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TMI Blog2023 (10) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 in assessee s own case had already held that income of the assessee would have to be determined in accordance with the provision of section 44BB of the Act and not section 44DA of the Act. Hence, the entire contract receipts derived by the assessee would have to be determined for the purpose of taxability only in accordance with the provisions of section 44BB of the Act. The assessee in the instant case has reported consolidated profit in its profit and loss account and business income under normal provisions of the Act in the income tax which works to 24.36% of gross receipts Whether the assessee though falling under the ambit of provisions of section 44BB of the Act, but earning income above the presumptive rate of 10% fixed u/s 44BB(1) of the Act, would be eligible for showing income in terms of section 44BB(1) of the Act / - In order to understand this issue, it would be pertinent to look at the same in the event of assessee s incurring losses. If the assessee is incurring losses, still it has to offer income at the presumptive rate of 10% on gross receipts as per section 44BB(1) of the Act. As a corollary, if an assessee earns income more than 10% on gross receipts actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the following grounds of appeal:- 1. That the AO (Assessing officer) and DRP (Dispute Resolution Panel) have grossly erred on facts and in law in passing the impugned order and assessing the income at Rs 2,72,23,425/- as against the returned income of the assessee. 2. That the AO and DRP have grossly erred on facts and in law in not assessing the income of the assessee u/s 44BB of the IT Act. 3. That the AO and DRP have grossly erred on facts and in law in passing the impugned order without giving a sufficient and proper opportunity to the assessee to be heard. The order has been passed in violation of principles of natural justice. 4. That the AO and DRP have grossly erred in not adjudicating the grounds of objections in which all the additions on merits have been challenged. 5. That the AO has grossly erred in law and on facts in not following the directions of DRP in letter and spirit. 6. That the AO has grossly erred in making disallowance of Rs 9,41,400/- on account of purchase of chemicals. 7. That the AO and DRP have grossly erred on facts and in law in making disallowance of Rs 39,86,242/- on account of disallowance of salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on 30.09.2011 declaring loss of Rs. 9,33,567/- in the profit and loss account filed along with return. During the course of assessment proceedings, the assessee gave the details of various contracts entered with Oil and Natural Gas Corporation Ltd (ONGC Ltd) and Petrogas E P LLC. The details of the contracts entered into are as under:- a. Contract No. MR/MM/WS/SER/PTS/S006/03-04/OT- 1011/9010003516 with ONGC for Hiring of Production Testing Surface Equipments Services for CBM-BPM Basin, Kolkata. b. Contract No. PG/IND/MB2/DRILL/CONTRACT/MUD/08 with Petrogas E P for Mud Engineering Services. 7. The assessee filed its return of income on the basis of profit and loss account/ consolidated statement in respect of both the contract and offered income on net basis under normal computation provisions of the Act. During the assessment proceedings, the assessee filed copy of audited balance sheet along with profit and loss account in respect of two contracts executed during the year and requested that the assessment be completed based on the audited financial statements filed during the assessment proceedings. The assessee also furnished entire supporting documents in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,22,921/- being payment made to Global Marine Technologies towards rent for containers without deduction of tax at source. The ld AO accordingly disallowed the same u/s 40(a)(i) of the Act in the draft assessment order which was upheld by the ld DRP. 14. The ld AO observed that the assessee has debited salary in its profit and loss account on lump sum basis of employee Shri Kameshwar Shukla. The assessee was asked to produce the salary register in support the claim of deduction together with nature of services performed by the concerned employee to the assessee. The ld AO also observed that from the perusal of the Form 16 filed by the assessee before the ld AO, the designation of the concerned employee is not mentioned thereon, whereas in respect of other employees, the designations were duly mentioned. Accordingly, the ld AO proceed to treat the salary expenditure debited in the books in the name of Shri Kameshwar Shukla in the sum of Rs. 39,86,242/- as bogus expenses and disallowed the same u/s 37(1) of the Act in the draft assessment order which was upheld by the ld DRP. 15. With the aforesaid observations the ld AO pursuant to the order of the ld DRP passed a final ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract No.: PG /IND /MB2 /DRILL /CONTRACT /MUD/ 08 for providing mud services on service contract to drill 04 number of wells (out of 04, including 01 of contingency). The well is drilled with water based mud system. The total Individual well depts. is ca 2,000 m+-100m (6,560 ft+ 320 ft) below sub-sea. The water depth in the block is expected to be between 45 60m (150 ft 200 ft). The well has two oil-bearing objectives. The primary objectives is the Sistone of Palaeocene formation and second is the predominantly limestone of Oligocene/Eocene formation. The nature of services provided by the assessee under the said contracts are in connection with prospecting for or extraction or exploration or production of mineral oils. The services provided by the assessee are explicitly connected with the activities of prospective, exploration, extraction and production of minerals oil and covered under the provision of section 44BB. Further, we would like to draw your attention to appellate order passed u/s 250(6) of Income Tax Act, 1961. In the said order Hon'ble CIT (A) - II has also accepted above argument i.e. the provision of section 44BB(3) of I.T. Act, 1961 is applicable and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices on service contract to drill 04 number of wells with water based mud system. Infact this contract with Petrogas was entered as a consortium of Oil exploration company with shares of Petrogas @20%; share of Gas Authority of India Ltd of 20%; share of Gujarat State Petroleum Corporation Ltd of 20%; share of Hindustan Petroleum Corporation of 20%; share of India Oil Corporation of 20% and assessee herein. The nature of services rendered under this Petrogas contract has already been detailed herein (supra). From the same it is evident that the services provided by the assessee are in connection with prospecting/ extraction/ production of mineral oil and hence, its activities would be squarely covered within the ambit of provision of section 44BB of the Act. We also find similar services were rendered by the assessee in the past and the same had been subject matter of adjudication of this Tribunal for AY 2007-08 to 2009-10 wherein, this tribunal had categorically observed that the services rendered by the assessee would be falling under the ambit of provision of section 44BB of the Act. As stated supra, the Tribunal in AY 2009-10 in assessee s own case had already held that incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be received in India by or on behalf of the assessee 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 outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that subsection, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sons reported in 96 ITR 390 had held as under:- The question whether a certain provision of law is directory does not fall to be decided on different standards because it is found in a taxing statute. There is no rule that every provision in a taxing statute is mandatory. The strict construction that a citizen does not become liable to tax unless he comes within the specific words of a statute is a different proposition. That a person cannot be taxed on the principle of estoppel does not admit of much argument. Article 265 of the Constitution lays down that no tax shall be levied except when authorised by law. 24. In any case, the elaborate circular has been issued by the CBDT vide Circular No. 14 (SL-35) dated 11.04.1955 wherein, it has been specifically observed by CBDT that the purpose of this circular is merely to emphasis that Income Tax Officer should not take advantage of assessee s ignorance to collect more tax out of him than his legitimate due from him. 25. In view of the aforesaid detailed observations and respectfully following the judicial precedents relied upon hereinabove, we hold that income of the assessee should be determined on presumptive basis as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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