ABAN SINGAPORE PTE LIMITED,HYDERABAD vs. DCIT INTL TAX 1(1) , CHENNAI,

ITTPA 12/CHNY/2025Status: DisposedITAT Chennai23 January 2026AY 2022-2315 pages
AI SummaryAllowed

What were the facts?

The assessee, Aban Singapore Pte. Ltd., a non-resident company incorporated in Singapore, is in appeal against the final assessment order for Assessment Year 2022-23. The Assessing Officer (AO) disallowed Rs. 14,91,33,600/- under Section 40(a)(i) of the Income Tax Act, 1961, for non-deduction of Tax Deducted at Source (TDS) on payments made to Deep Drilling No.8 Pte. Ltd. (DD8PL) for hiring of rigs. The AO held that the income received by DD8PL was taxable in India as royalty under Section 9(1)(vi)(b) and that the assessee was liable to deduct TDS. The Dispute Resolution Panel (DRP) upheld the AO's disallowance. The assessee contended that the issue is covered by previous ITAT decisions in its own case for preceding assessment years.

What did the Tribunal hold?

The Tribunal held that the disallowance made by the AO under Section 40(a)(i) of the Act deserves to be deleted. The Tribunal noted that the Coordinate Bench, in the assessee's own case for earlier assessment years (AY 2018-19 to 2021-22), had granted relief not only on the ground that the impugned payments were not taxable in the hands of the recipient but also considered the fact that the assessee had exercised the option available under Section 44BB of the Act to offer income on a presumptive basis. The Tribunal found that when Section 44BB operates, it excludes the application of other provisions like Section 40(a)(i). The Tribunal also referred to its previous decisions which consistently held that payments for bareboat charter hire to a non-resident company without a PE in India are not taxable in India as per Article 7 read with Article 5 of the India-Singapore DTAA. Therefore, the assessee was not liable to deduct withholding tax under Section 195. The Tribunal respectfully followed the coordinate bench's decision and set aside the orders of the lower authorities, deleting the addition made by the AO and confirmed by the DRP. The appeal filed by the assessee was allowed.

What were the issues?

1. Whether the disallowance of Rs. 14,91,33,600/- under Section 40(a)(i) for non-deduction of TDS is valid, considering the assessee's claim that the income of DD8PL is not taxable in India and that Section 44BB of the Act overrides Section 40(a)(i)? (Mixed law and fact) Assessee's contentions: - The disallowance under Section 40(a)(i) is incorrect as the income of DD8PL is not taxable in India. The assessee is a non-resident and the payments were made outside India for hiring rigs on a bareboat charter basis. - Section 44BB of the Act, with its non-obstante clause, overrides other provisions like Section 40(a)(i), especially when the assessee opts for presumptive taxation under Section 44BB. - The issue is covered by the Tribunal's decisions in the assessee's own case for earlier assessment years (AY 2018-19 to 2021-22), where similar disallowances were deleted. - The Double Taxation Avoidance Agreement (DTAA) between India and Singapore, as per Section 90 of the Act, should be considered, and the provisions more beneficial to the assessee should apply. - DD8PL, the owner of the rig, is a Singapore-based company with no Permanent Establishment (PE) in India, hence its income is not taxable in India. Revenue's contentions: - The reliance on earlier year orders is factually distinguishable because the AO for the current year treated the payments as royalty, not just business income. - The Tribunal's earlier relief was granted on the ground that DD8PL did not have a PE in India, which is not applicable here as the payments are treated as royalty. - The non-obstante clause in Section 44BB cannot extend to the liability to deduct tax under Section 195 or determine taxability under Section 9 of the Act. - The AO's order treating payments as royalty and the subsequent disallowance are correct.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 143(3),Section 144C,Section 44BB,Section 9(1)(vi)(b),Section 90,Section 195,Section 9,Section 28,Section 43,Section 43A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

Hearing: 08.01.2026Pronounced: 23.01.2026

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the final order of the assessment passed by Dy. Commissioner of Income Tax, International Tax-1(1), Chennai (in short "AO") passed u/s. 143(3) r.w.s 144C of the Income Tax Act, 1961 in short "the Act") dated 23.01.2025 for Assessment Year (AY) 2022-23. The grounds of appeal raised by the assessee are as under:

1.

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