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TMI Blog2012 (6) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the laws of Norway and it is engaged in the business of providing equipment and services in connection with prospecting and extraction or production of mineral oil. The return was filed on 31.10.2005 declaring total income of Rs. 2,50,20,440/-. This income was accepted in the assessment order. On scrutiny of the records, the ld. CIT(Appeals) found that -(i) the value of international transaction in the year exceeded Rs. 5.00 crore, and (ii) the assessee had received consideration of Rs. 24,98,91,889/- for leasing a vessel to CGG Marine SAS, France ('CGG' for short), which was offered to tax u/s 44BB. It was further found that the AO did not refer valuation of international transaction to the transfer pricing officer ('TPO' for short) for computing arm's length price in spite of instruction no. 3 of 2003 of the Board, and the decision of Delhi High Court in the case of Sony India (P.) Ltd. (supra). It was also found that the taxability of the receipt from CGG as royalty was not examined by the AO as he accepted that provisions of section 44BB were applicable. Therefore, the assessment order was set aside for making a fresh order of assessment as it was found to be erroneous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable and not section 44BB. In paragraph no. 10 it has been mentioned that there is a clear failure on the part of the AO to examine all these matters before passing the assessment order. Therefore, the assessment is erroneous in so far as it is prejudicial to the interest of revenue. 5.1 In the aforesaid connection, the ld. counsel drew our attention to the provisions contained in section 44BB which override other provisions contained in sections 28 to 41 and sections 43 to 43A, and is applicable to a non-resident person engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used, or to be used, in prospecting for or extraction or production of mineral oils. Clause (i) of the Explanation includes ships also in the definition of "plant" for the purpose of this section. Further, he drew our attention towards clause (iva) of Explanation-2 of section 9(1)(vi) in connection with the definition of "royalty which means the use or right to use any industrial, commercial or scientific equipment but does not include the amount referred to in section 44BB. Our attention has also been drawn towards the provision contained in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2006, the AO had called for a copy of the contract under which revenue had been received. However, thereafter the matter was not examined and income was determined on a presumptive basis u/s 44BB without examining the provisions contained in section 9(1)(vi). In this case, the ship has not been used by the assessee for the purpose of prospecting for or extracting and producing of mineral oil. It has been used by CGG for the purpose of collecting seismic data. Our attention has also been drawn towards clause (c) of section 9(1)(vi), which includes in the list of payers a non-resident person also. Therefore, it is argued that the order was not only erroneous but also prejudice to the interest of revenue occurring on account of accepting the case of the assessee without making enquiry, which was apparently called for. 7. In the rejoinder reply, the ld. counsel submits that section 44D contained in the list of payers only the Government or an Indian concern. Explanation 2 to section 9(1)(vii) regarding income by way of fee for technical services is different and it includes within the ambit of aforesaid word any managerial, technical or consultancy services but does not include con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the interest of revenue as per state of law existing on 26.03.2009. 8.2 In the case of ITO v. D.G. Housing Projects Ltd.[2012] 20 taxmann.com 587 passed by Hon'ble Delhi High Court on 01.03.2012, a copy of which has been placed in assessee's paper book, the question before the Court was-whether, ITAT was right in setting aside the order of the Commissioner of Income-tax u/s 263 of the Income-tax Act, 1961? The CIT had set aside the order for making fresh assessment on the ground that there is an apparent under-statement of sale consideration as property purchased in the year 1997 for a sum of Rs. 69.63 lakh, which yielded rent of Rs. 2.00 lakh per month, is shown to have been sold for a sum of Rs. 70.00 lakh in 2003. This order was set aside by the Tribunal by observing that CIT has not held that actual sale consideration was more than what has been declared in the return of income. He has also not recorded a finding that valuation made for the purpose of payment of stamp duty is more than the stated consideration. The Hon'ble Court considered the decision in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), Rampyari Devi Saraogi v. CIT [1968] 67 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional mechanism u/s 44BB of the Act? It will thus be seen that PF Thor gave a ship to Wavefield Inseis under time charter agreement. The entire operations, navigation and management of the vessel will be in the control of vessel owners and vessel will be operated and services rendered as and when required by the applicant. The ld. AAR mentioned that the agreement was essentially for hiring the vessel. It will be kept at the disposal of charterer and will be available for operations whenever he wants it. The fact that the ship itself will be under control and management of PF Thor does not go against the concept of hiring. The purpose for which hired vessel can be utilized is mentioned in the agreement, although it has been stated that the vessel will constantly be monitoring the activities of all the equipments used for acquisition of seismic data, it is not stated as to who is doing such monitoring, i.e., whether it is by the crew of the vessel or by the technical personnel of the applicant on-board the vessel. The latter situation seems to be more probable. It appears that the transaction falls more appropriately under second limb of sub-section (1) of section 44BB and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 71/139 Taxman 369 (All.), Duggal & Co. v. CIT [1996] 220 ITR 456/[1994] 77 Taxman 331 (Delhi) and K.A. Ramaswamy Chettiar v. CIT, [1996] 220 ITR 657/88 Taxman 526 (Mad.). According to ld. CIT (DR), these cases show that absence of proper enquiry by the AO would render the assessment order erroneous as well as prejudicial to the interest of revenue. Therefore, it has been held that there is a clear failure on the part of the AO to examine all aspects and accordingly the assessment is erroneous in so far as it is prejudicial to the interest of revenue. Finally, the assessment order has been set aside to examine the applicability of section 44D of the Act and pass a fresh assessment in accordance with law. Primarily the case of the ld. counsel is that the ld. DIT has not come to a definite conclusion that the order is erroneous and prejudicial to the interest of revenue. He has merely suspected that it is so. This is clear from the fact that the AO has been directed to examine the facts of the case in the light of provision contained in section 44D. 8.4 In the case of D.G. Housing Projects Ltd. (supra), the court considered the decision in the case of Gee Vee Enterprises (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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