. On the facts and in the circumstances of the case and in law, whether the Id. CIT(A) erred in directing AO to assess the income of the assessee on the gross receipts of ₹ 3,92,36,846/-/- under provisions of section 44 BB of the Act ignoring the fact that total gross receipts of ₹ 15,69,92,381/- is taxable as royalty as per the provisions of section 9(I)(vii) of the I.T. Act,1961. 3. The Appellant prays that the order of the Id. CIT (A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA) between India and UAE. Even in the assessment proceedings, assessee claimed that aforesaid earnings were by way of contractual receipts, which are in the nature of business profits covered by Article 7 of DTAA between India and UAE and, therefore, in the absence of any Permanent Establishment (PE) in India within the meaning of Article 5 of DTAA, such receipts were exempt. It was also pointed out that the said contracts were for a period of less than 9 months and, therefore, in the absence of any PE in India, the said earnings were not taxable in India in view of Article 7 read with Article 5 of DTAA between India and UAE. 5. The Assessing Officer for the reasons elaborated by him in paras 6 7 of the assessment order held that the assessee was not eligible to claim the benefit of DTAA between India and UAE. In nutshell, the stand of Assessing Officer was that assessee could not be considered as liable to tax as per India-UAE DTAA and thus could not be treated as a resident of contracting state within the meaning of Articles 1 and 4 of the DTAA on the basis of the Residency certificate issued by the Ministry of Finance and Industry, UAE. Having held the assessee not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of Assessing Officer in taxing the earnings from M/s. Leigthton Contractors India Pvt. Ltd. for the time charter hire of barge JU-251, assessee contended that the Assessing Officer erred in denying the benefits of DTAA of India-UAE and that such income was wrongly assessed as Royalty u/s 9(1)(vi) of the Act. The CIT(A) has considered the aforesaid aspects. Inasmuch as the plea of assessee for applicability of provisions of India-UAE DTAA is concerned, the CIT(A) upheld the stand of assessee by following the earlier appellate order in assessee s own case for Assessment Year 2006-07. The CIT(A) held that assessee-company was eligible for the benefits of DTAA between India and UAE and that in view of the provisions of Sec. 90(2) of the Act, it was open for the assessee-company to chose between the taxation as per the India-UAE DTAA or as per the Act, whichever was more beneficial to it. Such decision of the CIT(A) has been challenged by the Revenue by way of additional Grounds of appeal no. 1 stated above. 7. Secondly, insofar as hire charges earned by assessee with respect to tug boats Valentine III and Zakher King to M/s. Aracadia Shipping Ltd. are concerned, CIT(A) he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e JU-251 fell within the scope of Article 12(3) of the DTAA between India and UAE and amounted to Royalty. It was also noticed by CIT(A) that since the tax liability under the DTAA and the domestic law would remain the same as Royalty, the action of Assessing Officer of taxing the sum of ₹ 11,77,55,535/- as Royalty income was affirmed. The said decision of CIT(A) of denying the taxability of sum of ₹ 11,77,55,535/- earned from M/s. Leigthton Contractors India Pvt. Ltd. u/s 44BB of the Act has been assailed by the assessee by way of aforesaid additional Ground of appeal. Insofar as the two Grounds of appeal raised by assessee in its Memo of appeal are concerned, the same relate to the stand of assessee that earnings from lease of vessels to M/s. Aracadia Shipping Ltd. and M/s. Leigthton Contractors India Pvt. Ltd. are assessable as business profits within the meaning of Article 7 of India-UAE DTAA. Insofar as the Grounds of appeal raised by the Revenue in its Memo of appeal are concerned, the same arises from the action of CIT(A) in deleting the interest charged u/s 234B of the Act for shortfall in the payment of advance tax. 9. In the above background, we have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative pointed out that in the subsequent Assessment Year of 2008-09, vide assessment finalised u/s 144C(3) r.w.s 143(3) of the Act dated 22.2.2011, the Assessing Officer has himself accepted that the earnings from hiring of vessels to M/s. Aracadia Shipping Ltd. and M/s. Leigthton Contractors India Pvt. Ltd. are liable to be assessed in terms of Sec. 44BB of the Act. In particular, it is pointed out that in Assessment Year 2008-09 the earning from M/s. Leigthton Contractors India Pvt. Ltd. was with respect to barge JU-251, which is also the subject matter of consideration in the instant year. Apart from the aforesaid, the learned representative pointed out that the decision of the Delhi Bench of the Tribunal in the case of M/s. SBS Marine Ltd. in ITA No. 107/Del/2012 dated 13.2.2015 clearly covers the controversy in favour of assessee. It is pointed out that as per the Delhi Bench of Tribunal, even if it was found that the income was being derived by simply hiring of vessels, same would also be covered by the scope of Sec. 44BB of the Act. It is pointed out that in the present case, assessee had indeed leased out the vessels on wet lease basis. By referring to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that barge JU-251 at Jamnagar is cleared for operations relating to pipeline laying and SPM installation, pre-commissioning and commissioning work. On the basis of the aforesaid, the case of assessee is that all the three vessels hired out have been used in the business of prospecting for or extraction or production of mineral oils and, therefore, such earnings ought to have been taxed in terms of Sec. 44BB of the Act. We find that on the basis of aforesaid, CIT(A) has concluded that only so far as the earnings from M/s. Aracadia Shipping Ltd. are concerned, the same are eligible for taxation in terms of Sec. 44BB of the Act and not the earnings from M/s. Leigthton Contractors India Pvt. Ltd. With regard to the earnings from M/s. Leigthton Contractors India Pvt. Ltd., the CIT(A) found that the hired barge was used for offshore accommodation/construction activities at Jamnagar, which was an activity not directly involved in connection with prospecting for or extraction or production of mineral oils. 15. Insofar as the earnings from M/s. Aracadia Shipping Ltd. is concerned, in our view, the fact-situation clearly brings out that the tug boats have been used in connection with p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was engaged in simple hiring of vessels, the same, in our opinion, would still be covered by the second limb of section 44BB which deals with supplying plant and machinery on hire used or to be used in the prospecting for or extraction or production of mineral oils. As per the Explanation to section 44BB, the term plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business. Thus, an aircraft or vehicle given on hire and used / to be used in the prospecting for or extraction or production of mineral oil is an eligible activity under section 44BB. There can be no dispute that an aircraft or a vehicle cannot be directly used in the prospecting for or extraction or production of mineral oils. Thus, section 44BB does not envisage direct use of the plant or machinery in the prospecting for or extraction or production of mineral oil. It is sufficient if the plant or machinery is used for the purposes of the business of prospecting for or extraction or production of mineral oil. 21. In Lloyd Helicopters International Pty. Ltd., In re (249 ITR 162), the Authority for Advance Ruling ruled that the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee since what really matters is the activity for which the plant and machinery is used i.e., prospecting for or extraction or production of, mineral oils irrespective of who uses the plant and machinery whether (it is used) by first leg contractors i.e., hirers, or by the person actually engaged in prospecting for, or extraction or production of, mineral oils i.e., ONGC in the present case. 23. Further, there is no requirement of a direct contract or agreement with the person actually engaged in prospecting for, or extraction or production of, mineral oils as canvassed by the revenue for the applicability of section 44BB. One may refer other provisions of the statue which insists on an agreement. For instance, section 42 deals with allowances allowable in computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation which the Central Govt. has entered into an agreement. Section 80IA(4)(i)(b) provides that the enterprise carrying on the business of developing, operating and maintaining any infrastructure facility has to enter into an agreement with the Central Government of a State Govt. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. In coming to such a conclusion, we are also conscious of the stand of Assessing Officer as manifested in the assessment order for Assessment Year 2008-09, wherein hiring receipts from M/s. Leigthton Contractors India Pvt. Ltd. on account of hire of barge JU-251 in terms of same contract have been accepted to be assessable u/s 44BB of the Act. Therefore, considering the facts and circumstances of the case, we allow the additional Ground raised by assessee that the amount of ₹ 11,77,55,535/- received from M/s. Leigthton Contractors India Pvt. Ltd. is also liable to be taxed in terms of Sec. 44BB of the Act. Thus, assessee succeeds on its additional Ground of appeal. 17. Now, we may take up the respective Grounds raised in the original Memos of appeal. In the appeal of Revenue, the only issue is with respect to the interest charged u/s 234B of the Act, which has been directed to be deleted by the CIT(A). In this context, it was a common point between the parties that a similar Ground was raised by the Revenue in Assessment Year 2006-07, which has been dismissed by the Tribunal vide order dated 19.3.2015 (supra). Notably, in terms of the judgment of Hon'ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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