2015 (5) TMI 583 - AT - Income Tax

Non-resident company's income taxed under Section 44BB, interest not levied, unpaid invoices issue remanded

The Tribunal upheld the CIT(A)'s decision that the income of a non-resident company should be taxed under Section 44BB rather than Section 44DA of the ... Applicability of provisions of section 44BB - interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) rw 44DA and 44BB - whether the provisions of Section 44BB will apply to the facts or whether Section 44DA will be applicable on the facts of this case? - whether hire of equipment and personnel was not in the nature of FTS and equipment Royalty squarely covered u/s 9(1)(vii)? - Held that:- The CIT(A) following the decision of a coordinate bench in the case of CGG Veritas (2012 (4) TMI 280 - ITAT DELHI ) and noting that the assessee has a PE in India and that the case pertains to assessment year prior to 2011-12), correctly upheld the contention of the assessee, and has, accordingly, held that the income is liable to tax@ 10% under section 44 BB of the Act - Decided in favour of assessee. Interest under section 234B - CIT(A) deleted interest levy - Held that:- The issue is covered, in favour of the assessee, by a full bench decision of DIT Vs Maersk Co Ltd [2011 (4) TMI 886 - Uttarkhand High Court ] and the CIT(A) has merely followed the said decision, but yet the Assessing Officer is aggrieved that, as this decision has been challenged in appeal before Hon’ble Supreme Court, the CIT(A) ought not to have followed the same. Such a plea can only be stated and rejected. The mere fact that a binding judicial precedent has been challenged before a higher forum does not dilute, curtail or otherwise affect its binding nature. Once Hon’ble jurisdictional High Court has expressed a considered view on an issue, all the lower authorities in the judicial hierarchy, including this Tribunal as indeed the CIT(A), have to loyally follow this. There is no scope for deviating from this solemn duty. On this aspect of the matter, thus, the stand of the CIT(A) cannot be faulted - Decided in favour of assessee. Issues Involved:1. Applicability of Section 44BB vs. Section 44DA of the Income Tax Act, 1961.2. Levy of interest under Section 234B.3. Inclusion of unpaid invoices in gross revenues for computing presumptive income under Section 44BB.Issue-wise Detailed Analysis:1. Applicability of Section 44BB vs. Section 44DA:The primary issue in this case revolves around whether the income earned by the assessee, a non-resident company, from hiring equipment and rendering services to entities engaged in oil exploration should be taxed under Section 44BB or Section 44DA of the Income Tax Act, 1961. The assessee argued that its income should be taxed on a presumptive basis at 10% under Section 44BB, while the Assessing Officer contended that the income should be taxed as normal business income under Section 44DA, estimated at 25% of gross receipts due to the absence of books of accounts.The CIT(A) upheld the assessee's contention, referencing a coordinate bench decision in the case of CGG Veritas and noting that the assessee had a Permanent Establishment (PE) in India. The CIT(A) held that the income was liable to tax at 10% under Section 44BB. The Tribunal, after hearing the arguments and considering the facts, agreed with the CIT(A)'s decision. The Tribunal emphasized that judicial precedents must be followed unless overturned by higher courts, and found no reason to deviate from the coordinate bench's view.2. Levy of Interest Under Section 234B:The second issue was whether interest under Section 234B could be levied on the assessee. The CIT(A) had relied on a full bench decision of the Hon'ble jurisdictional High Court in the case of DIT Vs Maersk Co Ltd, which was in favor of the assessee. The Assessing Officer argued that since the decision had been challenged before the Supreme Court, the CIT(A) should not have followed it. The Tribunal rejected this plea, stating that the binding nature of a judicial precedent is not affected by its challenge before a higher forum. Therefore, the Tribunal confirmed the CIT(A)'s stand that interest under Section 234B could not be levied.3. Inclusion of Unpaid Invoices in Gross Revenues:In the cross-objection filed by the assessee, the grievance was that the CIT(A) erred in upholding the Assessing Officer's decision to include unpaid invoices amounting to Rs. 22,01,552 in the gross revenues for computing presumptive income under Section 44BB. The Tribunal noted that there were no factual findings by the authorities below on this matter. Consequently, the Tribunal restored the issue to the file of the Assessing Officer for re-examination and directed that the matter be decided in accordance with the law.Conclusion:In summary, the Tribunal dismissed the appeal filed by the Assessing Officer, confirming the CIT(A)'s decision that the income should be taxed under Section 44BB and that interest under Section 234B could not be levied. The cross-objection filed by the assessee was allowed for statistical purposes, with the issue of unpaid invoices being remanded back to the Assessing Officer for further examination.