DCIT (IT) 4(3)(1), MUMBAI vs. VALENTINE MARITIME (FULF) LLC, MUMBAI

It is necessary to put on record that this appeal was earlier disposed heard and disposed off in the absence of the assessee vide order dated 29th March 2017. Subsequently, the assessee filed an 2 Valentine Maritime (Gulf) LLC application seeking recall of the order. After considering the application of the assessee, the Tribunal recalled the appeal order vide order dated 6th April 2018, in M.A. no.755/Mum./2017.

Be that as it may, the core issue arising for our consideration is, whether the amount of ` 75,93,303, received by the assessee is taxable under section 44BB of the Income Tax Act, 1961 (for short “the Act”)?

Brief facts are, the assessee is a company incorporated in Abu Dhabi and is a resident of United Arab Emirates (UAE). The assessee is engaged in the business of installation and fabrication of on shore and off shore pipelines in connection with prospecting of or extraction of mineral oil. In course of its business activity, the assessee, during the previous year took up two projects in India. However, in the present appeal, we are concerned with the project with Leighton Contractors (India) Pvt. Ltd. for charter hire of Barge Regina 250 and Cargo Barge VML1, for ONGC oil fields. In relation to the aforesaid project the assessee for the year ended 31st March 2010, received U.S. $ 15,78,307. Though, the assessee treated it as business profit, however, taking shelter behind Article–7 of India–UAE Double Taxation Avoidance Agreement (DTAA) it was submitted that such business profit is taxable only to the extent they are attributable to a Permanent Establishment (PE) in India. Referring to Article–5 of the 3 Valentine Maritime (Gulf) LLC tax treaty, it was claimed by the assessee that, since, the project is for a period of less than nine months, there is no P.E. in India, hence, the amount received is not taxable in India. The Assessing Officer, however, did not find merit in the submissions of the assessee. Referring to the assessment order passed for the assessment year 2009–10, the Assessing Officer held that the assessee has a P.E. in India since it has entered into a contract with Leighton Contractors (India) Pvt. Ltd. on 16th July 2008. Therefore, the project is for a period exceeding nine months. Thus, he brought the amount received of U.S. $ 15,78,307, equivalent to ` 7,59,33,032 to tax under section 44BB of the Act by estimating the income @ 10% of the gross receipt. Assessee challenged the addition by filing appeal before the first appellate authority.

After considering the submissions of the assessee and taking note of the fact that while deciding identical issue arising in assessee’s own case for assessment year 2009–10, the learned Commissioner (Appeals) has held that the date of starting of the contract should be adopted at 9th November 2008 and reckoned from that date the project is less than nine months, hence, there is no P.E. in India, learned Commissioner (Appeals) decided the issue in favor of the assessee. Being aggrieved of the aforesaid decision of the learned Commissioner (Appeals), the Revenue is in appeal before us.

At the very outset, Shri Hiro Rai, learned Counsel for the assessee submitted that the issue has been decided in favour of the assessee by the Tribunal while disposing off Department’s appeal in assessment year 2009–10.

Shri M.V. Raj Guru, learned Departmental Representative has agreed with the aforesaid submissions of the assessee.

We have considered rival submissions and perused materials on record. As could be seen from the facts narrated in the impugned assessment order, the duration period of the particular project / contract with Leighton Contractors (India) Pvt. Ltd. was from 9th November 2008 to 11th June 2009 which falls in two financial years i.e., financial year 2008–09 and 2009–10. It has been the consistent claim of the assessee, since, the period of contract is less than nine months, there is no P.E. in India, hence, the business profits are not taxable in India in terms of the India–UAE Tax Treaty. Rejecting the aforesaid claim of the assessee in assessment year 2009–10, the Assessing Officer held that the period of contract has to be reckoned from the date of execution of contract i.e., 16th July 2008. Therefore, the period of contract is more than 9 months, hence, the assessee has a P.E. in India. However, while deciding assessee’s appeal in assessment year 2009–10, learned Commissioner (Appeals) has held