TMI Blog2017 (4) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... offshore pipelines in connection with prospecting for and extraction of mineral oil products and other services relating to areas concerning natural gas and oil fields. For A.Y. 2010-11, the assessee filed a return of income on 14.04.2011 declaring Nil income. The case was taken up for scrutiny. In the course of assessment proceedings it was submitted that in the year under consideration the assessee had entered into the following projects: - (i) Project with Leighton Contractors (India) Pvt. Ltd. for charter hire of Barge Regina 250 and Cargo Barge VML1 with manpower (for ONGC project). The assessee was of the view that the receipts/income of US $15,78,307/- was not exigible to tax since the period of contract was less than nine months under Articles of the India-UAE DTAA; (ii) Project with M/s. MPSEZ Ltd. for charter hire of Cargo Barge VML 3. The revenue/income of US $1,89,965/- was not offered to tax. The Barge was chartered at Abu Dhabi, used for transporting material from Mussafah Jetty Abu Dhabi to West Coast of India and barge was delivered back at Abu Dhabi. The assessee contended that this is business income under Article 7 of the India-UAE DTAA and since VMGL did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its behalf. Even service of notice for hearing through RPAD and through the Assessing Officer has not elicited any response from the assessee. The learned D.R. for Revenue was however present and ready to argue Revenue s case. In these circumstances, we are of the view that the assessee on its behalf is not interested in pursuing the matter. We, therefore, proceed to hear and dispose off this appeal with the assistance of the learned D.R. and the material on record. 5.1 Aggrieved by the order of the CIT(A)-58, Mumbai dated 04.03.2016 for A.Y. 2010-1, Revenue has preferred this appeal raising the following grounds: - 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in holding that the Assessee has no PE in India and income of the Assessee cannot be taxed under section 44BB of the I.T. Act, 1961? 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the Assessee preferred against decision of the AO of taxing income of the Assessee at ₹ 75,93,303/- u/s. 44BB of the I.T. Act, 1961? 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in (2077) 78 taxmann.com 109 (Mum-Trib) has considered this issue of the exigibility to tax under section 44BB of the Act of the assessee s income from its project with M/s. Leighton Contractors (India) P. Ltd. in that year at paras 11 to 16 thereof and held that the same is also liable to be taxed in terms of section 44BB of the Act. At paras 14 to 16 of its order (supra), the Coordinate Bench has held as under: - 14. We have carefully considered the rival submissions. Sec. 44BB of the Act deals with provision for computing profits and gains in connection with the business of exploration, etc. of mineral oils. Sec. 44BB of the Act seeks to provide a presumptive determination of profits and gains of businesses referred therein. It is applicable in the case of an assessee, being a non-resident, which is engaged in the business of providing services or facilities in connection with or supplying of plant and machinery on hire or to be used in prospecting for or extraction or production of mineral oils. In the instant, the case set-up by the assessee is that it has hired out two tug boats and a barge to M/s. Aracadia Shipping Ltd. and M/s. Leigthton Contractors India Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the plea of assessee with respect to the earnings from M/s. Leigthton Contractors India Pvt. Ltd. for hiring of barge JU-251. As per the terms of arrangement, copy of which is placed at pages 5 and 6 of Paper Book, the said vessel has been used for offshore accommodation/ construction activities at Jamnagar. As per the Revenue, use of the vessel for offshore accommodation/ construction activities does not fall within the scope of Sec. 44BB of the Act. In our considered opinion, the factum of the vessel being used for the business of operation of prospecting for or extraction or production of mineral oils is enough to cover it within the scope of Sec. 44BB of the Act and that the phraseology of Sec. 44BB of the Act does not envisage only direct use of the plant and machinery in the prospecting for or extraction or production of mineral oils. In this context, we may refer to the decision of the Authority for Advance Ruling (AAR) in the case of Lloyd Helicopters International Pty Ltd., 249 ITR 162 (AAR) wherein even the income derived from providing of helicopter to facilitate operation of extraction and production of mineral oil was held to be eligible for assessment Sec. 44BB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of section 44BB and, therefore, Wavefield would be justified in deducting taxes at source from payment made to P.F.Thor at the rate of 4.23%. Similarly, in Siem Offshore Inc. In re: (337 ITR 207) the Authority for Advance Ruling held that the consideration received for providing marine logistic services have to be dealt under section 44BB. 22. The revenue has unduly stressed on the word in the forming part of the expression supplying plant and machinery on hire used, or to be used, in the prospecting for or extraction or production of, mineral oils A plain reading of the above expression only provides that the assessee should be engaged in the business of supplying plant and machinery on hire and such plant or machinery are used or to be used in the prospecting for or extraction or production of, mineral oils. The activity for which the plant or machinery are used or to be used is the only criteria and that activity is prospecting for or extraction or production of, mineral oils. There is no requirement under section 44BB that the services or facilities or supplying of plant and machinery should be provided only to the main person who is engaged in prospecting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d machinery are used in connection with prospecting for or extraction or production of, mineral oils as required under section 44BB. The Hon ble Supreme Court in ICDS Ltd v CIT [2013] 350 ITR 527 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 section 44BB in as much as 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 production of, mineral oils or the services or facilities or plant and machinery on hire should be directly provided to the said person alone. We have already given a finding of fact that the services and facilities provided by the assessee along with plant and machinery are used in offshore drilling operations i.e., the activity of prospecting for or extraction or production of mineral oil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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