TMI Blog2016 (2) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Drilling Incorporation Vs. Commissioner of Income Tax, (2005 (11) TMI 25 - SUPREME Court ) that clarificatory provisions should be made applicable form the date when the main provision was introduced. In above judgment it is also held that if the amendment changes the law , it has to be prospective in nature. The Tribunal in the case of the assessee for AY 2008-09 cited above have already been dealt the arguments of the Commissioner of Income Tax(Departmental Representative ) that the effect of amendment carried out in Section 44BB and Section 44DA are not having retrospective effect Interest under section 234B - Held that:- Though the issue in dispute has already been decided in favour of the assessee by the Tribunal in AY 2008-09, but facts in the year under consideration may be different as regards to role of the assessee in getting lower or no deduction of certificate, following the judgement of the Jurisdictional High Court in the case of Jacabs Civil Incorporated (2010 (8) TMI 37 - DELHI HIGH COURT ) , we restore the issue to the file of Assessing Officer for verification of the fact , whether any certificate of lower or no deduction of tax was obtained and provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the assessee declared its income under the presumptive taxation scheme provided under Section 44BB of the Act, whereas from the facts and circumstances of the assessee, he was of the opinion that the assessee was liable to tax for the services rendered as fee for technical services (FTS) under Section 9(1)(vii) of the Act. Further, the learned Assessing Officer also observed that part of the revenue from the contract with M/s Allseas Marine Contractor pertaining to the activities of demobilization of the vessel i.e. bringing vessel for carrying out contract and its exit from Indian territorial water, was excluded by the assessee from the gross contract receipt offered under Section 44BB(2) of the Act and profit from the said revenue was treated as income earned outside India by the assessee and therfore it was not offered for taxation in the return of income under consideration. The Assessing Officer was of the view that the profit on entire gross revenue/receipt from the contract should have been offered for taxation under fee for technical services (FTS). Accordingly, in the draft assessment order, the learned Assessing Officer proposed adding of ₹ 3,84,54,15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law raised to be considered by this Court is as under : Whether on the facts and circumstances of the case, the Tribunal was right in upholding the inclusion of mobilization charges while calculating the aggregate amount referred in sub-s. (2) of s. 44BB of the IT Act. 9. Sec. 44BB is a special provision for imposing the income-tax treating 10 per cent of the aggregate amount specified in sub-s. (2) of s. 44BB as deemed profits and gains of such non-resident assessee who is 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 the prospecting for, or extraction or production of, mineral oils. The amount referred in sub-s. (2) of s. 44BB are the amounts (a) paid to the assessee (whether in or out of India) on account of the provision of services and facilities 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 in India, (b) payable to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-s. (2) of s. 44AA and gets his accounts audited and furnishes a report of such audit as required under s. 44AB, and thereupon the AO shall proceed to make an assessment of the total income or loss of the assessee under sub-s. (3) of s. 143 and determine the sum payable by, or refundable to, the assessee. Explanation-For the purpose of this section,- (i) plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business; (ii) mineral oil includes petroleum and natural gas. 10. Thus, the amounts which are to be taken are the amounts paid to assessee whether in or out of India, payable to assessee whether in or out of India on account of the provision of services and facilities 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 in India and the amount received or deemed to be received in India by the assessee on account of the provision of services and facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (20) Sedco Forex International Drilling Inc. vs. Jt. CIT (Tribunal D Bench, Delhi) (ITA No. 2024/Del/2001) (Asst. yr. 1998-99); (21) Circular No. 495 dt. 22nd Sept., 1987 [(1988) 67 CTR (St) 1] in respect of s. 44BB; (22) Finance Bill 1987 in respect of introduction of s. 44BB; (23) Notes on Clauses in Finance Bill, 1987 in respect of introduction of s. 44BB; (24) Memorandum Explaining Provisions in respect of introduction of s. 44B in Finance Bill, 1987; (25) McDermott International Inc. vs. Addl. CIT Anr. (2003) 180 CTR (Uttaranchal) 492 : (2003) 259 ITR 138 (Uttaranchal); (26) CIT vs. F.Y. Khambaty (1986) 50 CTR (Bom) 275 : (1986) 159 ITR 203 (Bom); (27) Ishikawajima-Harima Heavy Industries Ltd. vs. Director of IT (2007) 207 CTR (SC) 361 : (2007) 288 ITR 408 (SC) : 2007 (3) SCC 481. 12. Sri Porus Kaka, learned counsel for the appellant concluded by relying heavily on the law laid down by Hon ble apex Court in case of Ishikawajma-Harima Heavy Industries Ltd. vs. Director of IT (supra). The facts of this case have been narrated in the para 2 of the judgment and are that the assessee appellant company was incorporated in Japan, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that only such part of the income as is attributable to the operations carried out in India, is taxable in India. 14. And sub-cl. (1) of cl. (B) of para 98 of the aforesaid judgment reads as below : Sufficient territorial nexus between the rendition of services and territorial limits of India is necessary to make the income taxable. 15. Sri Porus Kaka also referred from the judgment and submitted that where the non-resident assessee entered into a composite contract with a resident company under turnkey project the severable parts thereof comprised onshore and offshore services in India and also offshore and onshore services outside India and the price received by non-resident company for such services and supply was not taxable. 16. We very respectfully submit that in the judgment Ishikawajma- Harima Heavy Industries Ltd. vs. Director of IT (supra), Hon ble Supreme Court has dealt with the assessment of a non-resident company on its income as per provisions of s. 5 and s. 9 of the IT Act. Here in the present case, provisions of s. 5 and s. 9 are not attracted. Sec. 4 is a charging section and s. 5 contains the scope of total income, which provides that sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the AO. 18. In view of our foregoing discussion, the appeal is devoid of merit and is dismissed accordingly. Question is answered in favour of the Revenue and against the assessee. There shall be no order as to costs. 7. Respectfully following the above binding principle, we hereby hold that the revenue/receipt from mobilisation charges (i.e. for work performed outside India) of ₹ 3,84,54,152/- received by the assessee has been rightly taken for the purpose of amount referred under sub-section (2) of Section 44BB of the Act by the Ld CIT(A) and thus no interference is required on his findings on the issue in dispute. Accordingly, this ground of appeal of the assessee is dismissed. 8. Hence, the appeal filed by the assessee is dismissed. ITA No. 5290/Del/2012 for AY: 2009-10 9. The Revenue raised the following grounds of appeal: 1. Whether on facts and circumstances of the case, the Commissioner of Income Tax(Appeals) had erred in holding that the provisions of vessels, ROV equipment and personnel to M/s. Allseas Marine Contractor SA for carrying out survey work as per contractor which M/s BGIPL was not in the nature of FTS and equipment R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt prays for leave to add, amend, modify or alter any grounds of appeal at the time of before the hearing of the appeal. 10. In respect of ground nos. 1 and 2 of the Revenue s appeal qua holding by the ld CIT(A) that the provisions of vessels, ROV equipment and personnel to M/s. Allseas Marine Contractor SA with M/s. BGIPL was not in the nature of FTS and it was taxable under the provision of Section 44BB of the Act, the learned Authorized Representative of the assessee submitted that these grounds were decided in favour of the assessee for assessment year 2008-09 in ITA No. 5562/Del/2011 vide order dated 11.07.2014 in the case of the assessee itself. 10.1 Learned Commissioner of Income Tax (Departmental Representative), on the other hand, relying on the order of the Assessing Officer submitted that the vessels provided on hire (along with personals) were highly specialized vessels, equipped with technical gadgets and performed through highly technical crew which established that the assessee was providing technical services and thus was taxed as fee for technical services rightly by the Assessing Officer. Further, the learned Commissioner of Income Tax (Departmental Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee was to be taxed as fee for technical services/royalty. 11.1 On the other hand, ld. Authorized Representative submitted that these grounds have been decided in favour of the assessee in the assessee s case itself passed for the assessment year 2008-09 by the Tribunal. 11.2 We have heard the rival submissions and perused the material. The amendment brought by the Finance Act, 2011 cannot be made effect from the retrospective effect as that it adversely affects the interest of the assessee. We are in agreement with the findings of the Hon ble Supreme Court in the case of Sedco Forex International Drilling Incorporation Vs. Commissioner of Income Tax, (supra) that clarificatory provisions should be made applicable form the date when the main provision was introduced. The relevant paragraph of the judgment is reproduced as under: 14. As was affirmed by this Court in Goslino Mario (supra), a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication [See also : Reliance Jute Industries Ltd. vs. CIT (1979) 13 CTR (SC) 186 : (1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in the case of the assessee for the assessment year 2008-09, we dismiss ground Nos. 3, 4 and 6 of appeal of the Revenue. 11.4 As regard to ground no. 5 qua the interest was not chargeable under Section 234B of the Act, The ld CIT(DR) relied upon the decision of Hon ble Uttaranchal High Court in the case of Maersk Company Ltd. Vs. Department of Income Tax, reported in 334 ITR 79. The learned Commissioner of Income Tax (Departmental Representative) also relied on the decision of the Jurisdictional High Court in the case of Director of Income Tax Vs. Jacobs Civil Incorporated reported in 194 Taxmann 495 and submitted that it needs to be determined, if the assessee had played any role in having lower or no deduction of TDS. 11.5 On the other hand, learned Authorized Representative submitted that this issue was already decided in favour of the assessee in the assessee s case itself for assessment year 2008-09 . He also submitted that no certificate of lower or no deduction was obtained by the assessee. 11.6 We have heard the rival submissions and perused the material on record. The issue of charging interest under section 234B of the act has been dealt in the judgement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compute the tax and take credit of taxes paid either prepaid or otherwise by enclosing the proof of such payment along with return of income. The TDS certificates were to be collected by the assessee even where taxes are borne by the payer. Since the assessee had not disclosed any certificates nor shown proof of payment of taxes, the AO held that the assessee was liable to pay interest under s. 234B of the Act. The assessee preferred an appeal before the CIT(A) against the assessment order so passed challenging the levy of interest under the said provision. The assessee was successful in that appeal in as much as CIT(A) allowed the appeal vide order dt. 29th Nov., 2004 and set aside the order of the AO on this aspect. The Revenue, feeling aggrieved by the order of the CIT(A), approached the Tribunal. However, the plea of the Revenue was not accepted by the Tribunal which resulted in dismissal of the said appeal vide impugned orders dt. 13th April, 2007. 4. Under similar circumstances, in the assessment orders passed for the various assessment years in case of M/s Mitsubishi Corporation, interest charged under s. 234B of the Act has been deleted by the Tribunal. In these judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified without hearing and without reasons. Accordingly, we answer this question in the affirmative, i.e., in favour of the assessee and against the Department. 5. This judgment was followed by the Bombay High Court in the case of Director of IT (International Taxation) vs. NGC Network Asia LLC (2009) 222 CTR (Bom) 86 : (2009) 18 DTR (Bom) 203. The Bombay High Court also took note of the judgment of the Madras High Court in the case of CIT vs. Madras Fertilisers Ltd. (1984) 149 ITR 703 (Mad) which had taken a similar view. The following observations of the Madras High Court are also worth quoting : ..If the TDS has not been deducted and paid over to the Department, then the banks whose duty it is to make deduction can be treated as the assessee in default under the provisions of s. 201 of the Act. Interest also can be collected along with the amounts which they ought to have deducted but which they did not deduct under s. 201(1A). Therefore, under the provisions of s. 201, that portion of the tax which has not been deducted and paid over to the Department will have to be paid with interest by the banks which are under a duty to make the deduction at the source. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at that stage, there is no question of actual deduction of the tax at source in respect of the interest income and the deduction at source takes place practically at the end of the year when the interest is paid and it is for this reason the statute in sub-s. (5) of the Act uses the expression 'deductible' instead of 'deducted'. Therefore, construing sub-s. (5), it is not possible to understand the expression 'deductible' occurring therein as 'deducted'. 6. Further, the learned counsel for the assessee appears to be right in his submission that in cases where the tax is deductible at source, that will have to be excluded from consideration while the estimate of the income for the payment of advance tax is submitted. Reliance is placed by the learned counsel on the language used in s. 190(1) which is as follows : '190. (1) Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this chapter.' 7. That section seems to provide that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of s. 215 interest could not be levied on the assessee on the tax which is deductible at source. We answer the said questions referred to us in the affirmative and against the Revenue. The Revenue will pay the costs of the assessee. 6. Mr. Sabharwal, the learned counsel appearing for the Revenue strenuously argued that s. 234B of the Act was an independent and standalone provision and once the ingredients/conditions contained in that section were satisfied, the liability to pay the interest would arise. Reading the provision of the section, he argued that since there was a default in payment of advance tax, interest thereupon had to be paid by the assessee as held by the Supreme Court in the case of CIT vs. Anjum M.H. Ghaswala Ors. (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC). He submitted that it was totally unnecessary to look into the other provisions like ss. 191, 195, 201, 209, 215 etc. for determining the liability of payment of interest. His submission was that whereas s. 209(1)(d) uses the expression deductible or collectible , the legislature in Expln. 1(i) of s. 234B of the Act had consciously used the expression income deducted or collected at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents is clear. Sec. 195 of the Act puts an obligation on the payer, i.e. any person responsible for paying to a non-resident, to deduct income-tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head 'Salaries'. Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payer to the nonresident. Sec. 201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy less and therefore can take action against the payer under the provisions of s. 201 of the IT Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-reside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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