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TMI Blog2023 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... . ADIT [ 2017 (1) TMI 1208 - ITAT MUMBAI] has held that receipt from giving on hire tugs and barges to be used in prospecting for, or extraction or production of mineral oils would come within section 44BB of the Act. The same view was expressed in case of Larson Toubro Ltd. [ 2022 (3) TMI 84 - BOMBAY HIGH COURT] Western Geco International Ltd. has expressed the view that the seismic data services and mining projects are inextricably linked to activities covered under section 44BB. Thus, we hold that the receipts are covered under section 44BB Since the assessee did not have any PE in India, section 44BB would not apply - On a careful reading of section 44BB of the Act, we do not find any such requirement as has been pointed out by learned DRP. Section 44BB applies to a non-resident entity carrying on business in connection with prospecting for, or extraction or production of mineral oils. The provision, unlike section 44DA, does not put any mandatory condition of existence of PE for the applicability of the provision. We do not agree with the view expressed by the AO and DRP. Accordingly, we direct the AO to tax the receipts under section 44BB of the Act. This gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued under section 148 of the Act, the assessee did not file any return of income. It is observed by the Assessing Officer, the assessee did not respond to the notices issued under sections 142(1) and 133(6) of the Act. Ultimately, the Assessing Officer issued a show- cause notice to the assessee in terms of section 144(1)(b) of the Act calling upon the assessee to explain why the assessment should not be completed to the best of judgment under section 144 of the Act. In absence of any reply to the said show-cause notice, the Assessing Officer proceeded to complete the assessment by treating the receipts of Rs.23,85,90,034/- as royalty/Fee for Technical Services (FTS) and brought to tax by applying the provisions of section 115A of the Act. Accordingly, he proposed the draft assessment order. 5. Against the draft assessment order, the assessee raised objections before learned DRP. Before learned DRP, the assessee submitted that it had given on hire vessels (ships) to Larson Toubro Ltd. and Polarcus DMCC for use or to be used in prospecting for, or exploration or production of minerals oils by the concerned parties. It was submitted, since, the receipts from giving on hire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17] 78 taxmann.com 109 (Mumbai Trib.) 5. CIT Vs. M/s. SBS Marine Ltd. Anr. [ITA No.36 of 2015 Anr., dated 6th August, 2015] 7. Learned Departmental Representative strongly relied upon the observations of learned DRP. 8. We have considered rival submissions in the light of the decisions relied upon and perused the materials on record. The short issue arising for consideration is, whether the disputed receipts are taxable as business profits of the assessee under section 44BB of the Act or are in the nature of royalty as defined in Explanation 2 (iva) to section 9(1)(vi) of the Act. It is evident, while framing the draft assessment order, the Assessing Officer, though, has brought the receipts to tax under section 115A of the Act, however, he has not specified the exact nature of receipts, whether royalty or FTS. However, learned DRP has characterized the receipts to be in the nature of royalty in terms of Explanation 2(iva) to section 9(1)(vi) of the Act. 9. Keeping in perspective the aforesaid facts, we will proceed to examine the nature and character of receipts and their taxability under the Act. On perusal of the charter hire agreement between the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head Profits and gains of business or profession : Provided that this sub-section shall not apply in a case where the provisions of secti6h 42 or section 44D or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely: (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services, and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) the amount received or deemed to He received in India by or on behalf of the assessee on account of the provision of services facilities connection with, or supply of plant and machinery on hire Used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. Expanation, For the purposes of this section (i) plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) . ( ii ) ( iii ) .. ( iv ) ( iva ) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB; 12. As could be seen from the aforesaid definition of royalty, it is in two limbs. Though, in the first limb, the use or right to use any industrial, commercial or scientific equipment is treated as royalty, however, the second limb carves out an exception by providing that the amounts referred to in section 44BB of the Act cannot be treated as royalty. In our considered opinion, while treated the receipts as royalty, learned DRP has overlooked the exception provided in the second limb of Explanation 2(iva) to section 9(1)(vi) of the Act. Thus, once the receipts are covered under section 44BB of the Act, automatically, they are excluded from the definition of royalty as provided under Explanation 2(via) to section 9(1)(vi) of the Act. Since, in the facts of the present case, the receipts in dispute are for giving on hire vessels for use or to be used in prospecting for, or exploration or production of mineral oils, which is an activity covered under section 44BB of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation. It is observed, after considering the submission of the assessee, learned DRP has observed that on perusal of Form 26AS, prima facie, it appears to be a case of double counting of revenue. However, the assessee was directed to provide complete copy of bank statements and summary reconciliation sheets submitted before them to the Assessing Officer for enabling the Assessing Officer to undertake the reconciliation exercise. However, in the final assessment order, the Assessing Officer has repeated the addition of Rs.23,85,90,034/- with the following observations: However, the assessee has failed to provide any documents in this regard to reconcile the revenue till date. The assessee has failed to provide the bank statements and the summary reconciliation sheet as directed by the DRP before this office till date. In absence of any documents, it is not possible for this office to reconcile the revenue earned by the assessee. In view of the above, the revenue is taken at Rs.23,85,90,034/- 16. As could be seen from the aforesaid observations of the Assessing Officer, he has alleged that the assessee failed to provide the bank statements and summary reconciliation sheets ..... X X X X Extracts X X X X X X X X Extracts X X X X
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