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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-10, Mumbai (‘ld.CIT(A) for short) dated 28.02.2014 and pertains to the assessment year (A.Y.) 2007-08.
The grounds of appeal read as under:
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the assessee has no Permanent Establishment in India as the number of days for which Rig was deployed for work in India was 179 days even when the Rig was actually entered India in 27,07.2006 and was exported outside India on 07.03.2007 and the number of days of stay in India was more than 183 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that activities of project office are to be considered as preparatory and auxillary in nature as per Article 5(7)(e) of the India Singapore DTAA and to be excluded from the activities of the PE even when the expansive preparatory works, including pre-hire survey and all premobilization jobs, were carried out before the commencement.
M/s. Aban 7Pte. Limited 3. On the facts and in the circumstances of the case and in law, CIT(A) erred in holding that the assessee has no Permanent Establishment in India and provisions of 115JB are not applicable even when as per the provisions of Article 5(2)(j) of the India Singapore DTAA the assessee has a PE in India and is therefore, liable u/s. 115JB of the IT Act, 1961.
Brief facts of the case are that the assessee is a company incorporated and registered in Singapore and is a tax resident of Singapore. The assessee is engaged in the business of making over and drilling of oil wells in offshore territories relating to prospective for exploration and exploitation of mineral oils and natural gases. For this purpose, the assessee deploys its own resources for carrying out the operations of drilling and making over of the oil wells.
The issue in dispute was whether the assessee has Permanent Establishment (‘PE’ for short) in India. Based upon number of days of the operation of its rig in India, the Assessing Officer (‘A.O.’ for short) has opined that it had a PE on the basis of number of days of the operation of the Rig in India. The A.O. had held the assessee to be liable to tax u/s. 115JB of the Income Tax Act, 1961 (‘the Act' hereinafter). The A.O. had concluded as under:
In view of the above, assessee has a PE in India. Hence, its business income is taxable in India. As assessee has maintained it account for the relevant year, it calims to be covered u/s. 44BB(3). The book profit of the assessee is Rs.3,71,97,259/-. Since the assessee has filed ‘Nil’ income because of depreciation on rig, the tax is calculated u/s.115JB as follows:
Book profit as per P & L a/c. Rs.3,71,97,259/- Add: Depreciation Rs.23,37,42,245/- Less: Deprecation (except revaluation reserve) Rs.23,27,42,245/- Book Profit as per Section 115JB Rs.3,71,97,259/-
M/s. Aban 7Pte. Limited 5. Against the above order, the assessee appealed before the ld. CIT(A).
The ld. CIT(A) treated certain activities as preparatory and auxiliary and reducing the same from the number of days of the operation of the rig came to the conclusion that the assessee did not have a PE in India. The ld. CIT(A) did not deal with the issue of exigibility of the assessee’s taxation u/s. 115JB of the Act. He summarily held as under:
In absence of Appellant having any PE in India, I hold that appellant is not liable to tax in India and accordingly, tax u/s. 115JB would also not apply.
Against the above order, the Revenue is in appeal before us.
The grounds raised by the Revenue have two facets. Firstly, the Revenue is aggrieved by the treatment of the ld. CIT(A) of certain number of the operation of rig to be excluded on account of being preparatory and auxiliary in nature. Secondly, the Revenue is aggrieved that the ld. CIT(A) has erred inasmuch as he has held that there is no liability u/s. 115JB as the assessee has no permanent establishment in India.
At the outset, in this case, the ld. Senior Counsel of the assessee Shri Percey Pardiwala submitted that the issue of assessee’s exigibility to tax u/s. 115JB has not been duly dealt with by the ld. CIT(A). He submitted that it is an important facet of the assessee’s appeal and the same is required to be adjudicated properly in order to complete the appellate order of the ld. CIT(A). In this regard, the ld. Counsel of the assessee submitted that this ITAT on several occasions had remitted similar incomplete orders to the file of the ld. CIT(A) to complete his appellate order on the touch stone of the decision of the Hon’ble Madras High Court in the case of CIT vs. Ramdas Pharmacy
M/s. Aban 7Pte. Limited [1970] 77 ITR 276 (Mad). Hence, the ld. Counsel of the assessee pleaded that the issue on adjudication of existence of PE may be left open and the ld. CIT(A) be directed to complete the appellate order by adjudicating on the assessee’s ground that the assessee cannot be exigible to taxation u/s. 115JB of the Act. In this regard, he stated that there are several case laws on the subject that assessee in the nature of foreign company like the assessee is not subject to provision of section 115JB of the Income Tax Act, 1961.
10. Per contra, the ld. Departmental Representative (‘ld. DR' for short) submitted a paper book and placed inter alia reliance upon the decision of the ITAT in the case of DCIT(IT) vs. Deep Drilling 1 Pte. Ltd. (in vide order dated 19.04.2017) where on similar facts, the ITAT had opined that the assessee had a PE in India. However, the ld. DR fairly agreed with the Sr. ld. Counsel of the assessee that the issue of exigibility of assessee to taxation u/s. 115JB has not been duly adjudicated by the ld. CIT(A).
Upon careful consideration, we note that the issue of assessee’s exigibility to taxation u/s. 115JB has not been properly decided by the ld. CIT(A). He has summarily dealt with the issue. It is settled law that the assessee has an indefeasible right of a speaking order. As expounded in Hon’ble Madras High Court decision in the case of Ramdas Pharmacy (supra), leaving some issues undecided by appellate authorities leads to multiplication of proceedings. Hence, we accede to the request of Sr. ld. Counsel of the assessee on remitting the issue to the file of the ld. CIT(A) to duly decide the issue of assessee’s exigibility to tax u/s. 115JB of the Act. The ld. CIT(A) is directed to complete
M/s. Aban 7Pte. Limited the appellate order by duly deciding on the issue of assessee’s exigibility to tax u/s. 115JB by a speaking order. After the order of the ld. CIT(A) is complete upon adjudication on this issue, both the parties will be at liberty to file necessary appeals as and if necessary. Accordingly, the issue of assessee’s exigibility to tax u/s. 115JB is remitted to the file of the ld. CIT(A). In view of our remitting this issue to the file of the ld. CIT(A) so as to complete his order, the other issue raised in this appeal are not being adjudicated.
Both the counsels fairly agreed to the above proposition.
In the result, this appeal by the Revenue stands allowed for statistical purpose.
Order pronounced in the open court on 05.09.2018