Case Law Details
Dy. DIT (IT) Vs weatherford Oil Tools (ME) Ltd. (ITAT Delhi)
On Issue relating to the service tax, learned AR placed reliance on the decision of the Hon’ble Jurisdiction High Court in the case of CIT vs Mitchell Drilling International P. Ltd. 380 ITR 130 in support of his contention that the service-tax being statutory levy, should not form part of gross receipts as per provision of Section 44BB of the Act. He further placed reliance on the decision of the coordinate bench in the case of DDIT vs Sundowner Offshore International (Bermuda) Ltd. ITA 1067/Del/2016 for a similar principle. We find that the principle laid down in the above decision squarely applies to the facts of this case also, as such, while respectfully following the same, we answer the issue that the service-tax does not form part of the gross receipts for computation u/s 44BB of the Act.
FULL TEXT OF THE ITAT JUDGMENT
Aggrieved by the order dated 23.4.4.2013 in Appeal No.155/CIT(A)-II/13-14 for assessment year 2010-11 passed by the learned CIT(A), Dehradun (for short hereinafter called as “the learned CIT(A)’), the revenue preferred this appeal.
2. Relevant facts are that the assessee is a company incorporated under the laws of British Virgin Islands having its registered office at P.O. Box No.4627, Dubai, United Arab Emirates. The Indian project office situated at 921, Solitaire Corporate Park, 167 Guru Hargovindji Marg, Chakala, Andheri East, Mumbai and is engaged in the business of providing services and facilities in connection with exploration, exploitation and production of mineral oil in India. For the assessment Year 2010-11, the assessee filed their return of income on 13.10.2010, declaring taxable income of Rs.246,667,735/- under the head ‘profits and gains of business and profession’ computed in terms of the presumptive tax scheme of Section 44BB of the Income-tax Act, 1961 (for short called “the Act”. However, during scrutiny u/s 143(3)/144C(3)(b) of the Act, by order dated 14.5.2013, the AO completed the assessment at an income of Rs.489,395,500/-and in that process bifurcating the revenue received by the assessee under contract into equipment rental, services and reimbursement and holding that the revenue received by the assessee on account of provision of oilfields equipment to other than PSC partners was in the nature of royalty u/s 9(1)(vi) of the Act;
i. the revenue received by the assessee on account of provision of alleged services was in the nature of fees for technical services u/s 9(1)(vi) of the Act;
ii. the revenue received by the assessee on account of supply of consumables, spares etc., was in the nature of fees for technical services u/s 9(1)(vi) of the Act;
iii. the receipts on account of service-tax and reimbursement of expenses incurred on material recharge to be in the nature of royalty/fees for technical services u/s 9(1)(vi), 9(1)(vii) of the Act;
iv. the assesse had a permanent establishment in India through which the business was carried on in India and that the income as aforesaid was attributable to such Indian permanent establishment;
v. in view of the fact that the assessee had a permanent establishment, income on account of royalty and fees for technical services was required to be computed u/s 44DA of the Act;
vi. in the absence of any books of accounts, income of the assessee was to be estimated at the profit rate of twenty five per cent.
He also levied interest u/s 234B of the Act and granted the credit of withholding taxes.
3. In appeal, by way of impugned order, learned CIT(A) deleted the additions and in that process he placed reliance on the decisions reported in the case of ONGC vs. CIT, 376 ITR 306 of the Hon’ble Apex Court, BJ Services of Uttarakhand High Court; of the coordinate bench of this Tribunal in the case of Precision Energy Services Ltd. Aggrieved by such findings of the learned CIT(A), revenue preferred this appeal on three issues. Firstly, whether the income of the assessee shall be taxed as per the provisions of Section 44AB; secondly, whether the service-tax forms part of receipts as per provision of Section 44B of the Act; and interest u/s 234B of the Act.
4. Heard arguments of both sides and perused the material on record. Learned AR submitted that the issue relates to the treatment of income from PSC and non PSC contracts for taxeability as per provisions of Section 44BB of the Act had come up for consideration before a coordinate bench of this Tribunal in ITA Nos.5290/Del/2010, 419/Del/2012 and 6391/Del/2013 for the Asstt. Years 2007-08, 2008-09 and 2009-10 respectively wherein it has been held that the income on account of provision of equipment and services earned by the assessee company shall be taxable as per the provisions of Section 44BB of the Act. He further submitted that the appeal preferred by the revenue against the said order was dismissed by the Hon’ble Uttarakhand High Court. At the very threshold, he further submitted that the Hon’ble Apex Court in the case of ONGC vs. CIT, 376 ITR 306 held that the services in connection with exploration and production of mineral oil shall fall within the purview of Section 44BB and outside the purview of fees for technical services as defined in Section 9(1)(vii) of the Act. He also brought it to our notice that in the assessment order for the Asstt. Year 2014-15, learned AO had accepted the taxability of revenue as per provisions of Section 44BB. Learned DR placed reliance on the assessment order.
5. We have perused the order dated 11.7.2014 by a coordinate bench of this Tribunal in ITA No.5282 of 2012 and batch wherein the assessee is also a party in ITA No.5290/Del/2010. Vide paragraph 227 of this order, the Bench while dealing with the addition qua equipment rental, service charges and sale of consumables and services rendered by assessee in connection with exploration/ prospecting/extraction of mineral oil held that the income arising on account of royalty/FTS, letting out of equipment etc. was to be taxed u/s 44BB. Appeal preferred against this order by the revenue in ITA No.76/14 and Income-tax Appeal No.27/15 was dismissed by the Hon’ble Uttarakhand High Court by order dated 6.8.15 and vide para No.6(i), the Hon’ble High Court decided the issue against the revenue. Since the issue of assessment of the revenue from PSC and non PSC contracts was substantially involved in ITA No.5282/2012 and batch and decided by the Tribunal and also by the Hon’ble High Court in favour of the assessee, while respectfully following the same, we answer this issue that the income on account of provision of equipment and services earned by the assessee company shall be taxable as per the provisions of Section 44BB of the Act.
6. Now, coming to the second issue relating to the service tax, learned AR placed reliance on the decision of the Hon’ble Jurisdiction High Court in the case of CIT vs Mitchell Drilling International P. Ltd. 380 ITR 130 in support of his contention that the service-tax being statutory levy, should not form part of gross receipts as per provision of Section 44BB of the Act. He further placed reliance on the decision of the coordinate bench in the case of DDIT vs Sundowner Offshore International (Bermuda) Ltd. ITA 1067/Del/2016 for a similar principle. We find that the principle laid down in the above decision squarely applies to the facts of this case also, as such, while respectfully following the same, we answer the issue that the service-tax does not form part of the gross receipts for computation u/s 44BB of the Act.
7. Lastly, now turning to the chargeability of interest u/s 234B of the Act, Hon’ble Delhi High Court in the case of DIT vs GE Packaged Power Inc, 373 ITR 65 held that interest u/s 234B was not chargeable in the case of a non-resident whose entire income was subject to tax deduction at source u/s 195 of the Act. In view of this binding precedent, we hold this issue also in favour of the assessee.
8. We are, therefore, of the considered opinion that all the issues involved in the matter are covered by the binding decisions in favour of the assessee, as such, the appeal of the revenue is devoid of merit and is liable to be dismissed.
9. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 29thJanuary, 2018
