TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 479
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....action will be taxed in India. 4. The appellant craves leave to supplement, to cancel, to amend, to add/or otherwise to modify any or all the ground(s) of appeal stated hereinabove, at a later stage." 2. The assessee is a non-resident entity entering into turnkey basis contracts with ONGC which have been listed in the assessment order in para 2 as follows:- S. No. Contract Agreement No. 1. MR/BandS/MM/KKT/ASS-Cranes/243/03-04/LT-06/PC-23 for "Revamping of 4 Nos. American Aero Make Cranes Installed at BPB (East), BC, BPB (West) and BLQ-2 Platforms of ONGC" on Turnkey basis. 2. MR/MH/CMC/OEM/DAMAGED-BOOM-SM/2005/05001 for replacement of damaged boom of SM Deck Crane on OEM and Turnkey basis installed at IC complex 3. MR/MH/MM/LSTK/RO/OEM/DAMAGE BOOM/110/2005/Y15OS05001/P-B-4006 for replacement of damaged boom selection of SS Deck Crane on Turnkey Basis installed at SH Complex. 4. MR/MH/MM/LSTK/AB/OEM/PATRIOT/CRANES/2004/Y15AL04003/PAPER-BOOK-3007 for repair/revamping overhauling and servicing of pedestal/patriot make deck cranes on OEM and Turnkey Basis installed at BHS (North) and SLQ (South) Platform. 5. MR/MH/MM/LSTK/AB/OEM/PATRIOT/CRANES/GROUP-I....
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.... raised the aforementioned grounds of appeal. 4. At the outset, it was submitted by learned AR that the assessee has forgone its claim of being assessed @ 1 per cent and now it is the case of the assessee that its entire receipts should be made subject to provisions of section 44BB(1) and, thus, the application of rate of 25 per cent on the component relating to user of spare parts is, thus, bad as none of the provisions of the Act support such computation of income @ 25 per cent. To support the contention that supply of spares in case of turnkey contract is also subject to provisions of section 44AB, learned counsel has relied on various judgments inter alia including the decision of Hon'ble Uttaranchal High Court in the case of CIT v. B.J. Services Co. Middle East [2008] 300 ITR 392/170 Taxman 286 the copy of which is placed at pages 37-38 of the paper book. Reading from paras 2-8, it was submitted by him that supply of spare parts in a turnkey contract of repair will also be covered under the provisions of section 44BB of the Act and, therefore, the applicable rate of net profit will be @ 10 per cent. For the sake of convenience paras 2 and 8 from the said order are bein....
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....resident company and hence was an amount referred to under sub-section (2) of section 44BB of the Act as it was a receipt during the course of business." 5. Thus, it was pleaded by learned AR that the assessee may be granted appropriate relief. He submitted that there is no doubt that on the other component the Assessing Officer has himself accepted the claim of the assessee regarding application of section 44BB(1) of the Act. 6. On the other hand, it was submitted by learned DR that since the assessee is not pressing his claim regarding application of 1 per cent rate, his submission is that the contracts obtained by the assessee from ONGC were having two components and, for this purpose, he referred to the computation of income submitted by the assessee in which such bifurcation was made. The one relating to supply of spare parts and the other relating to the services rendered in that regard. He submitted that supply of spares is not covered as such by the provisions of section 44BB of the Act and, hence, it should have been treated separately from the services rendered by the assessee as envisaged in section 44BB of the Act. He, therefore, supported the case of th....
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....ply which defines contractor's scope of supply as under:- "4. Scope of Supply 4.1 Contractors Scope of Supply The procurement and supply in sequence and at appropriate time of all materials and consumables shall be entirely the Contractor's responsibility and his quoted price for execution shall be inclusive of all these items which include, but not limited to the following. (a) All spares and assemblies/sub-assemblies along with optional items required to make the cranes fully operational at rated capacity and fit for certification are attached at Appendices I to IV under Annexure-III of the tender. (b) All structural and sea fastening materials, lifting and installation materials and equipments. (c) All industrial gases like oxygen, acetylene or inert gases and all types of welding machines, electrodes, torches, brazing rods, flux, etc. for welding purposes. (d) PTFE tape and other jointing compounds for sockets threads and gaskets for flanges. (e) Grease, cleaning oils, other solvents, chemicals required for cleaning and greasing of lines, adhesives, etc. (f) Paints, thinner and painting materials, painting ....
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....; Annexure-c Contract Price Schedule Contract No. MR/BandS/MM/KKT/AA-CRANES/243/03-04/LT-06/PC-23 for "Revamping of 4 nos American Aero make cranes installed at BPB (EAST), BC, BPB (West) and BLQ-2 Platforms of ONGC" on Turnkey. LUMPSUM PRICE Lump sum price for "Revamping of 4 nos. American Aero make cranes installed at BPB (East), BC BPB (West) and BLQ-2 platforms, as per enclosed scope of work on turnkey basis. The scope of work shall include but not limited to Dismantling and Replacement with new parts/sub-assemblies/assemblies, supply of parts/assemblies/sub-assemblies, servicing and greasing of items, installation and commissioning of cranes, providing manpower including OEM representative for complete execution of work along with mobilization and demobilization, tools and Tackles, overhauling/rebuilding of Engines and also including third party inspection charges. The lump sum price shall also be inclusive of all taxes, duties (excluding customs duty), levies, insurance, service tax and corporate tax to complete the job on turnkey basis. US$ 1,463,526=58 (United States Dollar One million Four hundred and sixty three thousand Five hundred twe....
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....it was decided by the Hon'ble High Court as under:- "8. Sub-section (1) of section 44BB specifically provides that aggregate of amounts specified in sub-section (2) shall be taken into account, 10 per cent of which shall be deemed to be profits and gains. Sub-section (2) provides that amounts referred shall be amount paid or payable to the assessee (whether in or out of India) and the amount received or deemed to be received in India on account of the 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 or production of, mineral oils in India. Explanation appended to section 44BB provides that for the purpose of this section, plant includes ships, aircrafts, apparatus and equipments used for the purpose of said business and mineral oils include petroleum and natural gas. Thus, the amount received by the assessee on account of supply of spare parts is squarely covered under section 44BB. Therefore, the Assessing Officer was right in calculating the 10 per cent of total amount of Rs.69,45,264, which was received by the assessee non-resident company from the ONGC. The claim ....