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Deputy Commissioner of Income Tax, Circle-1, (International Taxation) , Dehradun Versus M/s Halliburton Offshore Services Inc. and M/s Halliburton Offshore Services Inc. Versus Additional Director of Income Tax, International Taxation, Dehradun.

2016 (7) TMI 563 - ITAT DELHI

Denial of benefit of Section 44BB - assessee has not entered into an agreement directly with Central Government but is only a second leg contractor - Held that:- We find this issue to be covered in favour of the assessee by the decision of ITAT in the case of SBS Marine Ltd. Vs. Additional DIT [2015 (3) TMI 147 - ITAT DELHI ] where held section 44BB does not mandate that the assessee should directly enter into contract with the person engaged in the business of prospecting for or extraction or p .....

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] - Amount received on account of reimbursement of freight and transportation charges - amount actually incurred in respect of equipment was not includible while computing its income under section 44BB - Held that:- It was not in dispute that the amount had been received by the assessee. Therefore, the Assessing Officer correctly added the said amount which was received by the non-resident company rendering services under the provisions of section 44BB to the ONGC and imposed the income-ta .....

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. Ground No.1 of the Revenue s appeal reads as under:- 1. Whether on the facts and circumstances of the case, the ld.CIT(A) has erred in holding that no distinction can be made between receipts from Production Sharing Contract Participants ( PSC Partners ) and Non-Production Sharing Contract entities (Non-PSC Partners ) and between services rendered by first-leg and second-leg vendors, ignoring the fact that the receipts from non-PSC partners on account of provision of equipment on hire ( equipm .....

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ount of sale of consumables & reimbursement of service tax etc., were taxable under section 44BB of the Act as opposed to Section 44DA read with Section 9(1)(vi)/9(1)(vii) applicable to Royalties and Fee for Technical Services ( FTS ). 3. We have heard both the parties and have perused the material placed before us. We find this issue to be covered in favour of the assessee by the decision of ITAT in the case of SBS Marine Ltd. Vs. Additional DIT in ITA No.107/Del/2012, dated 13th February, .....

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ction or production of mineral oils in relation which the Central Govt. has entered into an agreement. Section 80IA(4)(i)(b) provides that the enterprise carrying on the business of developing, operating and maintaining any infrastructure facility has to enter into an agreement with the Central Government of a State Govt. or a local authority etc. In the absence of any requirement in section 44BB that the person providing services, facilities or plant and machinery on hire should have directly e .....

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d v CIT [2013] 350 ITR 527 = 2013 TIOL-06-Hon'ble Supreme Court-IT held that the assessee leasing the vehicles to others who use the said vehicles in their business of running them on hire is entitled for higher rate of depreciation on the vehicles given on lease. It was held by the Hon'ble Supreme Court that the lessor need not himself use the vehicles in the business of running them on hire. The rationale of the aforesaid decision of the Supreme court may be applied in the context of s .....

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.e., the activity of prospecting for or extraction or production of mineral oils. Consequently, the requirements of section 44BB are satisfied in the present case. 24. In view of the above, there is no merit in the contentions of the revenue that the assessee is not an eligible assessee under section 44BB since it has not directly entered into contract with the ONGC and it is not undertaking the activities specified in section 44BB itself and being second leg contractors they are not eligible un .....

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learned counsel that the above decision of ITAT has been upheld by Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s SBS Marine Limited vide Income Tax Appeal No.36 of 2015. In view of the above, we, respectfully following the above decision of ITAT and Hon'ble Jurisdictional High Court, uphold the order of learned CIT(A) and reject ground No.1 of the Revenue s appeal. 5. Ground Nos.2 to 5 of the Revenue s appeal read as under:- 2. Whether on the facts and in the circumstance .....

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tion of provisos in section 44BB/44DA/115A and the rationale behind the introduction of said amendment in the Finance Bill 2010 in holding that the income of the assessee company from equipment rental and technical services from Non-PSC Partners was covered under the presumptive provisions of section 44BB. 2(b) The ld.CIT(A) has erred in not appreciating the fact that even in terms of ratio of the judgment in the said of OHM Ltd [352, ITR 406 (Delhi)] cited by him, the provisions of section 44BB .....

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on 44DA. 3. Whether on the facts and in the circumstances of the case, the ld.CIT(A) has erred in holding that the income earned by the assessee for imparting of services was eligible for treatment u/s 44BB of the Act, without adjudicating the aspect of eligibility under the second limb of the exclusionary proviso (Explanation to section 9(1)(vii) of the IT Act, 1961) i.e. for a project undertaken by the recipient in terms of decision of Hon'ble Delhi High Court in CIT V Rio Tinto Technical .....

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Non-PSC Partners is liable to be taxed u/s 44DA, rightly estimated the income of the assessee by applying 25% rate of profit on gross receipts in the absence of books of accounts and details of expenses incurred in providing the services. 6. At the time of hearing before us, it was pointed out by the learned counsel that this issue is squarely covered in favour of the assessee by the decision of Hon ble Apex Court in assessee s own case which is reported in 278 CTR 153. It was also stated that .....

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of mineral oils the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10% of the aggregate of the amounts paid or payable to such non-resident assessee as mentioned in Sub-section (2). On the other hand, Section 44D contemplates that if the income of a foreign company with which the government or an Indian concern had an agreement executed before 1.4.1976 or on any date thereafter the computation of income would be made as contemplated under the aforesai .....

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ervices any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration which would be chargeable under the head salaries . Fees for technical services, therefore, by virtue of the aforesaid explanation will not include payments made in connection with a mining project. The Income Tax Act does not define the expressions mines or minerals . The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Developme .....

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57 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting and exploration of mineral oils, exhaustively referred to e .....

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company is to be assessed under Section 44BB or Section 44D of the Act. The test of pith and substance of the agreement commends to us as reasonable for acceptance. Equally important is the fact that the CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions mining projects or like projects occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training .....

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or prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by sett .....

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ssee by the decision of Hon ble Apex Court, we, respectfully following the same, uphold the order of learned CIT(A) on this point and reject ground Nos.2 to 5 of the Revenue s appeal. 8. Ground No.6 of the Revenue s appeal reads as under:- 6. Without prejudice to the generality of the ground relating to taxation of entire receipts as Royalty/FTS, whether on the facts and in the circumstances of the case, the ld.CIT(A) has erred in holding that the amounts received as re-imbursement of Service Ta .....

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s taxable u/s 44BB of the Act, there is no scope for computing or re-computing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits u/s 44BB of the Act and obviating the need for accounting for individual receipts and payments etc. 6(c) Whether the ld.CIT(A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P .....

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essee by the decision of Hon'ble Delhi High Court in the case of DIT Vs. Mitchell Drilling International Pvt.Ltd. - [2016] 380 ITR 130 (Delhi), wherein Hon ble High Court at paragraph 16 & 17 held as under:- 16. The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd. (supra) which held that the reimbursement received by the assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the .....

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ssessee for the services rendered by it. The assessee is only collecting the service tax for passing it on to the government. 10. From the above, it is evident that while deciding the above issue, Hon'ble Delhi High Court has concurred with the decision of Hon ble High Court of Uttarakhand in the case of DIT Vs. Schlumberger Asia Services Ltd. - [2009] 317 ITR 156. No contrary decision has been brought to our knowledge. We, therefore, respectfully following the above decision of Hon'ble .....

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y relying upon the case of M/s Maersk [334 ITR 79]. a. The ld.CIT(A) has erred in not appreciating the fact that the case of M/s Maersk was distinguishable on facts as it dealt with a case where the employer failed to deduct tax at source despite the specific provisions of the Act in terms of which the employer was mandatorily required to deduct tax from the salary paid to the employee. In the said case, the Hon ble Court held that an employee is not liable to pay advance tax on salary because u .....

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the role of the assessee/payee/deductee in short-deduction or nondeduction of tax needs to be ascertained before claim regarding non-liability to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgment of Delhi High Court dated 7.11.2013 in ITA No.327 & Ors of 2012). 12. We find that learned CIT(A) has decided this issue in favour of the assessee following the decision of Hon'ble Jurisdictional High Court in the case of DI .....

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