TaxTMI 
TaxTMI 
2009 (1) TMI 533
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....total income at Rs. 62,30,470. The return was processed under section 143(1) on 27-2-2006. Thereafter, the case was picked up for scrutiny. Notices under section 43(2) and section 42(1) were issued. Assessee was heard and the details furnished before the Assessing Officer were examined and verified. 2.1 In the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had offered income under section 44BB at the rate of 10 per cent of the receipts, the break up of which is as under:- Contract Particulars Amount 1.South East Asia Marine & Engineering Construction Limited Rs.5,43,61,301 2.Hal Offshore Limited Rs. 73,72,665 Total Rs. ... Rs. 6,17,33,966 2.2 The assessee submitted before the Assessing Officer that the assessee was engaged in the business of providing services and facilities in connection with the exploration/extraction and production of mineral oils in India and has offered its income under section 44BB of the Act. It was pointed out by the assessee that the receipts offered to tax were net of service tax. In this connection, the assessee submitted a note to the computation of income as under :- "The inv....
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....ng the assessee and considering the Assessing Officer's order, the CIT (Appeals) excluded the amount of service tax from the total receipts for the purpose of computing profit under section 44BB of the Act. The operative portion of the order passed by the learned CIT(Appeals) reads as under :- "I have gone through the order of the Assessing Officer and the submissions of the AR very carefully. I have also gone through some of the invoices produced in the appellate proceedings. The appellant has charged service tax collections are collections made on behalf of the Central Government and that service tax represent the money collected from the consumer of service and thereafter remitted to the Central Government. The amount is in the nature of reimbursement and there is no element of profit embedded in the service tax. The Assessing Officer was, therefore, not right in including service tax as part of the gross receipts for working out income under section 44BB of the Income-tax Act. The Assessing Officer is directed to compute the income by excluding the receipts on account of service tax." 2.8 Hence, the department is in appeal. 3. The learned DR submitted that the amount o....
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....(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 higher used, or to be used, in the 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 higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India, which is clear from the perusal of section 44BB of the Act, which is reproduced as under :- "44BB. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils.-(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee being a non-resident, 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 extraction for, or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-sec....
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....tion or production of, mineral oils in India and the amount received or deemed to be received in India by the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. After considering the aforesaid provisions contained in section 44BB of the Act, the jurisdictional High Court of Uttarakhand in the case of Sedco Forex International Inc. (supra) has held and observed as under :- "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 a....
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.... in the total sum for the purpose of determining profit under section 44BB of the Act. 5.6 In the present case, it is not in dispute that the assessee company has realized service tax on account of providing services and facilities in connection with the exploration or extraction of mineral oils in India. The service tax so realized is a part of receipts received by the assessee from ONGC. The service tax realized by the assessee is in respect of services specified under section 44BB and rendered by it to ONGC. The Hon'ble jurisdictional High Court of Uttarakhand has held that it is the sum received by the assessee which is to be taken into account for the purpose of determining profit under section 44BB of the Act and not the actual taxable income as contemplated under sections 4 and 5 of the Act. 5.7 The decision of the ITAT, Chennai Bench "C" in the case of Real Image Media Technologies (P.) Ltd. (supra) relied upon by the learned counsel for the assessee is, in our considered view, gives no assistance to the assessee's case as we very respectfully submit that in the said decision, the Tribunal has dealt with the issue as to whether the rigour of the provision of section 4....
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....mselves were not in connection with the specification of services mentioned in section 44BB of the Act. Following the observation of the Tribunal makes the thing clear:- ". . . . In the case of customs duty, it is primarily the obligation of the importer of the plant and machinery which in this case is ONGC. The ONGC's primary liability is discharging through the medium of the assessee. The payments in question are absolutely not on account of 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 of production of, mineral oils in India. In other words, the reimbursements themselves are not in connection with the specification of services mentioned in section 44BB of the Act. We, therefore, direct the Assessing Officer to exclude that part of the customs duty from being a part of the receipt for the purpose of determining the profits and gains under section 44BB of the Act. . . ." 5.9 In the said case of Transocean Offshore Deep Water Drilling Inc. (supra) the assessee contended before the Tribunal that the reimbursement of expenditure relating to custom duty was not in conne....