2017 (6) TMI 3 - ITAT DELHI

Revision u/s 263 - A.O has not made proper enquiries to determine the nature of services rendered by the assessee - as per CIT-A assessee being a second-leg contractor is only providing technical services to Aker and any sum in the nature of fees for technical services, for a project not undertaken by the recipient is outside the scope of section 44BB - Held that:- Proposition that the provision of section 44BB of the Act are held to be applicable to the tax payer being a second leg contractor/sub-contractor. Further, it has been held in various decisions including the decision of the Hon'ble Delhi High Court in the case of DIT Vs. OHM Ltd. [2012 (12) TMI 422 - DELHI HIGH COURT ] that the services rendered in relation to extraction and production of mineral oil are taxable u/s 44BB of the Act.

So far as the receipts of out-country services as taxable in India is concerned, we find in terms of section 90(2) of the Act, provisions of the Act are over ridden by the provisions of DTAA to the extent more beneficial to the non-resident assessee. Article 7(1) and 7(2) of the Indo-UK DTAA provides that profits attributable to PE in India shall be only profits arising from activities carried out by the PE in India. Therefore, we find merit in the submission of the ld. counsel for the assessee that assessee’s income taxable in India shall only be so much of profits under contract as is attributable to the PE in India. See Carborandum Co vs CIT [1977 (4) TMI 2 - SUPREME Court ]

Since in the instant case the A.O after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O, he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed