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2021 (11) TMI 1077 - ITAT DEHRADUNTaxation u/s 44BB - receipts out of the contracts executed to various drilling offshore contractees along with ONGC - nature of the activities and scope of work of the contract - AO held that the contracts receipts are to be treated as Fee for Technical Services (FTS) in respect of equipment rental hire and claim of Section 44BB was denied and taxed the amount u/s 44DA - distinction between PSC and non-PSC partners for deciding whether a receipt would be assessed u/s 44BB or as FTS or Royalty - HELD THAT:- Such a distinction has to be rejected as an artificial construct devoid of merit. Secondly, it also cannot be accepted that similar kinds of services can be taxed u/s 44BB of the Act if rendered to a PSC and thereafter, sought to be taxed as FTS or royalty if rendered to a non-PSC partner. The plethora of case laws cited by the ld. ARs and especially the case of CGG Veritas [2012 (4) TMI 280 - ITAT DELHI makes it clear that once a PE is known or admitted to exist then the income as in this case, has to be assessed u/s 44BB of the Act more so because the equipment supplied and services rendered are for the purposes of extraction or production of mineral oils. Thirdly, treating of supply of skilled personnel to operate equipment supplied by the assessee cannot be viewed in isolation since the activity of supplying such manpower is part and parcel of the supply of equipment to be used for extraction or production of mineral oils. For this reason also, the income has to be assessed u/s 44BB of the Act only. We also find that preferring appeal by the Revenue against the decision of the Hon’ble High Court in the case of M/s BJ Services Co. (ME) Ltd.[2007 (10) TMI 219 - UTTARAKHAND HIGH COURT] cannot be a ground for confirming the appeal. Till the decision is reversed, the order of the Hon’ble High Court stands legally binding. Profits Attributable on revenues – 5.08% or 2% - While arriving at 5.08%, the ld. CIT(A) has rejected KOA Tools Limited as a comparable company on account that it incurred losses - HELD THAT:- The assessee relied on the ruling of the Special Bench of Chandigarh ITAT in the case of DCIT vs. M/s Quark Systems Private Limited [2009 (10) TMI 591 - ITAT, CHANDIGARH] wherein it was held that merely because a comparable is making loss, it cannot be excluded from the list of comparables, Imercius is a case in which not only functional area is different. The above principle has also been upheld by other benches of ITAT in the case of UCB India (P) Limited [2009 (2) TMI 237 - ITAT BOMBAY-L], Wockhardt Limited [2010 (7) TMI 643 - ITAT, MUMBAI] , Brigade Global Services Private Limited [2014 (12) TMI 337 - ITAT HYDERABAD]. Thus we hold that Koa Tools India Limited which clears the FAR test should not be rejected as a comparable for the AY 2009-10. Service Tax Reimbursement - AO treated service tax collected by the assessee as a part of its gross receipts - HELD THAT:- The issue under consideration has been recently adjudicated by the Uttarakhand High Court (Full Bench) in assessee’s own case and Others [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] wherein the Uttarakhand High Court on similar facts has held that amount reimbursed to the assessee by ONGC representing service tax paid earlier by assessee to the Government of India and not “on account of provision of services in connection with exploration and production of mineral oil”, would not form part of aggregate taxable amount as referred under section 44BB. Given the above reasons, the Division Bench held that reimbursement of service tax collected by the assessee should not be included while computing taxable gross receipts under section 44BB of the Act. Also see MITCHELL DRILLING INTERNATIONAL PVT. LTD. [2015 (10) TMI 259 - DELHI HIGH COURT] Hence, keeping in view, the pronouncements of the Hon’ble Court, we hold that the service tax cannot be made a part of the Gross turnover. Revenue appeal dismissed.
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