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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH: DEHRADUN
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 26/5/2017 passed under Section 254/143(3) read with Section 144 C of the Income Tax Act, 1961 passed by DCIT, (International Taxation Circle-2, Dehradun, New Delhi for Assessment Year 2014-15.
The grounds of appeal are as under:- Based on the facts and circumstances of the case, Vantage International Management Company (hereinafter referred to as ‘the Appellant’) respectfully craves to prefer an appeal against the assessment order issued by the Deputy Commissioner of Income-tax (International Taxation), Circle - 2,
Dehradun (hereinafter referred to as the ‘Assessing Officer’) under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (‘the Act’) on the following grounds , which are without prejudice to each other: On the facts and circumstances of the case and in law, the Assessing Officer/ Hon’ble Dispute Resolution Panel (‘DRP’) has: 1. erred in assessing total income at INR 1,26,42,88,141 as against the returned income of INR 1,12,93,40,953; 2. erred in including reimbursement of service tax of INR 1,34,94,71,889 while computing gross receipts under section 44BB of the Act as opposed to Appellant’s claim for non taxability of such receipts; 3. erred in levying interest under section 234B of the Act of INR 7,60,308; 4. erred in initiating penalty proceedings under section 271(1)(c) of the Act without appreciating that the Appellant has neither concealed nor furnished any inaccurate particulars of income.
The assessee is a non-resident company incorporated under the laws of Cayman Islands and during the year under consideration it has offered its revenues on account of a five year contract awarded to it by ONGC vide contract no. MR/DS/MM/CT/DWRIG- 7500/2008/P4J6C08001/DYSDF0426 dated 29.04.2009 for the hiring of Ultra Deepwater Drilling Unit “PLATINUM EXPLORER" (HULL NO. 3601). Contractor is willing to perform such drilling operations on charter hire basis with Drilling Unit alongwith its personnel as per Exhibit-1 of the contract. The assessee is entitled to charge mobilization fees for mobilization of the rig to the site of ONGC for the execution of contract and further revenues are to be charged on the basis of day rate and Rig operating day rate (RODR) etc. This is a contract which is old and continuing from previous year. The assessee filed its return of the income, computing the taxable income u/s 44BB of the Act @ 10% of gross receipts of Rs.1128,25,56,728/-. Gross contractual receipts of Rs.1128,25,56,728/- have been earned during the year from the execution of contract with ONGC Ltd. Since the Drilling Rigs have been given on hire to ONGC Ltd. which is engaged in the prospecting for, or extraction or production of mineral oils, the contractual receipts are brought to tax u/s 44BB (1) of IT Act. The case was selected for scrutiny under CASS. Accordingly notice u/s 143(2) of I.T. Act, was issued on 31.08.2015. Notice u/s 142(1) of I.T. Act was issued on 16.05.2016. Further notice u/s 142(1) was issued on 13.07.2016. Another notice u/s 142(1) was issued on 27.09.2016 by the Assessing Officer. In pursuance to the various notices, the authorized representative of the assessee attended the proceedings from time to time for the same. Draft Assessment order u/s 143(3)/144C (1) of I.T. Act for the relevant Assessment Year was passed in this case on 23.11.2016 on a total income of Rs.126,42,88,140/-. The assessee filed objections before the DRP. The DRP vide direction dated 5/4/2017 issued certain directions to the Assessing Officer. The Assessing Officer passed final assessment order on 26.05.2017, thereby assessing the total income of the assessee at Rs. 126,42,88,140/-.
Being aggrieved by the assessment order dated 26/5/2017, the assessee filed present appeal before us.
The Ld. AR submitted that the issue of taxability of reimbursement of service tax receipts is decided in favour of the assesses by the Full Bench of the Jurisdictional Hon’ble Uttarakhand High Court in case of DIT Vs. Schlumberger Asia Services Ltd. 414 ITR 1.
The Ld. DR relied upon the assessment order and the directions of the DRP.
We have heard both the parties and perused the material available on record. It is pertinent to note that in the present case, the service tax receipts are in the nature of reimbursement and does not involve element of profit in itself as the service tax is linked to the contractual receipts of the assessee for the year under consideration and is also includible in gross receipts as they are linked to the contractual receipts to the assessee for execution of contract. The issue involved in the present case is squarely covered in favour of the assessee by the Hon’ble Jurisdictional Uttarakhand High Court in case of Schlumberger Asia Services Ltd. (Supra) wherein the Hon’ble High Court observed that service tax is an amount paid on account of providing services and facilities in connection with the prospecting for or extraction or production of mineral Oils in India and hence is not to be included while computing taxable income u/s 44BB of the Act. The Assessing Officer as well as the DRP failed to looked into this aspect and therefore, the making an addition of service tax receipt thereby stating it as deemed income @ 10% u/s 44BB of Income Tax Act, 1961 is not correct. Hence, Ground No. 1 and 2 are allowed. As regards to Ground No. 3 relating to levying of interest under Section 234B, the same is consequential, hence dismissed. As regards to Ground No. 4 relating to penalty under Section 271(1)(c), the same is premature, hence dismissed.
In result, the appeal of the assessee is partly allowed. Order pronounced in the Open Court on this 23rd Day of November, 2020.