Income earned abroad can’t be taxed, if the same is not chargeable to tax under the general provisions of the I-T Act

In a recent ruling Mumbai Income Tax Appellate Tribunal (ITAT) [2010- T11-41-ITAT-MUM-INTL] in the case of J Ray Mc Dermott Eastern Hemisphere Ltd. (Taxpayer) held that receipts pertaining to transportation and installation contract executed by the Taxpayer outside India cannot be taxed under the special provisions, which provide for taxation of certain income of a non-resident on presumptive basis, if the income is not chargeable to tax under the general provisions of the Income Tax Act, 1961.

Background and facts of the case

The Taxpayer, a company tax resident of Mauritius, was engaged in the business of designing, fabrication, construction and installation of platforms, docks, pipelines, jackets and other similar activities which are used in the exploration and production of mineral oil.

The Taxpayer undertook and executed a contract for transportation and installation work under certain well platforms projects to be used in mineral oil exploration viz. N-11 and N­12.

 While filing its tax return, the Taxpayer did not offer the receipts pertaining to activities carried on outside India for tax.

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