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TMI Blog2024 (6) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Accordingly, the assessee is not liable for deduction of TDS u/s. 195 of the Act. Therefore, the provisions of Section 40(a)(i) cannot be pressed for making disallowance of sub contract charges paid by the assessee to M/s. Deep Drilling 8 Pte Ltd., Singapore. In view of the above discussions made in the preceding para, the addition made by the Assessing Officer in the Assessment Order u/s. 143(3) read with section 144C(13) of the Act dated 05.01.2023 u/s 40(a)(i), relying upon the directions of the DRP is hereby deleted. Appeal of the assessee is allowed. - Shri Mahavir Singh, Vice President And Shri Amitabh Shukla, Accountant Member For the Appellant : Shri P. Muralimohan Rao, C.A For the Respondent : Shri A. Sasikumar, CIT ORDER PER AMITABH SHUKLA, A.M : This appeal filed by the assessee is directed against the final assessment order passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [ Act in short] dated 05.01.2023 relevant to the assessment year 2020-21 in pursuant to the directions of the ld. Dispute Resolution Panel-2, Bengaluru under section 143(3) r/w section 144C of the Act dated 30.12.2022. 2. At the outset, the Ld. Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n execution of the said contract, is India and therefore, according to A.O, the income of the assessee entity is therefore deemed to accrue or arise in India for its drilling operations carried out in India. Therefore, the A.O discussing the provisions of Section 195(1) of the Act held that the assessee is liable to deduct TDS on the same and accordingly, he disallowed the bareboat charter charges deemed sub contract charges paid to Deep Drilling 8 Pte Ltd. Singapore by invoking provisions of Section 40(a)(i) of the Act amounting to Rs. 55,12,69,200/-. Aggrieved by the draft assessment order, the assessee moved in objection before DRP. 4. The DRP vide its directions u/s. 143(3) r/w s. 144C of the Act dated 30.12.2022 rejected the objections of the assessee holding that the assessee s case, even though fall u/s. 144BB of the Act, but in view of the Explanation No.5 to Section 91(3) of the Act inserted by the Finance Act, 2012 with retrospective effect 01.06.1976 clarifying the respective control or possession or use or location in India of such right of property or information with the prayer, the payment is taxable as royalty. Accordingly, the DRP rejected the claim by observing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. The Hon ble High Court in the case of Poompuhar Shipping Corporation vs ITO held that the aipment rental is taxable as royalty even if the payer does not have control. The explanation no, 5 to section 9()(vi) inserted by Finance Act 2012 with retrospective effect from 01.06.76 clarified irrespective of control or possession or use or location in India such right, property or information with the payer; the payment is taxable as royalty. Moreover, the CBDT letter dated 29.07.2003 to Ministry of Shipping clarified that ships are industrial equipment and the payments for bare boat charter are in the nature of royalty. Accordingly, this panel is of considered view that the facts and circumstances of the instant case are quite different and distinct from the case laws relied upon by the assessee. Aggrieved by the above orders, now the assessee is in appeal before the Tribunal. 5. Before us, the Ld. Counsel for the assessee stated that the sub contract charges paid to Deep Drilling 8 Pte Ltd. Singapore being bareboat charges are arising out of continuous agreement from earlier years i.e., Financial Year 2018-19 relevant A.Y 2019-20 and on exactly identical facts the Tribunal in IT(TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the non-resident can claim a lower profit. It is for the purpose of claiming lower profits that the non-resident must file a return and prove the same with support of his regular books of accounts and other documents and by complying with other conditions specified therein ie., 44AA, 44AB and 143(3) of the Act. In this regard the assessee relied upon the following judicial precedent: i. Decision in case of Frontier Offshore Exploration (India) Ltd vs. DCIT Central Circle (1). Chennai vide ITA No 200/Mds/2009 where in it is held as 6. This is where the special provision of section 44BB comes into play. Where the statute has provided a special provision for dealing with a special type of income such a provision would exclude a general provision dealing with the income accruing or arising out of any business connection. Section 44BB is a special provision to the exclusion of all the contrary provisions provided in sections 28 to 41 and 43 and 43A of the Act. Once the provisions of sections 28 to 41 and sections 43 and 43A stand excluded the method of computing the business income of the non-resident on the basis of the books of account goes out of the picture. ii. Coordinate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, dividends, interest of securities, etc., but also to gross sums, whole of which may not be income or profits of recipient, such as payment to contractors and sub-contractors and payment of insurance commission -Held yes - Whether expression 'any other sum chargeable under the provisions of this Act would mean sum on which income-tax is leviable - Held yes- Whether expression any other sum chargeable under the provisions of this Act would include cases where any sum payable to the non-resident is a trading receipt which may or may not include 'pure income' - Held, yes Whether assessee who makes payments to non-residents under contract entered into is under obligation to deduct tax at source under section 195 and the obligation is limited only to appropriate proportion of income chargeable under Act -Held, yes. ii. Decision of Hon ble Supreme Court of India in case of GE India Technology Cen. (P) Ltd. vs. CIT, (2010) 193 Taxman 34 (SO), wherein, it is held Section 195 of the Income-tax Act, 1961 - Deduction of tax at source - Payment to non-resident - Whether the moment a remittance is made to a non-resident, obligation to deduct tax at source does not arise; it aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the Act as income earned by DD8PL is not chargeable to tax in India. 8. Thus, the assessee has exercised the option available under section 44BB of the Act by maintaining regular books of accounts and got the book audited and thus, the payment done to DD8PL are bareboat charter are business receipts for the Singapore Company and the company does not have PE and not taxable in India as per the DTAA between India and Singapore, the assessee is not liable to deduct any tax in India under section 195 of the Act. Therefore, no disallowance for the expenditure under section 40(a)(1) of the Act is warranted. Under the above facts and circumstances, we set aside the orders of authorities below and delete the addition made by the Assessing Officer and confirmed by the ld. DRP. Thus, the appeal filed by the assessee is allowed. 6. When these facts were confronted to Ld. CIT-DR, he could not controvert the above fact that this issue is covered by Tribunal s decision in assessee s own case in immediately preceding year, where the exactly the same agreement was under dispute by virtue of which the sub contract charges were paid by assessee to M/s. Deep Drilling 8 Pte Ltd., Singapore. 7. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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