M/S ABAN SINGAPORE PTE LIMITED ,SINGAPORE vs. DCIT, CHENNAI

ITTPA 8/CHNY/2023Status: DisposedITAT Chennai29 May 2024AY 2020-2110 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s. Aban Singapore Pte Ltd., a non-resident company engaged in offshore oil drilling, is in appeal against the final assessment order for AY 2020-21. The Assessing Officer (AO) disallowed bareboat charter charges of Rs. 55,12,69,200 paid to Deep Drilling 8 Pte Ltd., Singapore, for non-deduction of TDS under Section 40(a)(i) of the Income Tax Act, 1961. The AO held that the income accrued in India as the drilling rig was in Indian territorial waters for over 183 days. The Dispute Resolution Panel (DRP) upheld the disallowance, treating the payment as royalty and deeming it taxable in India. The assessee argued that the issue was covered by the Tribunal's decision for the preceding assessment year (AY 2019-20) on identical facts.

What did the Tribunal hold?

The Tribunal held that the assessee is covered under Section 44BB of the Act. It further found that M/s. Deep Drilling 8 Pte Ltd., Singapore, does not have a Permanent Establishment (PE) in India as per the India-Singapore Double Taxation Avoidance Agreement (DTAA). Consequently, the income earned by Deep Drilling 8 Pte Ltd. is not taxable in India. Therefore, the assessee is not liable for deducting TDS under Section 195 of the Act. As TDS was not deductible, the provisions of Section 40(a)(i) cannot be invoked for disallowance of the sub-contract charges paid by the assessee. The Tribunal set aside the orders of the authorities below and deleted the addition made by the Assessing Officer and confirmed by the DRP. The appeal filed by the assessee was allowed.

What were the issues?

1. Whether the bareboat charter charges paid by the assessee to a non-resident constitute income taxable in India, thereby necessitating TDS deduction under Section 195 of the Act, and consequently, attracting disallowance under Section 40(a)(i) if TDS is not deducted? (Question of law and mixed fact and law, turning on Sections 195 and 40(a)(i)). Assessee's Contentions: - The issue is covered in favour of the assessee by the Tribunal's order for AY 2019-20 on identical facts and the same agreement. - The payment to Deep Drilling 8 Pte Ltd. is covered under Section 44BB of the Act. - The recipient does not have a Permanent Establishment (PE) in India as per the India-Singapore DTAA. - Therefore, the income is not taxable in India, and TDS deduction under Section 195 is not required. - Relied on Tribunal's decision in its own case for AY 2019-20 (IT(TP)A No.38/Chny/2022 dated 20.07.2023), Supreme Court decisions in GE India Technology Cen. (P) Ltd. vs. CIT and Poompuhar Shipping Corporation vs. ITO, and ITAT Delhi decision in ACIT Vs. Interocean Shipping (I) (P) Ltd. Revenue's Contentions: - The AO held that the income accrued in India as the drilling rig was present in Indian territorial waters for over 183 days. - The DRP treated the payment as royalty under Section 9(1)(vi) read with Article 12 of the DTAA and rejected the assessee's reliance on judicial precedents like Puma Sports India Pvt Ltd., stating the facts were different. - The DRP relied on Explanation 5 to Section 9(1)(vi) and a CBDT letter clarifying ships as industrial equipment and bareboat charter payments as royalty.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 143(3),Section 144C,Section 195,Section 44BB,Section 9(1)(vi),Section 115A,Section 44D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI MAHAVIR SINGH & SHRI AMITABH SHUKLA

Hearing: 07.05.2024Pronounced: 29.05.2024

PER AMITABH SHUKLA, A.M :

This appeal filed by the assessee is directed against the final assessment order passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [“Act” in short] dated 05.01.2023 relevant to the IT(TP)A No.8/Chny/2023 :- 2 -:

assessment year 2020-21 in pursuant to the directions of the ld. Dispute Resolution Panel-2, Bengaluru un

The order continues below.

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