TMI Blog2010 (1) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... entire contract can be taken into account in the current assessment year, but the assessment cannot be done under Section 44BBB on the ground that the bills for payment were all raised prior to 01.04.1990? 3. Whether in the facts and circumstances of the case, the provisions of Section 44BBB can be applied to an assessee whose contract was entered into prior to the introduction of the section, but where the completion of the contract was only in the current year, and the assessee is declaring his income only on a completed contract basis?" 3. The assessee is a non-resident foreign company with its headquarters at Legnano, Italy and Project office at Chennai, India and also for the purpose of establishing a place of business in India with effect from 01.10.1981. The non-resident company got itself registered with the Registrar of Companies and the Reserve Bank's permission has been obtained to carry out the operation of the project as per the contract. The relevant assessment year is 1994-1995 and the corresponding accounting year ended on 31.03.1994. The assessee company entered into an agreement as per the contract No.006/2701K/H/IIT/81 dated 8.6.1981 for unloading, erect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illed and since the entire income relates to previous year, tax under Section 44BBB would have to be paid at this stage. He further submitted that the Tribunal ought to have considered that the contract had been completed only in November, 1993, which was proved by the assessee's own letter dated 24.01.1995 and therefore, the entire income of the contract has to be brought to tax on its completion, since the amounts received earlier were all treated as advance till then. He also submitted that the income from the project accrued to the assessee only during the accounting year and therefore, as per Section 44BBB, 10% of the payment shall be deemed to be the profit which was rightly assessed by the assessing officer and the order passed by the Tribunal is not in accordance with law and the same has to be set aside. 5. In spite of notice being served on the respondent, there is no representation on behalf of the assessee. 6. Heard the learned counsel appearing for the appellant and perused the materials available on record. The relevant provision of Section 44BBB reads as follows:- "Notwithstanding anything to the contrary contained in sections 28 to 44AA, in the case of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed on the basis of a certain percentage of their gross total receipts. In the series of such provisions, the Finance Act, 1989, has inserted a new section 44BBB for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects. The new section 44BBB provides that, notwithstanding anything to the contrary contained in sections 28 to 44AA of the Income-tax Act, the income of foreign companies as are engaged in the business of civil construction or erection or testing or commissioning of plant or machinery in connection with a turnkey power project shall be deemed at 10 per cent of the amount paid or payable to such assessee or to any person on his behalf, whether in or out of India. For this purpose, the turnkey power project should be approved by the Central Government and should be financed under any international aid programme. It is also clarified that erection of plant or machinery or testing or commissioning thereof will include laying of transmission lines and systems. This amendment will come into force with effect from 1st April, 1990, and will, accordingly apply in relation to the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to coming into force of the provisions of Section 44BBB of the Act. It is also considered by the authorities below that the payments at intermediate stages of work were made against the invoices duly supported by the purchaser's certificates of completion as provided in Clause 7.6 of the agreement. The invoice in respect of erection bills was raised on 16.04.1988 and the total amount paid under the contract was Rs.4,90,45,132 and all the bills of the assessee were settled prior to 30.04.1990. It is pertinent to note that the assessee has been regularly filing its return of income and the same has also been processed by the assessing officer. For the assessment years 1988-1989 and 1989-1990, the assessments have been completed accepting the loss returned by the assessee in these two years. The said returns were processed under Section 143 (1)(a) of the Act and also they reached finality. The Tribunal in para 12 has stated as follows:- "We had perused the assessment orders for the assessment years 1988-89 and 1989-90 found at pages 70 and 75 of the paper book and note that these two assessments have not been completed on a "No Income No Loss"basis and computation of loss re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g provision, which enables the revenue to levy 10% of the amount paid or payable to the assessee and the said 10% deemed to be the profits and gains of such business under the head "Profits and gains of business". From a reading of the above provision, it is clear that unless and until the amount is paid or payable to the assessee during the year, the revenue cannot levy 10% on the gross amount. In this case, the finding given by the authorities is that nothing was paid or payable during the accounting year. The finding is that the assessee has received a sum of Rs.4,90,45,132/- much prior to the assessment year 1994-1995. To invoke the said provision there should be amount paid or payable during the accounting year. Therefore, the assessing officer is wrong in taking the consolidated amount of Rs.4,90,45,132/-, which was paid by the NLC to the assessee over the period of assessment years 1987-1988 to 1991-1992. The said consolidated amount cannot be the basis for levying 10% on the amount under Section 44 BBB of the Act. Unless and until the conditions stipulated in the deeming provision are satisfied, the revenue cannot invoke Section 44 BBB of the Act. The finding given by both ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
