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2016 (2) TMI 267 - ITAT MUMBAI

2016 (2) TMI 267 - ITAT MUMBAI - TMI - Inclusion of demobilization revenue in gross receipts for the purpose of computing tax u/s 44BB - Held that:- The view taken by the AO that the demobilisation revenue pertaining to the entire period of 36 days is includible in the revenue u/s 44BB of the Act is supported by the two decisions EMGS Project Office Vs. DDIT [2012 (11) TMI 584 - ITAT DELHI ] and CIT Vs. Sedco Forex International Drilling Inc [2007 (9) TMI 196 - UTTARAKHAND HIGH COURT ]. Accordin .....

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ores, we notice that the assessee has actually claimed deduction of ₹ 11.65 crores. The claim of the assessee may be admissible, if the income is computed u/s 28 to sec. 43 of the Act. Since the income is computed as per the provisions of sec. 44BB of the Act and since the said section provides a deeming fiction for computing the profits and gains of provisions, the claim of the assessee is not admissible. Accordingly, we do not find any merit in the contentions of the assessee and accordi .....

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: Shri G M Doss ORDER Per B R Baskaran, AM: The assessee has filed this appeal challenging the assessment order passed by the AO u/s 143(3) read with section 144C of the Act in confirmity with the directions issued by Dispute Resolution Panel (DRP) for assessment year 2010-11. The assessee is aggrieved by the order passed by the AO on the following issues:- (a) Inclusion of demobilization revenue in the gross receipts. (b) Rejection for claim for deduction of credit note issued. (c) Charging of .....

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M/s Reliance Industries Ltd to undertake construction of offshore facilities for development of certain gas fields. M/s Allseas entered into a contract with the assessee for provision of certain services to it. The assessee filed its return of income for the year under consideration declaring total income at ₹ 5.66 crores as per the provisions of sec. 44BB of the Act, but the assessment was completed on a higher figure. 3. The first issue relates to the inclusion of demobilization revenue .....

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n as gross amount of contract u/s 44BB of the Act. The Ld DRP also upheld the same. 4. We heard the parties on this issue. Before us, the Ld D.R also relied upon the case of EMGS Project Office Vs. DDIT (2012)(27 taxmann.com 147)(Delhi ITAT), besides the decision rendered in the case of Sedco Forex International Drilling Inc. (supra), to support the view taken by the AO. The Ld A.R placed reliance on the submissions made before the assessing officer and he did not furnish any contrary decision. .....

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6 crores from the gross revenue, while computing income u/s 44BB of the Act. The assessing officer considered the same as reimbursement of freight charges and accordingly held that such kind of reimbursements are also includible in the Gross revenue and accordingly rejected the said claim. Before the Ld DRP, the assessee submitted that the above said claim is not a case of reimbursement, but the Ld DRP did not agree with the same. 6. The Ld A.R submitted that the assessee had agreed to provide s .....

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ssee as per the contract, the cost of fuel supplied by M/s Allseas is required to be paid by the assessee to M/s Allseas as per the agreed rate of GBP 350 per cubic meter. The Ld A.R submitted that the assessee had raised bill on M/s Allseas at the agreed rate of GBP 52,050/- in the earlier years and offered the same for taxation. During the year under consideration, the assessee issued a credit note for ₹ 11.65 crores to M/s Allseas in respect of the fuel supplied by it during the period .....

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f ₹ 11.65 crores, the assessee claimed deduction of ₹ 7.96 crores. The Ld A.R submitted that the assessing officer was not justified in rejecting the claim for deduction of ₹ 7.96 crores, as the same represents cost of fuel supplied by M/s Allseas and the gross amount has already been offered to tax in the earlier years. 7. We heard the parties on this issue. The assessee has computed the income u/s 44BB of the Act, which reads as under:- [Special provision for computing profit .....

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of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or [section 44DA or] section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section .....

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acilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. [(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishe .....

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l" includes petroleum and natural gas. As per sec. 44BB(1), 10% of the aggregate amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax. The amounts referred to in sub. Sec. (1) shall be the amount paid or payable to the assessee or received or deemed to be received in India by the assessee. 8. We notice that the provisions of sec. 44BB of the Act provide for determination of Profits and gains of business at a flat rate of 10% of .....

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ken as the profits and gains of business of the assessee under sub. Sec. (1) of sec. 44BB of the Act. The assessee has claimed deduction of the credit note issued by it to M/s Allseas in respect of fuel supplied by M/s Allseas to the assessee. No doubt, the fuel cost is an item of expenditure for the assessee and hence the same is required to be allowed as deduction while computing profits and gains of business. However, such a claim can be allowed only if the profits and gains of business is co .....

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s Allseas to the assessee herein constitutes an allowable expenditure, the same cannot be deducted from the gross receipts, since sec. 44BB of the Act does not provide for deduction of any of the expenditure. 10. The question of issuing credit note arises in this case, since the party receiving the (M/s Allseas) services has supplied the fuel to the assessee. If the assessee has purchased the fuel from an outside party, the question of issuing credit note does not arise at all. If the assessee h .....

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