https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=63562 https://www.taxtmi.com/caselaws?id=63562 Taxability of Mobilization Charges - Mineral Oil - Non-resident company - Whether, the mobilization charges, received by the assessee outside India, attributable to the transportation of rigs outside territorial waters of India are chargeable to tax u/s 44BB read with section 5(2)? - difference of opinion between the Members - Third Member Order. HELD THAT:- ld. Judicial Member took the view that the mobilization charges in respect of the transportation of the rig outside the territorial waters of India were not taxable and he accordingly set aside the order of the CIT(A) directing the Assessing Officer to include in the total income only that portion of the profit which was relatable to the receipts attributable to the transportation of the rig in the territorial waters of India while computing the income under section 44BB. ld. Accountant Member confirmed the view taken by the CIT(A). He accordingly took the view that the mobilization charges in respect of the transportation of the rig outside the territorial waters of India, the total amount involved being US $ 9,50,000 were includible for purpose of taxation under section 44BB of the Income-tax Act, 1961. Third Member Order - In the present case, admittedly the rig has travelled all the way from Sharjah in UAE to the Vishakhapatnam port in India and it is not disputed at any stage of the proceedings that the ONGC had paid the amount to the assessee outside India in in Italy. In other words, the journey outside India is substantial and much more than the journey of the rig within the Indian waters: The ld. Accountant Member in para 6 of his order accepts that ordinarily the income of a non-resident is to be computed according to the mandate of section 5 i.e. that income which is received or is deemed to be received in India as also income which accrues or arises or is deemed to accrue or arise in India but in the same para he proceeds to hold that the provisions of section 44BB being special provisions are not controlled or hit by section 5. In my opinion, the decisions taken by the ld. Accountant Member renders otiose/redundant the provisions of section 5 inasmuch as all assessees engaged in the business of exploration of mineral oils would have their income computed for taxation purposes only with reference to section 44BB and the entire exercise of deciding the question of accrual of income Or the place of accrual would become inoperative. There would be no need to refer to the provisions of section 5 or for that matter section 9. In my opinion, the CIT(A) in deciding an issue can refer to the decisions rendered by different Benches of the Tribunal wherever they sit and the decision of the Delhi Bench of the Tribunal vis-a-vis the CIT(A) sitting at Delhi does not operate in the same p1anner as a judgment of the jurisdictional High Court. Further, if the decision of the Delhi Benches was the only one available at that point of time then the CIT(A) committed no error in following the said decision but when the matter has travelled to the Tribunal, then the ld. Members of the Division Bench, were at liberty to follow the view that they thought was proper and in the present case if there were two views one of the Mumbai bench of the Tribunal and another of the Delhi Bench then the appropriate course would have been to refer the matter to a Special bench. Further, the ld. Judicial Member has distinguished the decision of the Delhi Bench of, the Tribunal whereas the ld. Accountant Member has taken the view that the said decision is squarely applicable. The ld. Accountant Member has further in para 13 of his separate order referred to the decision of the Delhi Bench of the Tribunal in the case of Sedco Forex International Drilling Inc.[ 1999 (3) TMI 111 - ITAT DELHI-B] but it is the categorical submission of the ld. counsel appearing on behalf of the appellant before me that this was never confronted to the assessee during the course of the hearing and this factual submission has also not been challenged by the ld. DR on behalf of the Revenue. At the relevant extract from the decision of the Delhi Bench in the case of Sedco Forex International Drilling Inc. has been extracted and the ld. Members have taken the view that section 44BB contains special provisions and these do not go beyond the scope of the charging sections 4 and 5. In my opinion, the manner in which the relevant provisions of the Act more so those of section 44BB have been interpreted in the case of Sedco Forex International Drilling Inc. has rendered inoperative the provisions of sections 4 and 5 which have been accepted even in the case of Sedco Forex International Drilling Inc. to be charging sections. The position as has now emerged before me is that there are two decisions of the Delhi Benches of the Tribunal taking a view in favour of the Revenue i.e. the cases of Sedco Forex International Drilling Inc. [ 1999 (3) TMI 111 - ITAT DELHI-B] and the case of Nippon Kokan K.K. [ 1998 (4) TMI 121 - CALCUTTA HIGH COURT] and on the other side are two decisions of the Mumbai Bench of the Tribunal, the first being the case of Jindal Drilling Leasing and the other being the decision of the same Bench in the case of Sonal Offshore Drilling Inc. The former decision has in fact been followed in the latter decision of the Mumbai Bench of the Tribunal and CBDT instruction No. 1767 dated1-7-1987has also been taken into account at page 2 of the said decision. Those instructions pertain to the percentage of work which pertains to activities performed in India and which would be subject to tax in India. In going by the accepted legal proposition that when there are two views, then the view which is favourable to the assessee should be followed, I am inclined to agree with the two decisions of the Mumbai Bench of the Tribunal but along with my own reasoning. With reference to the aforesaid, I accept the argument of the ld. counsel that section 5 is the charging provision and no income can be brought to tax unless it falls within the scope of the said section and the use of the expression subject to other provisions of the Act in section 5 would mean that if any other section operates to exclude from the total income of any person any income, which otherwise falls within the broad framework of his total income as laid down in section 5 of the Act such section would prevail. To emphasise, the provisions of section 44BB vis-a-vis the legislative intent only mean that these replace the system of computation of income earlier envisaged by application of the provisions of sections 28 to 41 and sections 43 and 43A of the Act but the provisions of section 5 of the Act, which is the charging section would remain intact and these by no maxim of interpretation would be superseded by the provisions of section 44BB. As per Circular No. 495 dated 22-9-1987 has been reported, section 44BB was no doubt described as a special provision for computing profits and gains in connection with the business of exploration of mineral oil but these were a measure of simplification providing for determination of income of such taxpayers at 10% of the aggregate of a certain amount. Thus, I considering the facts of the case as also the legal position vis-a-vis the decisions cited before me opine that the view taken by the ld. JM is the correct one and I, therefore, approve of the same. The matter may now be listed before the Division Bench for passing appropriate orders in accordance with the majority view. Case-Laws Income Tax Wed, 24 Dec 2003 00:00:00 +0530