ASSISTANT COMMISSIONER OF INCOME TAX, DEHRADUN vs. WESTERN GECO INTERNATIONAL LIMITED, HARYANA

The present appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-Noida-2 (‘Ld. CIT (A)’ for short), dated 20/06/2024 for the Assessment Year 2022-23.

The grounds of Appeal of the Revenue are as under:-

Facts in brief are that: the Assessee is a non-resident company engaged in the business of providing services and facilities in connection with the exploration, exploitation, production of mineral oil in India and in supplying plant and machinery on hire, used or to be used in the prospecting for, or extraction or production of mineral oils.

The AO completed the assessment on 11/03/2024 under section 143(3) r.w.s144C(3) of the Act, at an income of INR 28,762,670/-. In the said assessment order, the Ld. AO made the variation to the returned income by considering revenue received amounting to INR 11,31,45,762/- in respect of its contracts with Oil Natural Gas Corporation Limited for hiring of services for 4C-3D OBN data processing & interpretation of data D1 to be in the nature of fees for technical services under section 9(1)(vii) of the Act.

Aggrieved by the assessment order dated 11/03/2024, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 20/06/2024, deleted the disallowance made by the A.O. by following the ratio laid down by the Special Bench of the Tribunal in Assessee’s own case for Assessment Year 2011-12 in and 6536/Del/2014 and the Judgments of High Courts.

As against the order of the Ld. CIT(A) dated 20/06/2024, the Department preferred the present Appeal on the grounds mentioned above. The Department's Representative submitted that, theLd.CIT(A) has erred in ignoring the effects of the amendment brought in vide Finance Act, 2010 w.e.f. 01.04.2011, in terms of which income covered by section 44DA has been specially excluded from the scope of section 44BB for Assessment Years 2022-23 onwards. Further submitted that 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.

Per contra, the Ld. Assessee's Representative submitted that the issue in the present appeal are squarely covered in the order of Assessee’s own case for Assessment Year 2011-12 in and 6436/del/2014, wherein the matter was referred to the Third Member and the Hon’ble Third Member Bench of the Tribunal has decided the issue in favour of the Assessee. Further submitted that in the year under consideration, the Ld. CIT(A) has followed the order of the Special Bench (supra) and the ratio laid down by the Hon'ble High Courts, thus submitted that the Grounds of Appeal of the Revenue sans merit, therefore sought for dismissal of the Appeal of the Revenue.

We have heard both the parties and perused the material available on record. The Ld. CIT (A) while deciding the issue in favour of the Assessee, relied on the order of Assessee’s own case for Assessment Year 2011-12 in and 6436/Del/2014, wherein the Special Bench of the Tribunal held that the amount received by the Assessee in the present case as reimbursement of service tax is not including in the gross turnover for the purpose of computing taxable income u/s 44BB of the Act. The relevant portion of the order of the third member are as under:-

As regards the issue involved in question No.2, the learned representatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the decision of the Hon’ble Uttarakhand High Court in the case of Director of Income-tax International Taxation Vs. Schlumberger Asia Services Ltd. [2019] 414 ITR 1, wherein it was held that the amount reimbursed to assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by assessee to Government of India, not being an amount paid to assessee on account of providing services and facilities in connection with prospecting for, or extraction or production of mineral oils in India, would not form part of aggregate amount referred to in clauses (a) and (b) of sub-section (2) of Section 44BB of the Act. To the similar effect is the decision of Hon’ble High Court in the case of Director Income- tax Vs. Mitchell Drilling International (P.) Ltd. [2016] 380 ITR 130 (Del.), wherein it was held that the service tax collected by the assessee for passing it on to Government was not to be included in gross receipt in terms of Section 44BB(2) read with Section 44BB (1) of the Act for the purpose of computing presumptive income of the assessee under Section 44BB of the Act. Respectfully following the decision of Hon’ble Jurisdictional High Court in the case of Schlumberger Asia Services Ltd. (supra) as well as that the Hon’ble Delhi High Court in the case of Mitchell Drilling International (P.) Ltd. (supra), I hold that the amount received by the assessee in the present case as reimbursement of service tax is not including in the gross turnover for the purpose of computing taxable income under Section 44BB of the Act.

I accordingly agree with the view taken by the learned judicial Member on both the issues and answer both the questions referred under Section 255 (4) of the Act in favour of the assessee.”

Though the Department has raised the similar grounds of the present Appeal, no judicial precedent has been cited before us to contradict the finding of the order of the Third Member in and 6436/Del/2024(supra) and in the absence of bringing any change of circumstances/facts on record, we are of the considered opinion that the Ld. CIT(A) has committed no error in following the order of the Special Bench in Assessee’s own case for Assessment Year 2011-12 and allowing the first appeal of the Assessee. Accordingly, finding no merits in the Grounds of appeal of the Revenue, the Appeal of the Revenue is dismissed.