CAMERON (SINGAPORE) PTE LTD,COIMBATORE vs. DCIT, INTERNATIONAL TAXATION, CIRCLE-1(2)(1), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI

BEFORE SHRI G.S. PANNU, HON’BLE PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER

ITA No.1/JPR/2017 Assessment Year: 2013-14 M/s. Cameron (Singapore) Vs. Deputy Commissioner of Pte. Ltd., Income Tax, C/o- Schlumberger Asia International Taxation, Services Limited, Khasra Room No. 313, NCR Building, No.2481/838, Village Bhagwan Das Road, Murtala Gala, NH-15, Jaipur Ahmedabad Road, Barmer, Rajasthan -344001 PAN :AADCC5259P (Appellant) (Respondent)

With ITA No.6/JPR/2017 Assessment Year: 2014-15 M/s. Cameron (Singapore) Vs. Deputy Commissioner of Pte. Ltd., Income Tax, C/o-Cameron Manufacturing International Taxation, India Pvt. Ltd., IIIrd Floor, Room No. 313, NCR Building, Tidel Park, Vilankurichi Bhagwan Das Road, Road, Civil Aerodrome Post, Jaipur Coimbatore, Tamilnadu -641014 PAN :AADCC5259P (Appellant) (Respondent)

With ITA No.7960/Del/2018 Assessment Year: 2015-16 M/s. Cameron (Singapore) Vs. Deputy Commissioner of Pte. Ltd., Income Tax, C/o-Cameron Manufacturing International Taxation, India Pvt. Ltd., IIIrd Floor, Circle-1(2)(1),

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

Tidel Park, Vilankurichi New Delhi Road, Civil Aerodrome Post, Coimbatore, Tamilnadu -641014 PAN :AADCC5259P (Appellant) (Respondent)

Assessee by Sh. Salil Kapoor, Advocate Sh. Vibhu Jain, Advocate Department by Sh. Sanjay Kumar, Sr. DR Date of hearing 26.12.2022 Date of pronouncement 24.03.2023

ORDER PER SAKTIJIT DEY, JM: Captioned appeals by the assessee assail the final

assessment orders passed for assessment years 2013-14, 2014-

15 and 2015-16 in pursuance to the directions of learned Dispute

Resolution Panel (DRP). Since, the appeals relate to the same

assessee and involve common issues, they have been clubbed

together and disposed of in a common order, for the sake of

convenience. ITA No.1/JPR/2017 AY: 2013-14

does not require adjudication.

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of the departmental authorities in holding that receipts from

services relating to Progressive Cavity Pump system (PCP) and

rental of tools/equipments to Cairn Energy India Pty. Ltd. (in

short ‘Cairn India’) and Oil and Natural Gas Corporation (ONGC)

is not in the nature of business profits to be taxed under section

44BB of the Income-tax Act, 1961 (in shoft ‘the Act’) but is Fee for

Technical Services (FTS).

3.1 Briefly the facts relating to this issue are, the assessee is a

non-resident corporate entity incorporated under the laws of

Singapore and a tax resident of Singapore. As stated, the assessee

is engaged in the business of providing services or facilities of

drilling and production systems, valves and measurements,

compression system in connection with oil and gas exploration

activities to various onshore and offshore drilling contractors/oil

and gas producers across the globe. As stated by the Assessing

Officer, the assessee is a leading international manufacturer of

pressure control equipments for oil and gas drilling and

production of onshore, offshore and subsea equipment. The

assessee had entered into a contract with Cairn India for

installation and commissioning of PCP pump systems. Besides 3 | P a g e

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above, the assessee has also given certain tools/equipments on

lease/hire basis to ONGC, which are used by the ONGC in

connection with exploration of mineral oils in India. Thus, in the

year under consideration, as per the version of the assessee, it

had taxable income from the aforesaid two sources. The assessee

filed its return of income on 13.09.2013, declaring total income of

Rs.18,91,75,740/-. Subsequently, the assessee filed a revised

return of income 13.09.2014 declaring income of

Rs.1,80,56,100/-. In the return of income, the assessee offered

the receipts from services provided to Cairn India in relation to

PCP and rental of tools/equipments to Cairn India and ONGC by

applying the provisions of section 44BB of the Act. In course of

the assessment proceeding, the Assessing Officer called for the

necessary details, including the contracts executed with Cairn

India and ONGC. The Assessing Officer observed that as per the

contract with Cairn India, the scope of work includes providing

equipment and personnel to perform work of PCP. Further, as per

the scope of work, the assessee shall supply the complete PCP

pumps comprising services of various components. The scope of

work further requires that the safety and risk management shall

be a primary and is top priority in the project execution and 4 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

industry proven practices and equipment shall be utilized

throughout all phases of the execution to promote protection of

the environment and to reduce risk to the lowest possible. The

equipment to be supplied by the assessee shall be designed to

ensure safety of personnel during installation, operation and

maintenance activities.

3.2 Insofar as the contract with ONGC is concerned, as per the

scope of work the assessee is required to give on hire/lease tools

for drilling operations along the provision of service. After

examining the nature and scope of contracts, the Assessing

Officer was of the view that the services rendered are of technical

nature, hence, the receipts from such services has to be treated

as FTS under section 9(1)(vii) of the Act. Hence, assessee’s claim

that it is business profits to be taxed under section 44BB of the

Act is unacceptable. Accordingly, he issued a show-cause notice

to the assessee in similar line. In response to the show-cause

notice, the assessee submitted that since the receipts are from

provision of services or facilities and from lease/hire of plant and

machinery to be used in prospecting for, or extraction, or

production of mineral oils, they will be covered under section

44BB of the Act. Further, he submitted that since the assessee is 5 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

a non-resident and the work is rendered through the project office

in India, provision of section 44BB would apply. The Assessing

Officer, however, did not accept the claim of the assessee.

Referring to the definition of FTS under section 9(1)(vii) of the Act,

he concluded that the receipts are in the nature of FTS. Further,

since, the assessee had a PE in India, the Assessing Officer held

that the receipts would be taxable as FTS under section 44DA of

the Act. While doing so, he relied upon a decision of the Hon’ble

Uttarakhand High Court in case of CIT Vs. ONGC, 299 ITR 438

and ultimately applying the provisions of section 44DA of the Act,

he determined the profit at the rate of 25% on gross basis.

Accordingly, he proposed the draft assessment order. Against the

draft assessment order, the assessee raised objections before

learned DRP. However, the decision of the Assessing Officer was

upheld.

3.3 Before us, learned counsel appearing for the assessee drew

our attention to the relevant contracts with Cairn India and

ONGC and submitted that the services relating to installation and

commissioning of PCP is in connection with extraction or

exploration of mineral oil. He submitted, this factual position has

not been controverted by the departmental authorities. Further, 6 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

he submitted, the leasing/hiring of tools/equipments to ONGC is

also in connection with extraction/exploration of mineral oil, as,

such tools and equipments are used or to be used for such

purpose. Thus, he submitted, the receipts have to be taxed under

section 44BB of the Act as it is a special provision and cannot be

treated as FTS. Further, referring to the definition of FTS in

Explanation 2 to section 9(1)(vii) of the Act, he submitted, the

receipts from any construction, assembly or like project is

specifically excluded from being treated as FTS. He submitted,

this aspect has been further clarified by the CBDT in Instruction

No. 1862, dated 22.10.1990 by explanation the term ‘mining or

like project’ to mean drilling and exploration of mineral oils. Thus,

he submitted, the receipts are to be taxed under section 44BB of

the Act. Further, he submitted, the decision of the Hon’ble

Uttarakhand High court in case of CIT Vs. ONGC (supra) relied

upon by the Assessing Officer, subsequently has been reversed by

the Hon’ble Supreme Court in case of ONGC Vs. CIT, 376 ITR

year 2019-20, the Assessing Officer himself has brought identical

receipts to tax under section 44BB of the Act. Therefore, he

submitted, assesse’s claim should be accepted. 7 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

3.4 Learned Departmental Representative, strongly relying upon

the observations of the Assessing Officer and learned DRP,

submitted that the scope of work undertaken by the assessee

under the relevant contracts do not suggest that the services

rendered by the assessee are in connection with exploration, or

extraction, or production of mineral oils. On the contrary, the

services are of highly technical nature. Hence, the receipts being

in the nature of FTS has to be taxed under section 44DA of the

Act.

3.5 We have considered rival submissions in the light of

decisions relied upon and perused the materials on record. The

issue in dispute lies within a narrow compass as to whether the

receipts in dispute are in the nature of business profit assessable

under section 44BB of the Act or are in the nature of FTS as

defined under section 9(1)(vii) of the Act, hence, to be taxed under

section 44DA read with section 115A of the Act. As discussed

earlier, the assessee specializes in providing services or facilities

for drilling and production systems, valves and measurements,

compression systems required in connection with exploration of

mineral oils and gas. The receipts in question were received in

pursuance to contracts executed with Cairn India and ONGC. 8 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

From the discussions made by the Assessing Officer, it is

observed that Cairn India was entrusted with the work of

operation of oil blocks in northern fields and southern fields in

the state of Rajasthan. As per the contract with Cairn India, the

assessee is required to provide equipments and personnel to

perform the work in connection with the drilling and exploration

of mineral oils. Further, the assessee is required to provide

services of PCP system which is a system for extracting mineral

oils from oil wells. Additionally, the assessee also supplies

tools/equipments, both to Cairn Indian and ONGC to be used in

the activity or prospecting, exploration and production of mineral

oils. Undisputedly, both the contractees are engaged in the

activity of prospecting, exploration and production of mineral oils.

Since, the scope of work under the contracts has been elaborately

discussed by the Assessing Officer, there is no need to discuss

them any further in this order. Suffice to say, the terms of

contracts coupled with other materials on record do suggest that

the activities of the assessee under the contracts are in

connection with prospecting, exploration and extraction of

mineral oils.

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3.6 Section 44BB of the Act, which is a special provision for

computing profits and gains in connection with business of

exploration of mineral oils etc. begins with a non-obstante clause

and overrides anything contrary contained in sections 28 to 41,

43 and 43A of the Act. The said provision provides that any

consideration received by a non-resident from providing services

or facilities in connection with or supplying plant and machinery

on hire use, or ought to be used in the prospecting for, or

extraction, or production of mineral oils, has to be taxed under

the said provision on a presumptive basis at 10% of the gross

receipts and shall be chargeable to tax under the head ‘profits

and gains from business or profession’. However, the proviso to

sub-section (1) to section 44BB makes an exception by providing

that the provision of sub-section (1) of section 44BB shall not

apply in a case where the provisions of section 42 or section 44D

or section 44DA or section 115A or section 293A are applicable.

Thus, keeping in perspective the specific language of section

44BB, we have to examine the nature and character of the

receipts. It is a fact on record that the Assessing Officer has

treated the receipts as FTS under section 9(1)(vii) of the Act.

Explanation 2 to section 9(1)(vii) defines FTS as under: 10 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

“Explanation 2.—For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries";”

3.7 A careful reading of Explanation 2 to section 9(1)(vii) of the

Act makes it clear that any consideration from rendering of any

managerial, technical and consultancy services would fall within

the ambit of FTS. However, an exception has been provided to the

definition of FTS by saying that the consideration for any

construction, assembly, mining or like project shall not be

regarded as FTS. The CBDT while explaining/clarifying the

expression ‘mining or like projects’ used in Explanation 2 to

section 9(1)(vii) of the Act has observed that prospecting for,

extraction or production of mineral oils would come within the

expression ‘mining or like project’. Thus, once the services related

to prospecting, exploration, extraction or production of mineral

oils is treated as in the nature of mining or like projects,

automatically it will fall out of the ambit of FTS as defined in

Explanation 2 to section 9(1)(vii) of the Act, hence, cannot be

treated as FTS. It is further relevant to observe, the language used

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in section 44BB of the Act makes its scope very wide and

encompasses not only the services or facilities in connection with

prospecting for, or extraction, or production of mineral oils but

also supply of plant and machinery on hire to use or ought to be

used for the said purpose. In the facts of the present case,

undisputedly, the service provided by the assessee to Cairn India

is in connection with activity of prospecting for, or extraction, or

production of mineral oils. Even, the hiring/leasing of

tools/equipments to both Cairn India and ONGC is in connection

with the same activity. The materials on record clearly establish

such position. The perusal of respective orders of the

departmental authorities would demonstrate that no substantive

evidence has been brought on record by them to establish the fact

that the services/facilities and hiring/leasing of tools and

equipments are not in connection with the activities for

prospecting for, extraction, or production of mineral oils. Merely

because the services provided are of technical nature, that by

itself, would not make the receipts FTS when there is special

provision in the shape of section 44BB of the Act engrafted in the

Statute to bring such kind of receipts for the purpose of taxation

in India under the head ‘profits and gains from business or 12 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

profession’. It is relevant to observe, the Assessing Officer, while

concluding that the receipts are in the nature of FTS, has heavily

relied upon a decision of the Uttarakhand High Court in case of

CIT Vs. ONGC (supra). However, we are surprised to note that,

while doing so, he has completely ignored the decision of the

Hon’ble Supreme Court in case of ONGC Vs. CIT (supra) wherein

the very same decision of the Hon’ble Uttarakhand High Court

was reversed. A careful reading of the aforesaid judgment of the

Hon’ble Supreme Court would reveal that after taking note of the

entire gamut of services/work undertaking by non-resident

entities and the provisions contained under section 44BB of the

Act, the Hon’ble Supreme Court has held that if the work/services

in terms of a particular agreement is directly associated or

inextricably linked with prospecting, extraction or production of

mineral oil, then the receipts have to be taxed as business profits

under section 44BB of the Act. Thus, in our view, the scope and

ambit of section 44BB of the Act is wide enough to include the

receipts of the assessee from Cairn India and ONGC. At this

stage, it is relevant to observe, in assessee’s own case for

assessment year 2019-20, the Assessing Officer, while

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ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

considering similar nature of receipts from ONGC, has accepted

assessee’s claim under section 44BB of the Act.

3.8 In view of the aforesaid, we cannot sustain the decision of

the Assessing Officer to treat the receipt as FTS. Accordingly, we

direct the Assessing Officer to compute assessee’s income under

section 44BB of the Act. This ground is allowed.

challenged the taxability of the receipts from repair services

stated to have been rendered directly from head office to Cairn

India and ONGC. In the year under consideration, the assessee

had the follow additional receipts:

(i) Rs.2,31,45,285/- receipt from Cairn India towards

provision of services directly from head office, Singapore.

(ii) Rs.78,81,832/- receipt towards tools/repair services

from ONGC.

4.1 The aforesaid receipts were not offered to tax by the assessee

pleading that such services have been rendered from head office

at Singapore without involvement of the project office. Hence,

such receipts cannot be linked to the PE, therefore, not taxable in

India. The Assessing Officer, however, was not convinced with the

submission of the assessee. He was of the view that the services 14 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

rendered are of the nature of technical service, hence, would fall

within definition of FTS under section 9(1)(vii) of the Act as well as

treaty. Accordingly, he issued show-cause notice to the assessee.

In reply, the assessee took the position that the repair services

having been rendered from the head office in Singapore without

any involvement of the project office, the receipts are not taxable

in India. It was further submitted that the receipts cannot be

treated as FTS under Article 12(4)(6) of the Tax Treaty as while

rendering such services to Cairn India and ONGC, the assessee

has not made available any technical knowledge, experience, skill,

knowhow or process either to Cairn India and ONGC. The

assessee’s submission, however, did not find favour with the

Assessing officer and learned DRP. They held that major portion

of services include training of personnel of ONGC and Cairn India,

which means that the make available condition of Article 12(4)(b)

is satisfied. Therefore, the receipts are in the nature of FTS.

4.2 Before us, learned counsel appearing for the assessee

reiterated the stand taken before the departmental authorities.

However, he submitted, since the receipts are intrinsically

connected to the activity of exploration and extraction of mineral

oil, they can be taxed under section 44BB of the Act. 15 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

4.3 Learned Departmental Representative relied upon the

observation of the Assessing Officer and learned DRP.

4.4 We have considered rival submissions and perused the

materials on record. Though, before the departmental authorities,

the assessee has taken a stand that the receipts are not taxable

in India, as, the services were rendered from head office in

Singapore without the involvement of the project office and

further the make available condition under section 12(4)(b) of

India – Singapore DTAA is not satisfied, however, before us,

learned counsel appearing for the assessee has made an

alternative claim by pleading that the receipts should be taxed

under section 44BB of the Act. From the facts and materials on

record, it is observed that the receipts in dispute are from repair

of tools and equipments used by Cairn India and ONGC for

extraction or exploration of mineral oil. In case of ONGC Vs. CIT

(supra), the Hon’ble Supreme Court, while interpreting the

provisions contained under section 44BB of the Act in the context

of scope of work covered under the contract, has considered the

entire gamut of work executed under the contract, including

repair, training of personnel etc. and held that the pith and

substance of each of the contracts is inextricably connected with 16 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

prospecting, extraction or production of mineral oil. Thus,

applying the ratio laid down in the aforesaid decision, we hold

that the receipts from repair work is inextricably connected with

prospecting, extraction or production of mineral oil, hence, such

receipt has to be taxed under section 44BB of the Act. We order

accordingly. This ground is partly allowed.

the departmental authorities in treating the receipts from

Cameron Manufacturing India (P.) Ltd. (in short ‘Cameron India’)

amounting to Rs.21,01,464/- towards business support services

as FTS.

5.1 Briefly the facts relating to this issue are, the assessee had

entered into an agreement with Cameron India for providing

support and management services in the area of international

purchasing, international marketing and sales, obtaining

international quotations and tenders, coordinating sales,

coordinating pricing policies, coordinating marketing strategies,

sales administration, support in the area of accounting and

finance, complying with standard statements of generally

accepted accounting practice, other accounting activities, support

in the area of planning, support in the area of tax and legal 17 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

services, reviewing legal contracts, resolving local disputes and

litigation, support in the area of information technology, providing

assistance with the purchase or lease of new hardware and

software, support and management in the area of human

resources etc. The assessee did not offer the receipts from the

aforesaid activities pleading that, firstly, such services were

provided from outside India and secondly, while providing such

services the assessee has not made available any technical

knowledge, knowhow, skill etc. to make it FTS. The Assessing

Officer, however, did not accept assessee’s claim and held that

they are in the nature of FTS as the services rendered are of

managerial and consultancy nature and secondly while rendering

such services, the assessee has made available technical

knowledge, skill etc. Learned DRP also upheld the decision of the

Assessing Officer.

5.2 Before us, learned counsel appearing for the assessee

submitted that the services were rendered directly from the head

office without any involvement of the PE in India. He further

submitted, even if, some of the services rendered may be in the

nature of managerial services, however, the receipts cannot be

treated as FTS as the assessee had not made available any 18 | P a g e

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technical knowledge, skill etc. Thus, he submitted, due to non-

fulfillment of the make available condition of Article 12(4)(b) of the

treaty receipts cannot be treated as FTS. In support of such

contentions, he relied upon the following decisions:

Vs. ACIT, [2021] 133 taxmann.com 99 (Delhi-Trib.)

taxmann.com 8 (Delhi – Trib.)

5.3 We have considered rival submissions and perused the

materials on record. As could be seen from the facts on record,

business support services were provided to a completely different

entity in India through a separate agreement. It has no

connection with the activity of the project office, which was set up

only for the purpose of the contracts with Cairn India and ONGC.

Therefore, we are convinced with the submissions of the assessee

that the receipts from business support services have no link with

PE, hence, its taxability has to be examined separately. In terms

with the agreement with Camaron India the assessee is required

to provide the following services:

S. Particulars Description of Remarks No. service 1. International Assists in Management fees would 19 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

purchasing procurement of goods not make available in International technical knowledge, market. This includes experience, skill, know- reference to the how or process to service vendors receiver (CMI) 2. International Assists the group Management fees would marketing and companies to identify not make available sales potential business technical knowledge, opportunities and experience, skill, know- customers for the how or process to service products and services receiver (CMI) 3. Accounting Assistance in Management fees would and finance providing support in not make available the field of accounting technical knowledge, and finance and experience, skill, know- reporting how or process to service requirements of CMI receiver (CMI) 4. Tax and legal Assistance in Management fees would services providing support in not make available the field of tax and technical knowledge, legal services and experience, skill, know- reporting how or process to services requirements of CMI receiver (CMI) 5. Support and Assists in SAP Management fees would management implementation not make available in the area of activities, SAP support technical knowledge, information services, SAP experience, skill, know- technology development activities, how, or process to service Web service activities receiver (CMI) and Help Desk activities 6. Human Assistance in Management fees would resources providing support in not make available the field of human technical knowledge, resources and experience, skill, know- reporting how or process to service requirements of CMI receiver (CMI).

5.4 As could be seen from the nature of services, broadly it is

managerial and to some extent it may be consultancy. However, it

needs examination whether they fulfill the test of FTS under

Article 12(4) of India – Singapore DTAA. 20 | P a g e

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5.5 On a reading of Article 12(4) as a whole, we are convinced

that the nature of services rendered do not fall either under

Article 12(4)(a) or 12(4)(c) of the treaty. Thus, the only article

where it can fit in is Article 12(4)(b). However, Article 12(4)(b) puts

the condition that any consideration from services of managerial,

technical or consultancy nature can be treated as FTS, if they

make available technical knowledge, experience, skill, know-how

or process, which enables the person acquiring the services to

apply the technology contained therein. Though, the departmental

authorities have made broad allegations that while rendering

services the assessee has made available technical knowledge,

experience etc., however, no material has been brought on record

to establish such fact. The expression ‘make available’ if read in

conjunction with, which enables the person acquiring the services

to apply the technology contained therein’, would mean that the

recipient of service will be in a position to acquire the technical

knowledge, experience, skill etc so that it equips the recipient to

apply such technical knowledge, experience, skill etc. by himself

independently without the aid and assistance of the service

provider. In the facts of the present appeal, the departmental

authorities have failed to prove this fact through any cogent 21 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

material brought on record. The nature of services enumerated

earlier would make it clear that these are routine managerial and

partly consultancy services to provide business support to the

subsidiary. There is nothing on record to suggest that while

rendering services, the assessee has made available any technical

knowledge, know-how, skill etc. enabling the recipient of service

to apply them independently. That being the case, in our

considered opinion, the conditions of section 12(4)(b) are not

satisfied. Therefore, we hold that the receipts are not in the

nature of FTS. This ground is allowed.

nos. 5, 6 and 7 have become consequential or academic, hence,

do not require adjudication. ITA No.6/JPR/2017 AY: 2014-15

adjudication.

identical to ground no. 2 of ITA No. 1/Jpr./2017 decided by us in

the earlier part of the order. Thus, following our decision therein

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we direct the Assessing Officer to compute the income under

section 44BB of the Act. Accordingly, these grounds are allowed.

to ground no. 3, 3.1 and 3.2 of ITA No. 1/Jpr./2017. Thus,

following our decision therein, we direct the Assessing Officer to

tax the receipts by applying the provisions of section 44BB of the

Act. These grounds are partly allowed.

to ground no. 4 of ITA No. 1/Jpr./2017. Thus, following our

decision therein, we delete the addition. These grounds are

allowed.

addition of Rs. 7,53,42,991/- to the income by treating the

reimbursement of expenses as FTS.

11.1 Briefly the facts are, in course of assessment proceeding, the

Assessing Officer noticing that the assessee has reduced an

amount of Rs.7,53,42,991/- from the receipts from Cameron

India, called upon the assessee to explain the reason for doing so.

In response to the show-cause notice issue by the Assessing

Officer, the assessee submitted that out of Rs.7,53,42,991/- an

amount of Rs.32,10,271/- is the expenditure incurred by the 23 | P a g e

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assessee, on which service tax was paid under the reverse charge

mechanism. He submitted, this amount is not in the nature of

reimbursement. Thus, he submitted, the expenditure incurred

cannot be treated as income of the assessee. As regards the

balance amount of Rs.7,21,32,720/-, the assessee submitted that

these are expenses incurred on behalf of Cameron India and

claimed as reimbursement on cost to cost basis without any

markup. He submitted, after incurring the expenditure, the

assessee has cross charged them to Cameron India. Thus, the

assessee submitted, the amount cannot be brought to tax as it

has no profit element. The Assessing Officer, however, did not

accept the claim of the assessee. Alleging that the assessee failed

to furnish the relevant contract invoices and other details called

for, the Assessing Officer ultimately concluded that the disputed

receipts are in the nature of FTS and accordingly brought them to

tax.

11.2 The assessee objected to such addition before learned DRP.

After considering the submissions of the assessee, in the context

of facts and materials on record, learned DRP directed the

Assessing Officer to consider assessee’s submission and decide

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ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

the issue. However, in the final assessment order, the Assessing

Officer again made the addition.

11.3 We have considered rival submissions and perused the

materials on record. As could be seen from the materials placed

before us, the disputed addition of Rs.7,53,42,991/- comprises of

two amounts. An amount of Rs.32,10,271/-, on which, the

assessee has paid service tax on reverse charge mechanism is

actually expenditure incurred by the assessee itself on its own

behalf and not in the nature of reimbursement. As it appears, the

Assessing Officer has treated this amount as income under

factual misconception. Therefore, we are inclined to delete the

addition of Rs.32,10,271/- made as FTS.

11.4 Insofar as the balance amount of Rs.7,21,32,720/- is

concerned, it is the claim of the assessee that these are

reimbursements from Cameron Indian on cost to cost basis

without any markup. The assessee has explained before the

Assessing Office that the assessee was expecting to enter into new

contracts with Cairn India but Cairn India awarded the contract

to Cameron India. The assessee submitted that since the assessee

had incurred certain expenses in relation to ongoing work, they

were cross charged to Cameron India without any markup on 25 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

pure cost to cost basis. In principle, we accept assessee’s

contention that reimbursement of expenses on cost to cost basis

without any markup does not have any profit element. However, it

is observed, at the stage of draft assessment, the Assessing

Officer has called upon the assessee to furnish the contract

between Cairn Indian and Cameron India, copy of invoices, full

particulars of expenses, basis of allocation etc. As alleged by the

assessing Officer, the assessee did not furnish copy of invoices

and other details. It is further observed, in course of proceeding

before learned DRP, the assessee has furnished additional

evidences including sample copy of invoices. However, the

assessee had submitted that it is in the process of collating the

invoices amounting to Rs.7,21,32,720/- to substantiate that the

amount represents reimbursement of expenditure on cost to cost

basis without any markup. However, in the final assessment

order, the Assessing Officer while confirming the addition, has

again reiterated that the assessee failed to produce copy of

contract between Cairn India and Cameron India. He has also

alleged that the assessee has not furnished the cross charged

invoices. The allegations of the Assessing Officer in this regard are

as under: 26 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

“1. The assessee has failed to produce the copy of contract between Indian entity (CMI) and Cairn India Pty. Ltd. explaining the expenses claimed by CMI. 2. There is no accountant’s certificate to the effect that he has audited all the expenses & allocation thereof and that the same have been allocated among the beneficiaries on the basis of the pre-determined allocation keys on a fair, equitable and consistent basis. 3. The assessee has also not provided the agreements and documentation clearly outlining the nature of arrangement. 4. The assessee has not properly explained with documentary evidences the basis of allocation the basis of allocation of aforesaid expenses and the details of allocation amongst the group entities. 5. The assessee has not completely explained with documentary evidences the full particulars of the expenses (including date, invoice, name of the payee, nature of expenses and mode of payment). 6. The assessee has not provided the cross charge invoices in his submission.”

11.5 It is observed, before the Assessing Officer and learned DRP,

the assessee did make submission to the effect that given

sufficient time, he will be in a position to submit the agreement

between Cairn India and Cameron India. The assessee has also

submitted that complete set of invoices relating to reimbursement

of expenses from Cameron India would also be furnished.

However, it appears form the observations of the Assessing officer

in the final assessment order, the assessee had not furnished

complete set of evidences.

11.6 Keeping in view the aforesaid factual position, we restore

this issue to the Assessing Officer with a direction to examine

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ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

assessee’s claim afresh with reference to evidences already

available on record or which the assessee may file in course of

proceeding. If the assessee can establish through proper

documentary evidences that the amount in dispute represents

reimbursement of expenses on cost to cost basis without any

markup, then no addition can be made.

11.7 With the aforesaid observations, the ground relating to

reimbursement of expenses from Cameron India is restored back

to the Assessing Officer. Grounds are partly allowed.

of our decision in ground nos. 2, 3, 4 and 5. Accordingly, these

grounds are dismissed.

addition of an amount of Rs.6,58,19,210/-.

13.1 We have considered rival submissions and perused the

materials on record. It is observed, pointing out computational

errors, the assessee has preferred a rectification application,

which is pending before the Assessing Officer. In view of the

aforesaid, we direct the Assessing Officer to verify assessee’s claim

and decide the issue accordingly after providing an opportunity of

being heard to the assessee. 28 | P a g e

ITA Nos.1/JPR/2017; 6/JPR/2017 & 7960/Del/2018

ITA No.7960/Del/2018 AY: 2015-16

adjudication.

No. 1/Jpr./2017, following our decision therein, we direct the

Assessing Officer to compute assessee’s income under section

44BB of the Act. This ground is allowed.

5, 6 and 7 have become consequential, hence, do not require

adjudication.

Order pronounced in the open court on 24th March, 2023

Sd/- Sd/- (G.S. PANNU) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: 24th March, 2023. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi

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