DDIT, DEHRADUN vs. M/S. ALMANSOORI SPERIALIZED ENGINEERING CO., DEHRADUN

“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the revenue earned by the assessee during the year from various entities on account of provision of technical services is chargeable to tax u/s 44BB of the Income Tax Act, 1961 (‘the Act’). 1.(a) The Ld. CIT(A) has erred in reversing the findings of the Assessing Officer (‘AO’) that the receipts on account of provision of technical services are in the nature of Fee for Technical Services (‘FTS’) as defined under section 9(1 )(vii) and therefore, liable to be taxed under section 44DA of the I.T. Act, 1961 as they do not quality for treatment under section 44BB of the Act.

The facts in brief of the case are that the assessee earned revenue from various contracts, which was held as “Fee for Technical Services” (FTS) under section 9(1)(vii) of the Income-tax Act, 1961 (in short “the Act”) by the Assessing Officer. Further, as the assessee did not produce books of accounts and according to the Assessing Officer, the assessee has rendered such services through its permanent establishment in India, he computed the profit of the assessee on estimate basis at the rate of 25% of the gross receipt, as business income of the assessee. The assessee contended that above income was earned from providing services and facilities in connection with exploration and production of mineral oil and, therefore, income of the assessee was taxable under the presumptive tax scheme provided under section 44BB of the Act. The Assessing Officer rejected the contention of the assessee and framed the assessment on total income of Rs.1,63,76,980/- as against the returned income of Rs.65,50,790/- in the final assessment order passed under section 144C(1)(3)(b) r.w.s 143(3) of the Act on 07/05/2013. Aggrieved, the assessee preferred appeal before the Ld. CIT-A, who following the earlier orders on the taxability of receipts from contract in the field of oil exploration under section 9(1)(vii) of viz-a-viz section 44BB the Act, allowed the appeal of the assessee.

At the outset, the Ld. counsel of the assessee submitted that identical grounds were raised in the appeal No. 6587/Del/2014 for assessment year 2011-12 in the case of the assessee and the appeal of the Revenue has been dismissed by the Tribunal and accordingly he submitted that issue in dispute is squarely covered by the said order of the Tribunal in favour of the assessee. 4. The Ld. Sr. D.R., relied on the order of the Assessing Officer, however, fairly conceded that issue in dispute is covered by the order of the Tribunal(supra) cited by the Ld. counsel. 5. We have heard the rival submissions and perused the relevant material on record. We find that in the case of the assessee for assessment year 2011-12, following grounds of appeal were raised: “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the revenues received by the assessee, on account of the provision of slick-line services, wire-line services, well-testing services etc., including provision of technical personnel, to various entities was taxable u/s 44BB of the Income Tax Act, 1961 ('the Act') as opposed to Section 44DA read with Section 9(l)(vii) of the Act.

Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the decisions of jurisdictional High Court in the cases of ONGC as Agent of Foramer France and M/s Rolls Royce Pvt Ltd [2007-TM-03-HC-UKHAND-INTL] 5. Whether on the facts and circumstances on the facts, the Ld CIT(A) has erred in reversing the action of the AO who, having held that the assessee's revenues on account of aforesaid services under Contracts with various entities are liable to be taxed u/s 44DA, rightly estimated the income of the assessee by applying 25% rate of profit on gross receipts in the absence of books of accounts and details of expenses incurred in providing the services. 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that interest u/s 234B of the Income Tax Act, 1961 ('the Act') was not chargeable in this case by relying upon the case of M/s Maersk [334 ITR 79] a. The Ld. CIT (A) has erred in not appreciating the fact that the case of M/s Maersk was distinguishable on facts as it dealt with a case where the employer failed to deduct tax at source despite the specific provisions of the Act in terms of which the employer was mandatorily required to deduct tax from the salary paid to the employee. In the said case, the Hon'ble Court held that an employee is not liable to pay advance tax Page 3 of 8 on salary because u/s 192 there is an obligation on the employer to deduct tax at source. The case does not lay down a general proposition of law that interest u/s 234B is not chargeable in all cases, particularly in cases where the Non- Resident assessee/payee/deductee has played a role in inducing non- deduction or short-deduction on the part of the payer/deductor. b. The Ld. CIT (A) has erred in failing to take note of the observations of the Hon'ble High Court in the case of M/s Mitsubishi [330 ITR 578 (Del) that the role of the assessee/payee/deductee in short-deduction or non-deduction of tax needs to be ascertained before claim regarding non-liability to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgment of Delhi High Court dated 7.11.2013 in & Ors of 2012).” 5.1 We find that the grounds of appeal in the year under consideration are almost identical to the grounds of appeal raised in AY: 2011-12. The Tribunal in the said order has dismissed the appeal of the Revenue with following observation:

In ground No. 6 to 6.2, the Revenue has challenged the finding of the Ld. CIT-A that interest under section 234B of the Act was not chargeable. Before us, the Ld. Senior DR supporting the grounds submitted that the assessee was required to pay interest under section 234B of the Act. 6.1 The Ld. counsel on the other hand, submitted that Hon’ble Delhi High Court in the case of DIT versus GE packaged power Inc 373 ITR 65 has held that interest under section 234B of the Act was not chargeable in case of non-resident whose entire income was subject to tax deduction at source under section 195 of the Act. 6.2 We have heard the rival submission and perused the relevant material on record. In the decision of the Jacobs Civil (2011) 330 ITR 578(Delhi) it is held that the obligation was upon the payer to deduct tax at source before making remittances to them and the payer’s failure to do so cannot invite an interest upon the payees.The Hon’ble Delhi High Court in the case of CIT versus GE packaged power inc (supra) held as under:

For the above reasons, this Court finds that no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether the assessees were liable to tax under Section 195(1), and to what extent, by taking recourse to the mechanism provided in Section 195(2) of the Act. The failure of the payers to do so does not leave the Revenue without remedy; the payer may be regarded an assessee-in-default under Section 201, and the consequences delineated in that provision will visit the payer. The appeal of the Revenue is accordingly dismissed without any order as to costs. 6.3 In view of the above decisions of the Hon’ble High Court, we restore the issue to the file of the Assessing Officer to decide the liability of interest under section 234B of the Act in accordance with law. It is needless to mention that the assessee shall be provided opportunity of hearing on the issue in dispute. Accordingly, grounds No. 6 to 6.2 of the appeal are allowed for statistical purpose. 7. In the result, appeal of the Revenue is allowed partly for statistical purpose.