Celestial Vision Limited Vs ACIT (ITAT Mumbai)
Charter Hire Charges: Royalty or 44BB Income? – DRP Mixed Up Facts & Ignored Core Issue- Mumbai Tribunal Sends Back for Fresh Decision
Celestial Vision Ltd, a company incorporated in the British Virgin Islands (BVI), filed its return for AY 2022-23 declaring income of ₹89.64 lakh u/s 44BB on presumptive basis, claiming that receipts of ₹8.96 crore represented charter hire charges for equipment used in oil exploration activities. AO rejected this, holding that the receipts were in the nature of “royalty” u/s 9(1)(vi) r.w. Explanation 2(iv-a), taxable @10% u/s 115A, since no DTAA exists with BVI.
Assessee objected before the DRP, contending that (i) its receipts were directly connected with oil exploration & fell within s.44BB, (ii) Circular No.7/2003 supported its claim, & (iii) judicial precedents mandated application of 44BB over 115A. It also argued that DRP failed to consider its submissions & instead dealt with unrelated issues like reopening u/s 147, though the case involved regular scrutiny u/s 143(3).
Tribunal found merit in assessee’s grievance. It observed that the DRP’s directions contained serious inconsistencies – while AO himself noted no DTAA with BVI, DRP discussed DTAA applicability; further, DRP held that reopening was valid u/s 147, though in fact this was not a reassessment case. The core issue of whether receipts constituted royalty or income u/s 44BB was not addressed properly.
