COMMISSIONER OF INCOME TAX vs. M/S VANTAGE INTERNATIONAL MANAGEMENT CO.

THE CHIEF JUSTICE SHRI VIPIN SANGHI AND JUSTICE SHRI RAMESH CHANDRA KHULBE

2nd November, 2022

Income Tax Appeal No.08 of 2022

Commissioner of Income Tax, (International Taxation).

……Appellant. Vs. M/s B.J. Services Co. Me Limited.

… Respondent

With Income Tax Appeal No.07 of 2021

Commissioner of Income Tax

……Appellant. Vs. M/s Vantage International Management Co. … Respondent

With Income Tax Appeal No.18 of 2021

Commissioner of Income Tax, International Taxation

……Appellant. Vs. Schlumberger Asia Services Ltd.

… Respondent

With Income Tax Appeal No.09 of 2022

Commissioner of Income Tax, International Taxation

……Appellant. Vs. Transocean Offshore International Ventures Ltd. … Respondent

With Income Tax Appeal No.10 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Sundowner Offshore International Bermuda Ltd. … Respondent.

With Income Tax Appeal No.11 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Deepwater Pacific 1 INC

… Respondent.

With Income Tax Appeal No.12 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Deepwater Pacific 1 INC.

… Respondent.

With Income Tax Appeal No.13 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Transocean Offshore International Ventures Ltd. … Respondent.

With Income Tax Appeal No.17 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Transocean Offshore International Ventures Ltd. … Respondent.

With Income Tax Appeal No.20 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Deepwater Pacific 1 INC

… Respondent.

With Income Tax Appeal No.22 of 2022

Commissioner of Income Tax, (International Taxation).

……Appellant. Vs. M/s B.J. Services Co. Me Limited.

… Respondent

With Income Tax Appeal No.26 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Ensco Maritime Ltd.

… Respondent.

With Income Tax Appeal No.29 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. Sundowner Offshore International (Bermuda) Ltd. … Respondent.

With Income Tax Appeal No.35 of 2022

Commissioner of Income Tax, International Taxation ……Appellant. Vs. M/s Sundowner Offshore International Bermuda Ltd. … Respondent.

Presence:- Mr. Hari Mohan Bhatia, learned counsel for the appellant-Department. Mr. Pulak Raj Mallick, Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr.Tarun Chanana, Mr. Chetan Joshi, Mr. Nishant Thakkar and Ms. Jasmin Amalsadvala, learned counsel for the respondents.

JUDGMENT: (Per Shri Vipin Sanghi, Chief Justice)

These income tax references arise from the orders passed by the Income Tax Appellate Tribunal, Dehradun Bench, New Delhi in different ITAs’ preferred by the Revenue. The issue, which came up for consideration before the ITAT, was with regard to the interpretation of Sections 44 BB(1) and 44 BB(2) of the Income Tax Act. The specific issue, that arose for consideration was, whether the service tax collected by the assessees in the course of provision of services and facilities in connection with, or supply of plant and machinery on hire, in the prospecting for, or extraction or production of, mineral oils in India, was liable to be included in the amount paid or payable for the purpose of computation of the ‘presumptive taxable income’ of the assessee. The Tribunal while passing the impugned orders, held in favour of the assessee. While doing so, the Tribunal 3

relied upon the Full Bench judgment of this Court in DIT (International Taxation) & others vs. Schlumberger Asia Services Limited in ITA No. 40 of 2012, decided on 12.04.2019, also reported as (2019) 414 ITR 1 (Uttarakhand) (FB). 2.

The Full Bench in the said judgment held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB of the Income Tax Act. 3.

Mr. Bhatia, learned counsel for the appellant-Department submits that since the tax effect, in ITA No. 40 of 2012 and other appeals decided by the Full Bench, was less than the prescribed limits, no Special Leave Petition could be preferred before the Supreme Court, and on that account, the judgment of the Full Bench has attained finality. However, in some of the present appeals, the tax effect exceeds the limit set by the Central Board of Direct Taxes for preferring a further appeal to the Supreme Court. 4.

Mr. Bhatia has sought to argue before us that the findings returned by the Full Bench are, in fact, in favour of the Revenue on the interpretation of Section 44BB of the Income Tax Act. He submits that the only reason why the Full Bench decided the appeals against the Revenue, was the decision of the Hon’ble Division Bench of the Delhi High Court in DIT vs. Mitchell Drilling International (P.) Ltd., (2016) 380 ITR 130 (Delhi). 5.

Mr. Bhatia has taken us to the judgment of the Full Bench in DIT (International Taxation) & others vs. Schlumberger Asia Services Limited (Supra). A perusal of the said judgment shows that the Full Bench has arrived at its interpretation of Section 44 BB of the Act, on its own reading and interpretation of the said provision. The Full Bench has merely supported its view by placing reliance on the judgment of the Division Bench of the Delhi High Court in DIT vs. 4

Mitchell Drilling International (P.) Ltd. (Supra). 6.

It goes without saying that the Full Bench of this Court was not bound by the view taken by the Delhi High Court and the said view only had persuasive value. Therefore, it would not be correct to say that the Full Bench of this Court, though agreeing with the submission of the Revenue, decided the appeals of the Revenue against it in the light of the judgment of the Division Bench of the Delhi High Court. 7.

In para 28 and 29 of its judgment, the Full Bench of this Court, inter alia, observed as follows:-

”28. As the expression 'amount paid or payable' in Section 44BB(2)(a), and the expression 'amount received or deemed to be received' in Section 44BB(2)(b), is qualified by the words 'on account of the provision of services and facilities in connection with, or supply of plant and machinery, it is only such amounts, paid or payable for the services provided by the assessee, which can form part of the gross receipts for the purposes of computation of gross income under Section 44BB(1) read with Section 44BB(2). DIT v. Mitchell Drilling International Pvt. Ltd. (2015) 62 taxmann.com 24/234 Taxman 818/(2016) 380 ITR 130 (Delhi). On its literal construction, Section 44BB(2) would only be the amount paid by the ONGC to the assessee on account of (i) provision of services in connection with or (ii) supply of plant and machinery on hire used in, the prospecting, extraction and production of mineral oils. As the amount reimbursed by the ONGC, towards the service tax paid by assessee earlier to the Government, is not an amount paid to the assessee towards the services provided by the latter in connection with the prospecting, extraction or production of mineral oils, it is not required to be included in the amounts specified in clauses (a) and (b) of Section 44BB(2). 29. As shall be elaborated later in this order, service tax is a tax levied on services, and cannot be treated as the Service itself. It is difficult, therefore, to accept the submission of the revenue that the amount reimbursed by the ONGC, towards service tax paid earlier by the assessee to the Government, should be included in the amount paid to the assessee on account of provision of services and facilities. Even otherwise, it is not every amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee under Section 44BB. It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee. On a plain and literal reading of clauses (a) and (b) of Section 44BB of the Act, it is clear that reimbursement of service tax ought not to be included in the aggregate of the amounts specified in clauses (a) and (b) of Section 44BB(2), as it is not an amount received by the assessee on account of services provided by them in the prospecting, extraction or production of mineral oils. 5

Firstly, we are bound by the view taken by the Full Bench of this Court. Secondly, Mr. Bhatia has not been able to satisfy us that the said judgment of the Full Bench needs re-consideration so as to persuade us to refer the issue to a still Larger Bench. 9.

Following the judgment of the Full Bench of this Court in DIT (International Taxation) & others vs. Schlumberger Asia Services Limited (Supra), we are of the view that no fresh question of law arises for consideration in these appeals. Accordingly, the appeals are dismissed.

________________ VIPIN SANGHI, C.J.

________________________

RAMESH CHANDRA KHULBE, J. Dated: 2nd November, 2022 AK/BS