TMI Blog2012 (6) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... for event to took place in the subsequent year no question of adding the remaining amount in the current year by holding that the assessee acquired any right to receive the amount - the assessee had not acquired any right to receive US$ 2.27 million on account of service tax, being the first step therefore need not embark upon the second step, being its inclusion or otherwise in the receipts for the purposes of section 44BB – in favour of assessee. Challenge charging of interest u/s 234B – Held that:- As decided in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 (HC)] that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee u/s 234B – in favour of assessee. - IT APPEAL NO. 9038 (MUM.) OF 2010 - - - Dated:- 2-4-2012 - R.S. SYAL, AMIT SHUKLA, JJ. Madhur Agarwal for the Appellant. Narender Kumar for the Respondent. ORDER R.S. Syal, Accountant Member This appeal by the assessee arises out of the order passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 on 25.10.2010, in relation to the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved or receivable on account of supply of machinery, including the hire charges as relatable to the territorial waters outside India. Recently the Hon'ble Uttarakhand High Court in the case of CIT v. Sundowner Offshore International (Burmuda) Ltd. [2011] 338 ITR 147/[2009] 183 Taxman 365 considered a similar case in which the Tribunal, following the Third Member order in the case of Saipem S.P.A. (supra) , had held that the mobilization charges received by the non-resident company outside India attributed to the transportation of rig outside the territorial waters of India, were not chargeable to tax u/s 44BB. Reversing such order of the tribunal, the Hon'ble High Court has held that the mobilization charges received by the assessee attributable to transportation of rig from outside India have to be taken into account for the purpose of computing income u/s 44BB. In view of the said judgment of the Hon'ble Uttarakhand High Court, it is vivid that the amount of Rs. 14.69 crore is liable to be considered for the purpose of section 44BB of the Act. No contrary judgment has been brought to our notice by the learned AR, who has only made a submission that he wants to keep the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 186 Taxman 436 (Uttarakhand) holding that the reimbursement of custom duty paid by the assessee being statutory in nature cannot form part of amount for the purpose of deemed profit u/s 44BB unlike the other amounts received towards reimbursement. The learned AR contended that the Mumbai Bench of the Tribunal in the aforenoted case of Islamic Republic of Iran Shipping Lines (supra) also considered this judgment of the Hon'ble Uttarakhand High Court supporting the assessee's contention. 8. On the second aspect it was submitted that in fact there was no accrual of income in the current year to the extent of Rs. 98.41 lakh because the invoice raised by the assessee on Hardy was not accepted by the latter and it remained unrealized. It was submitted that only when a settlement was reached in the subsequent year by which the assessee received US$ 3.01 million pertaining to the service tax that the same was promptly offered for taxation. He relied on certain judgments to contend that the income in such circumstances cannot be said to have accrued at all in the current year relevant to the assessment year under consideration. 9. The learned Departmental Representative supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication from the amount received by the assessee on account of provision of services. Thus he summed up his argument by submitting that the service tax is an integral part of "the amount paid or payable ..on account of the provision of services and facilities' and as such is liable to be included within the scope of section 44BB. 10. On the second aspect, the learned Departmental Representative submitted that the assessee was following mercantile system of accounting in which the income arises when a right to receive an income is acquired. He argued that by raising an invoice on Hardy, the assessee received such right to receive the income in the year under consideration and hence it was liable to be considered for the purpose of inclusion u/s 44BB of the Act. 11. We have heard the rival submissions in extenso and perused the relevant material in the light of precedents cited before us. The undisputed facts on this issue are that the assessee raised invoice of US$ 5.28 million on Hardy towards service tax in connection with its income which is otherwise includible u/s 44BB of the Act. Hardy did not accept the liability arising pursuant to such invoice and disputed the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount or non-receipt of income. Unless an income has actually accrued there can be no question of its inclusion in the total income. 13. It is trite that a mere claim of income without any enforceable right does not result into any income. In the like manner there does not arise any liability to pay against whom such a claim is made. Thus at the stage of making such a claim which has no contractual or legal force, it cannot be said that any income has accrued to the person making such a claim or any liability for expenditure has been incurred in the hands of a person on whom such a claim is made. If it remains a mere claim without the force of any enforceable right to receive, practically there can be no accrual of income. In the case of Godhra Electricity Co. v. CIT [1997] 225 ITR 746/91 Taxman 351 (SC) the assessee electricity company, after enhancing tariff, was restrained from realizing the enhanced rate. Having never been able to receive the enhanced tariff, it was taken over by the State Electricity Board. The Revenue took the stand that since the assessee had issued the bills in respect of the enhanced tariff, such amount accrued to it and hence became taxable. Repe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion did not bestow any right on the assessee to receive the income in the current year. In view of the foregoing discussion it is clear that the assessee did not acquire any right to receive the balance amount of US$ 2.27 million in the current year which has been included by the Assessing Officer in the total income of the assessee. Neither such amount accrued to the assessee nor it was ever realized. In that view of the matter, we accept the argument advanced by the ld. AR in this regard. 15. Insofar as the submissions made by both the sides on the inclusion or otherwise of the amount of service tax in the aggregate amount u/s 44BB of the Act is concerned, it is found that the Mumbai Bench on the one hand and Delhi Bench on the other in the cases discussed above have expressed diagonally opposite views. Whereas the Delhi Bench in the case of Technip Offshore Contracting BV (supra) has categorically held that the service tax collected by that assessee was directly in connection with the services and facilities provided by it to the ONGC and the same was includible in the receipts for the purpose of determination of profits as per section 44BB of the Act, the Mumbai Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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