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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
ORDER Per Prashant Maharishi, AM:
This appeal is preferred by assessee against the order of CIT (A) –II Dehradun dated 14.08.2013.
Brief facts are that Assessee Company, incorporated under the laws of BVI having its registered office at Cayman Islands, is engaged in the business of providing services and facilities in connection with exploitation and production of mineral oil in India. For the AY 2010-11 it filed return of income on 1.10.2010 declaring income of Rs. 24,81,91,830/- and assessment u/s 143(3) read with section 144(c) was made on 11.3.2013 at Rs. 25,25,07,200/-.
Assessee has received mobilisation charges amounting to Rs. 4,56,26,615/- for mobilisation of Rigs from South Korea to Cochin and proportionate amount of Rs. 24,72,963/- is relating to Voyage undertaken by the rig inside Indian Waters and therefore only Rs. 24,72,963/- is offered for computation u/s 44 BB (2) and an amount of Rs.
Deepwater Pacific 1 inc. AY: 2010-11 4,31,53,652/- related to voyage outside India and therefore same was not included while offering 10 % presumptive tax u/s 44BB (2) of the act.. However, AO rejected the contention of the assessee relying on several decisions that this amount is chargeable to tax in India as section 44BB is a complete code in itself and it provides presumptive taxation @ 10% and which also covers reimbursement, mobilisation, de-mobilisation etc. for the purpose of determining the profit. Assessee carried the matter before the CIT (A) who in turn dismissed the appeal of the assessee agreeing with the view of the AO which is based on various decisions. Against this order assessee is in appeal before us.
Ld. AR fairly admitted that this issue that whether mobilisation fees is includible for the purpose of working out 10% of the presumptive income u/s 44BB and same is required to be included for the purpose of computing income there under by the decision of Hon’ble UttaraKhand High Court in case of SEDCO FOREX INTERNATIONAL INC. VS. COMMISSIONER OF INCOME TAX & ANR. 299 ITR 238.
LD. DR also submitted that the issue is covered in favour of the revenue.
We have carefully considered the rival submission. Provisions of section 44BB are special presumptive tax provisions treating 10 % of the aggregate amount specified in sub-section (2) of section 44BB as deemed profits and gains of non-resident assessee who is engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils. The amount referred in sub-section (2) of section 44BB are the amounts (a) paid to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India, (b) payable to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India, (c)received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the Deepwater Pacific 1 inc. AY: 2010-11 prospecting for, or extraction or production of, mineral oils outside India, and (d) deemed to be received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. Only dispute in this appeal is whether according to provisions of section 44BB mobilisation advance related to mobilisation of rigs outside India is excludible from the working of gross receipt. Honourable Uttarakhand High court has dealt with an identical issue where in the question before honourable high court was Whether, on the facts and circumstances of the case, the Tribunal was right in upholding the inclusion of mobilization charges while calculating the aggregate amount referred in sub-section (2) of section 44BB of the Income-tax Act." or not as well as the decision of Hon’ble Uttarakhand High Court 299 ITR 328 wherein it is held that : “16. We very respectfully submit that in the judgment Ishikawajima- Harima Heavy Industries Ltd. v. Director of Income-tax reported in [2007] 288 ITR 408; [2007] 3 SCC 481, the hon' ble Supreme Court has dealt with the assessment of a non-resident company on its income as per the provisions of section 5 and section 9 of the Income-tax Act. Here in the present case, provisions of section 5 and section 9 are not attracted. Section 4 is a charging section and section 5 contains the scope of total income, which provides that subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income as described under this section and section 9 provides the incomes deemed to accrue or arise in India in the contingencies described under this section. Therefore, section 5 and section 9 both are aimed at the income for the taxability under section 4 of the Act, while section 44BB does not take into account the income for calculating the aggregate amount to calculate 10 per cent. profits and gains. Profits and gains is a type of income to be taxed under a legal fiction, i.e., at 10 per cent. of the amount specified in sub-section (2) of section 44BB. Section 44BB is a special provision relating to the nonresident assessee who is providing services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in or outside India. The section is a complete code in itself. Thus, the reliance placed by Sri Porus Kaka, learned counsel for the assessee, is misplaced as we have observed that the amount referred in sub-section (2) of section 44BB are four types of amounts and all the four types of amounts are mutually inclusive and has to be taken into account either all of them or any of them and its clauses themselves provide that whether the payment is made inside India or outside India.
In the present case, a finding has been recorded by the Income-tax Appellate Tribunal that it was not in dispute before the Tribunal that the payment was made to the appellant-company outside India and the Deepwater Pacific 1 inc. AY: 2010-11
mobilization fee as claimed by the assessee was paid to the appellant by ONGC has no nexus with the actual amount incurred by the appellant- company for transportation of drilling units of rigs to the specified drilling locations in India. Hence, the mobilization fee is not the reimbursement of expenditure. ONGC was liable to pay a fixed sum as stipulated in the contract regardless of actual expenditure which may be incurred by the assessee-company for the purpose. In view of the fictional taxing provision contained under section 44BB, the Assessing Officer was right in adding the amount of Rs. 99,04,000 for the assessment year 1986-87 and the amount worth Rs. 64,64,530 for the assessment year 1987-88 received by the assessee towards mobilization charges for the purpose of imposing Income-tax and the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal were also right in upholding the order of the Assessing Officer.”
Therefore, respectfully following the decision of the Hon’ble Uttarakhand High in case of Sedco Forex International Inc. V CIT 299 ITR 238 we hold that AO was correct in adding mobilisation advance received of Rs 43,153,652/- for computation of income according to the provision of section 44BB. Therefore we confirm the order of CIT (A).
In the result appeal of the assessee is dismissed. (Order Pronounced in the Court on14/10/2015)