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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
सुनवाई क� तार�ख / Date of Hearing : 10/10/2018 10/10/2018 आदेश क� तार�ख /Date of Order: आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 23/02/2017 of the Ld. First Appellate Authority, Mumbai,
2 Weatherford Drilling International (BVI) Ltd.. holding that proportionate amount received by the assessee for mobilization/demobilization of the rig, outside Indian territorial water, is to be included in the gross receipt for the purposes of determination of income under section 44BB of the Income Tax Act, 1961 (hereinafter the Act) as opposed to the claim of the assessee that the same does not constitute income chargeable to tax in India, as per section 5 r.w.s. 9 of the Income Tax Act.
2. At the outset, the Ld. DR, Chaudhary Arun Kumar Singh, contended that the issue in hand is covered against the assessee by the decision of the Tribunal for Assessment Year 2009-10 (ITA No.495/Mum/2017), order dated 20/06/2018. This factual matrix was claimed to be correct by Shri Kishan Kumar Mundra, ld. counsel for the assessee.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 20/06/2018 for ready reference and analysis:-
3 Weatherford Drilling International (BVI) Ltd..
“These cross appeals are directed against the order dated 20.10.2016 passed by the learned CIT(A)-59, Mumbai and it pertains to A.Y. 2009-10.
The assessee is a non-resident company incorporated under the laws of British Virgin Islands. It is engaged in the business of providing services or facilities in connection with excavation or production of natural oil. The assessee offered its income under Section 44BB(1) of the Income Tax Act (hereinafter “the Act”).
The issue urged in the appeal of the assessee is whether the amount received by the assessee for mobilisation/demobilisation of vessels and equipments outside Indian territorial waters is required to be included in the gross receipts for the purpose of determining total income under Section 44BB of the Act. The AO as well as the CIT(A) included the mobilisation/demobilisation receipts as part of gross receipt.
At the time hearing the learned A.R. fairly submitted that identical issue was considered by Hon'ble Supreme Court in the case of Sedco Forex International Inc (Civil Appeal No. 4906 of 2010) and vide its order dated 30.10.2017, the Hon’ble Apex Court has held that the receipts related to mobilisation/ demobilisation of vessels outside Indian territorial waters is required to be included in the gross receipt for the purpose of determining the total income under Section 44BB of the Act.
We have heard the learned D.R. and perused the record. Since the issue urged herein has been decided against the assessee by the Hon'ble Supreme Court in the case cited above, we confirm the order passed by the CIT(A) on this issue.
We shall now take up the appeal filed by Revenue. The solitary issue urged therein is whether the service tax collected by the assessee shall form part of gross receipts for computing income under Section 44BB of the Act.
The learned A.R. submitted that the Hon'ble Delhi High Court in the case of Mitchell Drilling International (P) Ltd. 380 ITR 130 (Del) has decided the issue in favour of the assessee by holding that service tax collected by the assessee was not to be included in the gross receipts in terms of section 44BB of the Act. He submitted that the learned CIT(A) has followed the decision rendered by the Hon'ble Delhi High Court in the case referred above.
On the contrary, the learned D.R. submitted that the Mumbai Bench of the Tribunal has held in the case of China Shipping Container Lines (Hong Kong) (2013) TIL-1621-ITAT, Mum-Intl) has held that the service tax collected from distributors shall be included in gross receipts.
In the rejoinder the learned A.R. submitted that the Mumbai benches of Tribunal has followed the decision rendered by the Hon'ble Delhi High Court (referred supra) in the cases of Oceaneering International GmbH (ITA No. 1023/Mum/2014 dated 06.11.2015 and Jet Drilling (S) Pte Ltd. in dated 07.07.2016. 10. We have heard the rival submissions
4 Weatherford Drilling International (BVI) Ltd.. on this issue and perused the record. We noticed that the learned CIT(A) has followed the decision rendered by the Hon'ble Delhi High Court in the case of Mitchell Drilling International (P) Ltd. (supra) in holding that service tax collected by the assessee cannot form part of gross receipts.
On the contrary, Revenue has placed reliance on the decision rendered by the Coordinate Bench of the Tribunal in the case of China shipping Container lines (supra). The learned A.R. has, on the contrary, pointed out that the Coordinate Benches of the Tribunal have followed the decision rendered by the Hon'ble Delhi High Court in other cases (referred above) and have held that the service tax shall not form part of Gross receipts. Since the High Court is superior to the Tribunal, the inferior Court should bow to the wisdom of Superior Court. Accordingly, the decision rendered by the High Court should be preferred over the decision rendered by the Tribunal. Accordingly we do not find any infirmity in the action of the AO in following the decision rendered by the Hon'ble Delhi High Court. Therefore we affirm the order passed by the learned CIT(A) on this issue.
In the result, the appeals filed by the assessee as well as Revenue are dismissed. 2.2. We also note that the Hon'ble Apex Court in the case of SEDCO Forex International Inc. vs CIT (Civil Appeal No.4906 of 2010 etc.), order dated 30/10/2017 on identical issue of scope and interpretation of section 44BB of the Act, where the assessee is a non-resident and specifically engaged in the business of exploration etc of mineral oil, special mechanism is provided in section 44BB of the Act for computation of profit & gains on which tax is charged.
Section 44BB of the Act is reproduced hereunder:-
(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the 5 Weatherford Drilling International (BVI) Ltd.. amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 44DA or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely :— (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee. Explanation.—For the purposes of this section,— (i) "plant" includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business; (ii) "mineral oil" includes petroleum and natural gas.
2.3. If the aforesaid special provision for computing profit & gains is analyzed, its purpose was explained by the Circular No.495 dated 22/09/1987, namely, to simplify the computation of taxable income. However, the legislation provided a simple formula treating the amounts paid or payable (whether in or out of India) and the amount received
6 Weatherford Drilling International (BVI) Ltd.. or deemed to be received in India as mentioned in sub- section (2) of section 44BB of the Act as deemed profit & gains. Our view further find supports from the decision in Sedco Forex International Inc. vs CIT (2005) 279 ITR 1, 8 (Uttrakhand), DIT vs Jindal Drilling & Industries Ltd. (2010)
320 ITR 104, 106 (Del.), DIT vs OHM Ltd. (2013) 352 ITR 406 (Del.), Global Industries Asia Pacific Pte. Ltd.(2012) 343 ITR 253(AAR). Section 44BB of the Act is a special provision for computing profit & gains in connection with the business oil exploration. Thus, respectfully following the aforesaid decision from Hon'ble Apex Court and considering the decision of the Coordinate Bench, the appeal of the assessee is dismissed, as agreed by Ld. counsel for the assessee also.
Finally, the appeal of the assessee is dismissed.
This order was pronounced in the open court in the presence of the ld. representatives from both sides at the conclusion of the hearing on 10/10/2018.