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2016 (5) TMI 258 - ITAT DELHI

2016 (5) TMI 258 - ITAT DELHI - TMI - Professional charges received - whether were not in the nature of fees for technical services as defined in sec. 9(1 )(vii) - invoking the provisions of sec 44DA r.w.s. 115 - Held that:- Income from the services rendered in connection with providing drilling rigs/drilling services to ‘Cairn’ in India are in the nature of services and facilities in connection with, or supplying plant and machinery on hire which are used in prospecting for extraction or produc .....

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nces that any such certificate of lower or no withholding tax was ever submitted by the assessee to the ‘Cairn’, and therefore it cannot be said that the assessee played any role in lower or no withholding tax by the payer. Thus, respectfully following the judgment of the Hon’ble High Court in the case of GE Packaged Power Inc,[2015 (1) TMI 1168 - DELHI HIGH COURT] we are of the opinion that the assessee cannot be held responsible for lower or no withholding tax and consequent responsibility of .....

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irn’ and therefore the entire sum was liable for taxed under section 44BB of the Act. Accordingly, we uphold the finding of the learned Commissioner of Incometax( Appeals) on the issue in dispute and the ground of the assessee is dismissed. - Decided in favour of revenue - ITA No. 4619/Del/2012, C.O. No. 59/Del/2013 - Dated:- 25-4-2016 - Sh. I. C. Sudhir, Judicial Member And Sh. O. P. Kant, Accountant Member For the Petitioner : Sh. Anuj Arora, CIT(DR) For the Respondent : Sh. Nageshwar Rao, Adv .....

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e nature of fees for technical services as defined in sec. 9(1 )(vii) of the Act. 2. Whether on the facts and circumstances of the case, theCIT(A) has erred in holding thatthe income of the assessee was not taxable under the provisions of sec 44DA r.w.s. 115 of the Act, 1961, even though the provisions of sec 44DA r.w.s. 115A of the Act, 1961, even though the nature of services rendered by the assessee were technical in nature and were not for a project undertaken by the assessee, as required by .....

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viso to section 44DA brought about by the 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 v/sCIT, delivered on 17.11.2005. 5. Whether on the facts and circumstances of the case, the CIT(A) has erred in deleting the interest charged u/s 234B by relying upon the decision o .....

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iness of providing drilling rigs on hire and other drilling related services. During the year under consideration, the assessee entered into a contract dated 30/06/2007 with M/s Cairn Energy India Private Limited (In short Cairn ) for providing drilling rigs and other related services. The assessee filed return of income on 23rd of March 2009, declaring total income of ₹ 15,58,98,454/-. The income received by the assessee from such hire of rigs as well as connected services was offered to .....

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drilling rigs offshore courageous 44 BB 2,52,02,396.25 Towards technical services rendered by the assessee 115A 2,23,53,241.70 4,75,55,637.95 3. Further, according to the assessee, the income received from Cairns included mobilization fee of ₹ 31,20,76,989/- (USD 80,10,189) was towards mobilization charges of the rig from Texas, USA to the offloading point, offshore West Coast of India and the mobilization fee to the extent of mobilization activities attributable to the distance travelled .....

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ssessee filed appeal before the learned Commissioner of Income-tax(Appeals), who held that looking to the nature of activities of the assessee as per contract, the assessee was within the purview of section 44BB of the Act and not within section 44DA/115A(b) of the Act. He also held that for the purpose of section 44BB gross revenue/receipt basis is to be taken and mobilization revenue cannot be apportioned based on the voyage done within and outside the territorial water of India. 5. Aggrieved, .....

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e learned Authorized Representative (in short the AR ) of the assessee concurred with the above submission of the Ld. CIT(DR). 6.1 We have heard the rival submissions and perused the material on record. The Tribunal in para 46 of its order in the case of CGG Veritas Services, SA (supra) held that in view of the fact that w.e.f. assessment year 2011-12 only the fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil or otherwise will be as .....

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tion 44DA for those years. The relevant part of the decision is reproduced as under: 46. On combined reading of section 44DA(1) and 115A(1)(b) it is clear that the provisions of section 44DA(1) are applicable in the case of a non-resident assessee who carries on business in India through a permanent establishment, or performs professional services from a fixed place of profession, and fees for technical services paid under the contract is effectively connected with such permanent establishment o .....

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h is not connected with permanent establishment of business or fixed place of profession in India, will be taxable u/s 115A(1)(b) of the Act. As observed earlier section 44DA was inserted in proviso to section 44BB (1) by the Finance Act, 2010 with effect from 1.4.2011 and simultaneously inserted second proviso to section 44DA applicable from assessment year 2011-12 according to which provisions of section 44BB (1) will not be applicable in respect of income referred to this section. On combined .....

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n connection with prospecting for or extraction or production of mineral oil having business PE or fixed place of profession - (section 44DA); (ii) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil without having business PE or fixed place of profession - (section 115A); (iii) Other fee for technical services having business PE or fixed place of profession - (section 44DA); (iv) Other fee for technical services without business PE o .....

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ved for fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall outside the scope of section 44DA and will be assessable under section 44BB (1) of the Act for the simple reason that proviso to section 44BB(1) does not contain section 44DA for these years. 6.2 Respectfully, following the above decision of the Coordinate Bench of the Tribunal, we are of the opinion .....

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gly, we uphold the findings of the learned Commissioner of Income-tax(Appeals) on this issue. Thus grounds No. 1 to 5 of the appeal are dismissed. 7. The ground No. 6 is in respect of deletion by the learned Commissioner of Income-tax(Appeals) of interest charged under section 234B of the Act by the AO. 7.1 The Ld. CIT(DR) submitted that the learned Commissioner of Incometax( Appeals), has followed the judgment of the Hon ble Delhi High Court in the case of DCIT Vs. Jacobs Civil Incorporated, 33 .....

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r lower or no withholding tax by the Cairn on production of lower or no withholding tax certificate by the assessee. 7.2 On the other hand, learned Authorized Representative of the assessee relied on the recent judgment of the Hon ble High Court of Delhi in the case of Director of Income Tax, International Taxation Vs. GE Packaged Power Inc. reported in (2015) 56 taxmann.com 190 (Delhi), wherein it is held that where the assessee were non-resident companies and entire tax was to be deducted at s .....

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se of Alcatel Lucent USA Inc (supra) and held that in the case of Alcatel Lucent USA Inc. (supra) the decision was turning upon its facts, it seemingly wide observations, limited to the circumstances of the case. The Hon ble High Court also considered the judgments of the other courts on the issue in dispute and held that the primary responsibility deducting tax for the period, prior to the change after the finance Act, 2012, was that of the payer and the payer will be an assessee in default, on .....

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f the view that the fact that was central to the decision of this Court in Alcatel Lucent USA Inc (supra) is the assessee's initial denial of PE status, and consequently of its tax liability, that was aggravated by its subsequentvolte face by way of its admission that it was a PE liable to tax in India. This resulted in the Court's view that the assessee had played a role in influencing the payer's non-deduction of tax at source, and was thus required to compensate for such a volte f .....

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ould depend on the payee's opinion of whether it is liable to tax, which may differ from its actual liability to tax as determined by the A.O's final order. This effectively authorizes the assessee and the payer to contract out of the statutory obligation to deduct tax at source, which in this case, is located in Section 195(1). Surely this could not be the Parliamentary intent. If such were the case, there would have been no need to treat the payer as an assessee-in-default for failure .....

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would depend directly on the income of the assessee that is taxable in India on account of being attributable to its PE in India. That this determination is the responsibility of the payer is provided for, in the statute, in Section 195(2), which reads: '(2) Where the person responsible for paying any such sum chargeable under this Act other than salary to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an applicati .....

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ax in India, the payer is obliged to apply to the AO to determine what portion, if any, of its remittance to the assessee, is liable to be deducted at source towards tax. 18. The view of this Court finds confirmation in the position of law as it stands at present, after the Finance Act, 2012; should a situation akin to that in Alcatel Lucent USA Inc (supra) arise, the payer would be treated as the assessee-in-default according to Section 201, and the payee/assessee would not be permitted a tax c .....

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ties that needed to be balanced in those peculiar facts, in favour of taxability. This is evident from the following words of the Court: "26. It further seems to us inequitable that the assessee, who accepted the tax liability after initially denying it, should be permitted to shift the responsibility to the Indian payers for not deducting the tax at source from the remittances, after leading them to believe that no tax was deductible. The assessee must take responsibility for its volte fac .....

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imagine that the Indian telecom equipment dealers of the assessee would have failed to deduct tax at source except on being prompted by the assessee. It may be true that the general rule is that equity has no place in the interpretation of tax laws. But we are of the view that when the facts of a particular case justify it, it is open to the court to invoke the principles of equity even in the interpretation of tax laws. Tax laws and equity need not be sworn enemies at all times. The rule of str .....

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nd where the loss arose as a result of vacillating stands taken by the assessee, it is not expected of the assessee to shift the responsibility to the Indian payers. We are not to be understood as passing a value-judgment on the assessee's conduct. We are only saying that the assessee should take responsibility for its actions." [Emphasis added] This Court finds that no need is made out in these facts to balance any equities in these facts, as the assessee has not vacillated in its stan .....

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of the Uttarakhand High Court in Sedco Forex International Drilling Co. Ltd. (supra) was considered and affirmed by the Bombay High Court in NGC Network Asia LLC (supra) that "We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee." An important decision is that of the Karnataka High Court in CIT v. Samsung Electronics Co. Ltd. [2012] 345 ITR 494/[2011] 203 Taxman 477/16 taxmann.com 141, .....

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me Court has made certain observations while analysing the provisions of Section 195 of the Act as follows: "7. Under Section 195(1), the tax has to be deducted at source from interest (other than interest on securities) or any other sum (not being salaries) chargeable under the I.T. Act in the case of non-residents only and not in the case of residents. Failure to deduct the tax under this Section may disentitle the payer to any allowance apart from prosecution under Section 276B. Thus, Se .....

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Act to which the aforestated requirement of tax deduction at source applies. The tax so collected and deducted is required to be paid to the credit of Central Government in terms of Section 200 of the I.T. Act read with Rule 30 of the I.T. Rules, 1962. Failure to deduct tax or failure to pay tax would also render a person liable to penalty under Section 201 read with Section 221 of the I.T. Act. In addition, he would also be liable under Section 201(1A) to pay simple interest at 12 per cent per .....

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e recipient and that the payment does not arise out of any contract or obligation between the payer and the recipient but is made voluntarily, such payments cannot be regarded as income under the I.T. Act. It may be noted that Section 195 contemplate not merely amounts, the whole of which are pure income payments, it also covers composite payments which has an element of income embedded or incorporated in them. Thus, where an amount is payable to a non-resident, the payer is under an obligation .....

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clarified that the tax deductor can take into consideration the effect of while deducting TAS. It may also be noted that Section 195(1) is in identical terms with Section 18(3B) of the 1922 Act, In CIT v. Cooper Engineering [1968] 68 ITR 457 (Bom.) it was pointed out that if the payment made by the resident to the non-resident was an amount which was not chargeable to tax in India, then no tax is deductible at source even though the assessee had not made an application under Section 18(3B) (now .....

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onditions are satisfied and an application is made to the ITO (TDS) that the question of making an order under Section 195(2) will arise. In fact, at one point of time, there was a provision in the I. T. Act to obtain a NOC from the Department that no tax was due. That certificate was required to be given to RBI for making remittance. It was held in the case of Czechoslovak Ocean Shipping International Joint Stock Company v. ITO [1971] 81 ITR 162 (Calcutta) that an application for NOC cannot be .....

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the non-resident or by the resident payer is to avoid any future hassles for both resident as well as non-resident. In our view, Sections 195(2) and 195(3) are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation (supra) in which this safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as to whether the tax was deduc .....

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e finds use of different expressions however, the expression "sum chargeable under the provisions of the Act" is used only in Section 195. For example, Section 194C casts an obligation to deduct TAS in respect of "any sum paid to any resident". Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of "any amount" referred to in the specified provisions. In none of the provisions we find the expression "sum chargeable under the pr .....

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resident. Therefore, Section 195 has to be read in conformity with the charging provisions, ie., Sections 4, 5 and 9. This reasoning flows from the words "sum chargeable under the provisions of the Act" in Section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe Section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all We cannot read Section 195, as suggested .....

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d in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging Sections of that Act de hors the machinery Sections. The Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of C.I.T v. Eli Lilly & Co. (India) (P.) Ltd. [2009] 312 ITR 225 (SC) the previsions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of t .....

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". Similarly, Section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any sum 'chargeable under the provisions of the Act', which expression, as stated above, do not find place in other Sections of Chapter XVII. It is in this sense that we hold that the I.T. Act constitutes one single integral inseparable Code. Hence, the provisions relating to TDS applies only to those sums which are Department that any person making payment to a non-reside .....

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i.e., the payee could seek a refund. It must therefore follow, if the Department is right that the law requires tax to be deducted on all payments. The payer, therefore, has to deduct and pay tax, even if the so-called deduction comes out of his own pocket and he has no remedy whatsoever, even where the sum paid by him is not a sum changeable under the Act. The interpretation of the Department, therefore, not only requires the words "chargeable under the provisions of the Act" to be o .....

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epartment's contention is based on administrative convenience in support of its interpretation. According to the Department huge seepage of revenue can take place if persons making payments to non-residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that Section 195(2), as interpreted by the High Court, would plug the loophole as the said interpretation requires the payer to make a declaration before the ITO(TDS) of payments made to non-residents. In other .....

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The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfil the statutory obligation under Section 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default. The above mentioned contention of the Department is based on an apprehension which is ill founded. The payer is also an assessee under the ordinary provisions of the I.T. Act. When the payer remits an amount to a .....

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nce of Section195 of the I.T. Act relating to tax deduction at source in respect of payments outside India in respect of royalties, fees or other sums chargeable under the I.T. Act. In a given case where the payer is an assessee he will definitely claim deduction under the I.T. Act for such remittance and on inquiry if the AO finds that the sums remitted outside India comes within the definition of royalty or fees for technical service or other sums chargeable under the I.T. Act then it would be .....

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which would prevent revenue leakage.' The Karnataka High Court first addressed this question and stated that: "17. It is clear from the scrutiny of the material on record and the contentions of the parties viz., revenue and the respective respondent in these cases that the fact that payments have been made by the respondent herein to non-resident for having imported shrink wrapped software/off-the-shelf software is not disputed. There is also no dispute that no tax was deducted at sour .....

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uct the advance tax under Section 195 of the Act and also consequential proceedings would not be attracted. Therefore, the dispute between the revenue and the respondent in these cases is whether payments made by the respondent to the nonresident would constitute 'royalty' or 'Income from Business' and if it is to be treated as 'Income from Business', whether the non-resident is required to have a permanent establishment in India. Further, in the absence of any permanent .....

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th respective countries or whether the payments would amount to royalty in the hands of the non-resident, for which no permanent establishment is required for making payment in India. There is also no dispute that if the payments made by the respondent are held to be royalty and not 'Income from Business', there is an obligation on the part of the payee, the respondent herein to deduct the tax at source and in default, the respondent herein would be considered as a default assessee. Once .....

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mon examples of sums chargeable under the provisions of the Act to which the aforestated requirement of TDS applies. The tax so collected and deducted is required to be paid to the credit of Central Government in terms of Section 200 of the Act read with rule 30 of the Income Tax Rules, 1962. Failure to deduct tax or failure to pay tax would also render a person liable to penalty under Section 201 read with Section 221 of the Act. In addition, he would also be liable under Section 201(1A) to pay .....

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Section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the non-resident Companies would amount to 'royalty' within the meaning of Article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the respondents t .....

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er found. If Alcatel Lucent USA Inc(supra) is correct and is to be applied in all situations, there would be dissimilar and asymmetrical results entirely dependent on the facts presented in each case. It is unclear what would be the outcome where the payee is, in fact, under the bona fide belief that it does not have a PE, or how the payer is to discern that a payee's assertion is intended to defeat the law. This Court therefore, notes that this precise question was addressed in Samsung Elec .....

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view, Sections 195(2) and 195(3) are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation(supra) in which this safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as to whether the tax was deductible at source and, if so, what should be the amount thereof." 22. This Court, therefore, holds that Jacabs Civil Inco .....

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ilure to discharge the obligation to deduct tax, under Section 201 of the Act. 23. For the above reasons, this Court finds that no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether the assessees were liable to tax under Section 195(1), and to what extent, by taking recourse to the mechanism provided in Section 195(2) of the Act. The failure of the paye .....

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such certificate of lower or no withholding tax was ever submitted by the assessee to the Cairn , and therefore it cannot be said that the assessee played any role in lower or no withholding tax by the payer. Thus, respectfully following the judgment of the Hon ble High Court in the case of GE Packaged Power Inc, we are of the opinion that the assessee cannot be held responsible for lower or no withholding tax and consequent responsibility of interest under section 234B of the Act for non-paymen .....

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the case, the CIT(A) has erred inholding that the Professional charges received by the assessee were not in the nature of fees for technical services as defined in sec. 9(1 ){vii) of the Act. 2. Whether on the facts and circumstances of the case, the CIT{A) has erred in holding that the income of the assessee was not taxable under the provisions of sec 44DA r.w.s. 115 of the Act, 1961, even though the provisions of sec 44DA r.w.s. 115A of the Act, 1961, even though the nature of services render .....

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4. Whether on the facts and circumstances of the case the CIT(A) has erred in not appreciating the fact that proviso to section 44DA brought about by the 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 v/s CIT, delivered on 17.11.2005. 5. Whether on the facts and circum .....

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the assessee has challenged considering the entire mobilization charges by learned Commissioner of Income-tax(Appeals) for taxing under section 44BB of the Act. 11.1 The Ld. Authorized Representative of the assessee, at the outset of hearing, fairly submitted that the issue in dispute was covered against the assessee by the decision of the coordinate bench of the Tribunal, Delhi in the case of WesternGeco International Ltd. Vs. 88 International Taxation in ITA No. 4906/DEL/2012, however, submit .....

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are to be considered for estimating income from the contract activity carried out in India. The relevant part of the decision is reproduced as under: 8. On ground no.5 and 6 the submissions of Ld. Counsel for the assessee are as follows. 2. Taxability of mobilization/demobilization revenues Nature of mobilization/demobilization activities Mobilization/demobilization activities include all the activities involved in movement of equipment from one operating area to another. In the Oil and Gas sec .....

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ct extends to 200 nautical miles from the Indian coast. Taxability of mobilization/ demobilization activity in India Section 4 of the Act is the charging section. Section 5(2) provides for the scope of total income of a non-resident person as per which the total income of a nonresident in any previous year includes all income from whatever source derived which: • is received or is deemed to be received in India; or • accrues or arises or is deemed to accrue or arise in India. During AY .....

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IL as the same were attributable to activity/ distance travelled outside India. It was clarified that the mobilization/ demobilization consideration is agreed and mentioned separately in the contract as it is separate from the consideration for services for exploration, which are the subject matter of assessment under section 4488 of the Act. It was submitted that as per the charging provisions of sections 4 and 5 of the Act, the mobilization/ demobilization revenues could be subject to tax in I .....

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d under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Thus, the Act specifically provides that in a situation where the operations are carried on partly in India and partly outside India, only such portion of the income as is reasonably attributable to the operations carried out in India is deemed to accrue or arise in India and hence, taxable in India. In view of the above, mobilization/ demobi .....

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re the lower authorities also the revenues from mobilization! demobilization attributable to distance travelled outside India should not be taxable, the Appellant placed reliance on the following judicial precedents: • Rand B Falcon Drilling Co vs. ACIT [(2007) 14 SOT 281(Delhi ITAT)] • Saipem S.P.A. vs Deputy Commissioner of Income Tax [(2003) 86 ITD 572 (Delhi ITAT)] • Assistant Commissioner of Income Tax vs Jindal Drilling Leasing [(1991) ITA No 6452 (Mumbai ITAT)] (Unreported .....

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ubmitted that even in a case wherein a composite and lump-sum consideration is agreed, the Hon'ble Supreme Court in the case of Ishikawajima and Hyundai Heavy industries clarified that the Revenue authorities are duty bound to determine the portion attributable to taxable activities under the Act and the non-taxable portion. Accordingly, it is submitted that in the instant case for AY 2009-10, out of the total revenues received by WGIL with respect to mobilization! demobilization of vessels .....

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that the entire amount mobilization! demobilization revenues received by WGIL should be taxable in India while computing its income under section 44BB of the Act. As submitted by the Appellant's counsel the decision in Sedco Forex is distinguishable as the following aspects did not receive the consideration of the Hon'ble HC: • WGIL has submitted the certificates issued by Noble Denton, Chartered Marine Engineers, certifying the distance travelled within India and outside India &bul .....

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uld be taxable in India. • The measure of tax cannot also be assumed to extend beyond the very scope of charging section. As unlike in case of Sedco Forex the Appellant is not seeking a deduction from taxable income on the ground of reimbursement but is contending that a portion of the revenue cannot form part of income at all. By reference to the facts in the Sed co Forex decision it was submitted that the dispute considered by Hon'ble HC therein was whether reimbursement could be excl .....

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39;whether in or out of India' was used. Appellant respectfully submits that such an interpretation would be incorrect as such phrase has to be read in the context and the only possible interpretation would be that consideration received for provision of services referred to in that clause for prospecting etc., would be taxable whether the same are received in India or outside of India. Such a phrase cannot be read in a way to subject transactions which are effected outside India and paid ou .....

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f (a) Sedco Forex International Inc. reported in 299 ITR 238; (b) in the case of Halliburton Offshore Service Inc. reported in 300 ITR 265 and (c) in the case of Trans Ocean Offshore Inc. 299 ITR 248. He further relied upon the order of the Assessing Officer as well as the findings of the D.R.P. He submitted that : The issue of taxability of these amounts is settled by a number of the decisions of the Hon'ble Uttarakhand High Court. Some of these decisions are: Sedco Forex Internationallnc 2 .....

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see for mobilization/demobilization are on account of the provision of services and facilities in connection with, or supply of plant and machinery (Section 44 BB92)). The assessee has claimed that revenue of INR 47.06 crores were not offered to tax by WGIL as the same were attributable to activity/distance travelled outside India. The main arguments of the assessee are dealt below: • Provisions of Section 5(2)(b) applies to the assessee being a non-resident. It referred to Clause(a) of Exp .....

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e of profits and gains of the business or profession. Section 28(i) deals with the profits and gains of any business or profession which was carried on by the assessee at any given time during the previous year. Therefore, what is important is the business or profession carried out by the assessee. Section 44BB overrides Sections 28 to 41 and sections 43 and 43A. Here emphasis is on the business carried out by the assessee. Mobilization and Demobilization are activities in connection with the bu .....

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Section 9 takes into account situations where a business consists of many operations/activities which are mainly carried out "out of India" by the non-resident and due to some business connection in India in relation to the same business, the income accruing or arising, whether directly or indirectly, is taxable in India. In the case of the assessee the business is being carried out In India. It cannot be the case of the assessee that it is carrying out its main "business" ou .....

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were carried out outside India and income in relation those operations may not be taxable in India. The movement of Rig from any place was for the purpose of the business in India and that is the reason that the Project owner agrees to pay the moving charges. • The Reliance of the assessee on various case laws including the Decision in the case of Ishikawajima and Hyundai Heavy Industries are of no help because in those cases the contracts consisted of various divisible parts. Various part .....

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te only certify the movements of ship in Indian water or out of Indian water. It does not justify that these are different operations. The movements whether in Indian water or out of Indian water are for the purpose of business in India? The assessee need to appreciate that ship started moving of its present location for carrying out the work in India. The movement itself is not a separate operation. • The claim that measure of tax cannot assumed to extend beyond the very scope of charging .....

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ion) will lead to absurd results as then only amounts proportionate to distance travelled in Indian water would be taxable. The results are not what the Legislature has intended. 10. After hearing rival contentions, we are of the considered opinion that the issue is covered by the judgment of the Jurisdictional High Court in the case of Sedco Forex International Inc.(supra). We are not convinced with the arguments of the Ld. Counsel for the assessee trying to distinguish this case law for the re .....

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he assessee would try to work out, based on some basis, the revenues attributable to the activity of mobilization carried out outside India, cannot be accepted, as such an exercise would amount to estimating income for activities outside India, when the scope of the contract is for execution of the contract in India. Mobilization in our view is an incidental activity to the main activity of carrying out the contract in India. The judgment of the Hon ble Supreme Court in the case of Ishikawajima .....

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