2019 (5) TMI 424 - AT - Income Tax

Inclusion of Reimbursements in Gross Receipts Upheld for A.Y. 2012-13 & 2013-14

The Tribunal upheld the inclusion of reimbursements in gross receipts under section 44BB for A.Y. 2012-13 and 2013-14, citing the Supreme Court's ruling. ... Determination of income u/s 44BB - Receipts on account of reimbursements of expenses were includable in the gross receipts - HELD THAT:- Assessee was engaged in the business of providing offshore supply vessel in respect of all the contracts mentioned in the Assessment Order. In the present case also the amount which is paid to the assessee is towards the expenses incurred on behalf of the payer and no where mentions that it is for reimbursement of expenses. The assessee also relied upon the decision of Sedco Forex International Inc. which is now decided by the Hon’ble Apex Court [2017 (11) TMI 78 - SUPREME COURT] against the assessee. Receipts qualified for determination of income under Section 44BB of the Act has been decided in favour of the assessee in assessee’s own case for A.Y. 2011-12 Taxability of receipts on account of mobilization for the activities carried outside Indian Territorial Waters - includibie in the revenue taxable u/s 44BB - HELD THAT:- The provision of Section 44BB considers inclusion of all kind of amount paid or payable to the assessee or to any person on his behalf on account of the provision of services or 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. Thus, both the grounds are dismissed. Issues Involved:1. Inclusion of reimbursements of expenses in gross receipts for determination of income under section 44BB of the Income Tax Act, 1961.2. Taxability of income from towing a rig as royalty payments versus determination under section 44BB of the Act.3. Inclusion of mobilization charges in gross receipts for tax purposes under section 44BB.Issue-wise Detailed Analysis:Issue 1: Inclusion of Reimbursements of Expenses in Gross Receipts (A.Y. 2012-13 and 2013-14)- Facts and Arguments: The assessee contended that reimbursements of expenses should not be included in the gross receipts for the purposes of determining income under section 44BB. The Assessing Officer (AO) included these reimbursements in the gross receipts, which was affirmed by the CIT(A).- Legal Precedent: The Tribunal referred to the Hon’ble Apex Court’s decision in Sedco Forex International Inc. vs. CIT, which clarified that all amounts related to the provision of services and facilities in connection with the extraction of mineral oils are to be included in the gross receipts, regardless of whether these are reimbursements or not.- Tribunal’s Decision: The Tribunal upheld the inclusion of reimbursements in gross receipts, citing the Supreme Court’s ruling that Section 44BB encompasses all amounts paid or payable, including reimbursements, as part of the deemed profits and gains of the business. Consequently, Ground No. 1 of the assessee’s appeal for A.Y. 2012-13 and Ground No. 2 for A.Y. 2013-14 were dismissed.Issue 2: Taxability of Income from Towing a Rig (A.Y. 2012-13)- Facts and Arguments: The assessee argued that the income from towing a rig should be determined under section 44BB, not as royalty payments. The AO treated this income as royalty under section 44DA, which was upheld by the CIT(A).- Legal Precedent: The Tribunal considered its own decision in the assessee’s case for A.Y. 2011-12, where similar receipts were determined under section 44BB. The Tribunal also noted that Section 44DA applies to fees for technical services received by a non-resident from the Indian Government or an Indian Concern, not from another non-resident.- Tribunal’s Decision: The Tribunal ruled in favor of the assessee, stating that the receipts qualified for determination of income under section 44BB, as previously decided in A.Y. 2011-12. Ground No. 2 of the assessee’s appeal for A.Y. 2012-13 was allowed.Issue 3: Inclusion of Mobilization Charges in Gross Receipts (A.Y. 2013-14)- Facts and Arguments: The assessee contested the inclusion of mobilization charges in the gross receipts for tax purposes under section 44BB. The AO included these charges, which was affirmed by the CIT(A).- Legal Precedent: The Tribunal referred to the Supreme Court’s decision in Sedco Forex International Inc., which held that mobilization charges are to be included in the gross receipts for the purposes of section 44BB.- Tribunal’s Decision: The Tribunal upheld the inclusion of mobilization charges in gross receipts, in line with the Apex Court’s ruling. Ground No. 1 of the assessee’s appeal for A.Y. 2013-14 was dismissed.Conclusion:- A.Y. 2012-13: The appeal was partly allowed. The Tribunal dismissed the ground related to reimbursements (Ground No. 1) but allowed the ground related to the taxability of income from towing a rig (Ground No. 2).- A.Y. 2013-14: The appeal was dismissed. Both grounds related to the inclusion of mobilization charges and reimbursements in gross receipts were dismissed.Order Pronouncement: The order was pronounced in the Open Court on 02nd May 2019.