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2015 (5) TMI 582 - ITAT DELHI

2015 (5) TMI 582 - ITAT DELHI - TMI - Applicability of provisions of section 44BB - interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) rw 44DA and 44BB - whether the provisions of Section 44BB will apply to the facts or whether Section 44DA will be applicable on the facts of this case? - whether hire of equipment and personnel was not in the nature of FTS and equipment Royalty squarely covered u/s 9(1)(vii)? - Held that:- The CIT(A) following the decisi .....

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sessee, by a full bench decision of DIT Vs Maersk Co Ltd [2011 (4) TMI 886 - Uttarkhand High Court ] and the CIT(A) has merely followed the said decision, but yet the Assessing Officer is aggrieved that, as this decision has been challenged in appeal before Hon’ble Supreme Court, the CIT(A) ought not to have followed the same. Such a plea can only be stated and rejected. The mere fact that a binding judicial precedent has been challenged before a higher forum does not dilute, curtail or otherwis .....

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on 44BB - Held that:- Learned consel’s defence consists only of the decision of a coordinate bench of this Tribunal, in the case of Sedco Forex International Drilling Inc Vs ADIT (2012 (7) TMI 250 - ITAT, DELHI) but then in this case, the earlier binding precedent in the case of DDIT Vs Technic Offshore Contracting BV (2009 (1) TMI 533 - ITAT DELHI) was not brought to their notice. Such a decision, in view of the Hon’ble Andhra Pradesh High Court Full Bench decision in the case of CIT Vs BR Cons .....

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ssessment under section 143(3) of the Income Tax Act, 1961, for the assessment year. 2. We will first take up the appeal filed by the Assessing Officer. 3. Grievances raised by the Assessing Officer, which are by way of questions that we are required to adjudicate, are as follows: 1. Whether on the facts and circumstances of the case, the CIT(A) has erred in passing a non-speaking order wherein averments of the assessee have been extracted selectively to hold that revenues have to be assessed u/ .....

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ces of the case, the CIT(A) has erred in holding that the hire of equipment and personnel was not in the nature of FTS and equipment Royalty squarely covered u/s 9(1)(vii) of the l.T. Act, 1961. 4. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the income of the assessee was taxable under the presumptive provisions of section 44BB even though the nature of services rendered by the assessee were technical in nature and not for a project undertaken by the .....

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rifies the main provision as the term services or facilities used therein are not defined and the two terms used are too general in nature and thus once the payments are characterized as FTS u/s 9(1)(vii), they go outside the purview of Section 44BB and have to be taxed as FTS at applicable FTS rates as prescribed under the Act and/or DTAA. 7. Whether the CIT(A), has erred in not appreciating that assessees reliance on Jindal Drilling is misplaced since 44DA being the special provision for taxat .....

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-¬01, 2001-02 does not contain any reference to section 44DA as the said provision came on the Statute w.e.f. 1.4.2004 and the reliance thereon is thus misplaced. 9. Whether the CIT(A) has erred in not appreciating that he decision of Jindal Drilling & Geofizyka Torun has not adjudicated the aspect of eligibility in terms of second limb of the exclusionary proviso i.e. for a project undertaken by the recipient as confirmed in CGG Veritas based on Delhi High Court decision in Rio Tinto. 1 .....

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he Finance Act 2011 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came in to effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT. 12. Whether the facts and circumstances of the case the CIT(A) has erred in holding that interest u/s 234B was not chargeable in this case by relying upon the decision of Hon'ble Uttarakhand High Court in .....

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e requirements of Rule 10 of the Income Tax Rules, 1962 in the absence of books of accounts and taxed accordingly. 4. As a careful reading of the above rather detailed grounds of appeal would show, the two short issues that we are really required to adjudicate on this appeal is whether or not the learned CIT(A) was justified in holding that the provisions of Section 44BB of the Act, and whether or not the learned CIT(A) was justified in holding that the interest under section 234B cannot be levi .....

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llowed the same. Such a plea can only be stated and rejected. The mere fact that a binding judicial precedent has been challenged before a higher forum does not dilute, curtail or otherwise affect its binding nature. Once Hon ble jurisdictional High Court has expressed a considered view on an issue, all the lower authorities in the judicial hierarchy, including this Tribunal as indeed the CIT(A), have to loyally follow this. There is no scope for deviating from this sol emn duty. On this aspect .....

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w material facts need to be taken note of. The assessee before us is a non-resident company, and, as it appears from the details furnished in the return of income, it has an office at Midas Sahar Plaza, Kondivita, Andheri (East), Mumbai. During the relevant financial period, the assessee has earned revenues of ₹ 68,24,70,607 from the following contracts: 1. Contract No. : 2001/KGD6L-E2-DR-G-170-MB with Reliance Industries Limited for provision of DKD unit and filtration unit. 2. Contract N .....

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C0438 with Niko Resources. 7. Contract No. : HAZ-34232 with Niko Resources. 8. Contract No. : 2003/B/G/D/597 with BG Exploration & Production India Limited for extended reach drilling in Tapti and Panna areas - feasibility study. 9. Contract No. : RJ2Cb5001 with Cairn Energy India Pty Limited for provision of mud chemicals, technical services and laboratory equipments. 10. Contract No. : RJCB5028 with Cairn Energy India Pty Limited for provision of directional drilling services. 11. Contract .....

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from hiring of equipment and from rendering of services to the entities engaged in oil exploration work. There is also no dispute that the income so earned by the assessee was offered by the assessee to tax, on presumptive profits @ 10% under section 44BB of the Act. The point of dispute is confined to whether or not the provisions of Section 44BB will apply to the facts of this case. While contention of the assessee is that the provisions of Section 44 BB for taxability of income on presumptive .....

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Veritas (ITA No. 4653/Del/2010; order dated 25th January 2012) and noting that the assessee has a PE in India and that the case pertains to assessment year prior to 2011-12), upheld the contention of the assessee, and has, accordingly, held that the income is liable to tax@ 10% under section 44 BB of the Act, and, aggrieved by the stand so taken by the CIT(A), the Assessing Officer is in appeal before us. . 6. We have heard the rival contentions at considerable length, perused the material on re .....

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standing as it does on own facts which are distinguishable . She has elaborate arguments in support of the stand of the Assessing Officer and urged us to take an independent view of the matter. Her line of reasoning, in broad terms, is like this. It is pointed out that the payments for use and hire of equipment and personnel is equipment royalty/ fees for technical services, and that the income being in nature of royalty/ FTS, and not for a project undertaken by the appellant, is not eligible fo .....

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benefit of these provisions cannot be extended to the vendors and suppliers of such first leg contractors. It is submitted that doing so would amount to base erosion and profit shifting from developing countries. A reference is then made Heydon s rule and submitted that the amendments in the scheme of Section 44BB and 44DA, vide Finance Act 2010, though stated to be effective from assessment year 2011-12 must be treated as clarificatory in nature. A reference is made to the decision of Hon ble .....

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ubmitted that the decision of PGS Geophysical AS Vs ADIT (269 CTR 433) contradicts the findings in the earlier Hon ble Delhi High Court decision in the case of DIT Vs OHM Ltd (352 ITR 406), based on which the coordinate bench has decided this issue in favour of the assesse. It is submitted that the decision of the coordinate bench in the case of Baker Hughes Asia Pacific Ltd (supra), by which this issue in appeal is stated to be covered in favour of the assesse, did not take account the binding .....

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CIT(A) and decline to interfere in the matter. 9. We have noted that the issue is directly covered by the decisions of the coordinate benches and there are no direct decisions on the issue by any higher forums. The meticulous research done by the learned Commissioner (DR), as also her erudite arguments, are of not of any practical effect at this stage. As for the BEPS considerations, as so strenuously argued by the learned counsel, base erosion and profit shifting is a tax policy consideration w .....

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legal arguments advanced by the learned Commissioner (DR), as was laid down by Hon ble Supreme Court in the case of Ambika Prasad Mishra vs. State of UP AIR 1980 SC 1762 : (1980) 3 SCC 719 (p. 1764 of AIR 1980 SC), Every new discovery nor argumentative novelty cannot undo or compel reconsideration of a binding precedent... A decision does not lose its authority merely because it was badly argued, inadequately considered or fallaciously reasoned....". Similarly, in the case of Kesho Ram & .....

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ing the views of the coordinate bench, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 3. We see no reasons to take any other view of the matter than the view so taken by us in the above case, which was argued alongwith this appeal and in which common arguments were advanced by the parties. 4. Respectfully following the views so expressed, and respectfully following the views of the coordinate benches, we approve the conclusions arrived at by .....

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