Applicability of section 44BB of the IT Act on mobilization/ demolization charges received by a non-resident foreign company
SUMMARY OF CASE LAW
The mobilization/ demolization charges received by a non-resident foreign company in connection with supply of plant and machinery form part of gross receipts for the purpose of computing the income under section 44BB irrespective of whether the same was paid or payable in or outside India.
CASE LAW DETAILS
Decided by: HIGH COURT OF UTTARAKHAND, In The case of: R&B Falcon Drilling Co. v. Addl. CIT, Appeal No.: ITA No. 29 of 2008, Decided on: July 3, 2009
4. Brief facts of the case giving rise to this appeal are that assessee, a non-resident foreign company, engaged in the business of providing services in connection with extraction and production of mineral oils, submitted its return of income declaring income at Rs. 2,11,79,270/ – for the Assessment Year 1999-2000. The case was processed under Section 143(1) of the Income Tax Act by the Assessing Officer, who issued notices under Section 143(2) of the Act to the assessee as to why not the reimbursement charges received by the assessee from Enron Oil and Gas India Limited be included in the gross receipts, received by the assessee? After hearing the parties, the Assessing Officer included said receipts amounting to Rs. 4,78,52,006/ -. Aggrieved by said order, the assessee preferred appeal before the Commissioner of Income Tax (Appeals) [for brevity CIT(A)], but the same was also dismissed vide order dated 29.09.2004, passed by CIT(A)–1, Dehradun. Thereafter, the assessee filed Second Appeal No. 388 / Del / 2005 before the ITAT, Delhi. The ITAT, after hearing the parties, dismissed the appeal holding that Section 44BB apply to the mobilization charges received by the assessee, and accordingly, the receipts are rightly taxed @ 10 per cent as per provision of Section 44BB of the Act. Hence, this appeal by the assessee.
7. In Income Tax Appeal No. 280 of 2001; Sedco Forex Internation Inc. Vs. Commissioner of Income Tax, Meerut and another decided on 28.09.2007, Division Bench of this Court has opined that the payment made to the assessee on account of mobilization fee is not the actual reimbursement, rather, it includes the expenditure incurred by the company in transporting the drilling units of rigs to the specified drilling locations in India. As such, such amounts received are liable to be included in the `gross receipts’. That being so, in our opinion, the amount received by the assessee in the present case towards mobilization / demobilization charges form part of the amount mentioned in sub-section (2) of Section 44BB of the Act. Therefore, we concur with the view taken by the ITAT in holding that the mobilization / demobilization charges received by the assessee form part of gross receipts for the purpose of computing the income under Section 44BB of the Act. Needless to say that sub-section (1) of Section 44BB read with Clause (a) of sub-section (2) of Section 44BB of the Act expressly. provides that it makes no difference whether the amount was paid or payable in or outside India. The section does not exclude the mobilization /demobilization charges paid for transportation of the plant and machinery from the place out of India to the locations in India or its territorial waters.