TaxTMI 
TaxTMI 
2014 (1) TMI 1580
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....th France and ignored the beneficial provisions in terms of sec. 90(2) of the IT Act. 2. The Ld Assessing Officer erred in law and on facts in making addition of reimbursement of communication immersat charges of Rs.13,90,937/- as taxable as per sec. 44BB of the IT Act. 3. The Ld Assessing Officer erred in law and on facts in making addition of reimbursement of repair cost of equipments of Rs.4,03,485/- as taxable as per sec. 44BB of the IT Act when equipment supplied at the instance and cost of ONGC under the terms of contract. 4. The Ld Assessing Officer erred in law and on facts in making addition of the reimbursement of service tax received/receivable of Rs.3,00,17,523/- in computing income u/s 44BB of the Act. 2. The brief facts of the case are that the assessee is a company incorporated in France. During the previous year under consideration the assessee was engaged in executing contract with ONGC Ltd. for offshore drilling operations relating to mineral oil in India. The assessee has computed its income as per the provisions of section 44BB(1) applying the deemed net profit rate of 10% of gross revenues. The Assessing Officer made the additions on account of the followin....
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....nt of the Ld AR that assessee should have been given benefit of provisions of treaty, he submitted that Hon'ble High Court has already decided the matter against assessee and at this stage this ground is not tenable. Arguing upon 2nd and 3rd ground, the Ld DR placed reliance on the order of M/s Schilumber Asia Servie Ltd. 317 ITR 156 wherein it was held that all receipts other than customs duty were taxable u/s 44BB of the Act. He further argued that section 44BB is a deeming provision and is a complete code in itself and it over ride all other sections of the Act and therefore, he argued that Assessing Officer has rightly included the reimbursement of expenses in the gross receipts for the purpose of computation u/s 44BB of the Act. Regarding the argument of Ld AR that in earlier years the case was decided in favour of assessee, the Ld DR argued that in the order relied upon by Ld AR the reimbursement was on account of different items which had nothing to do with the contractual obligations of the assessee whereas in the present case the reimbursement of expenses are with respect to contractual obligations and hence the facts of present case are distinguishable. Regarding service ....
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....see or the contractee. Therefore, the reimbursement payments received by the assessee not coming within the scope of sec. 44BB had rightly been held to be excludible by the Commissioner (Appeals). The reimbursement of expenses was also not taxable under other provisions of the Act as there was no material on record to show that any element of profit was embedded in the reimbursement received by the assessee. In absence of element of profit in the amount received by the assessee as reimbursement no income could be assessed under other provisions of the Act also." 9. We further find that Hon'ble Uttrakhand High in the case of CIT v. Halliburton Offshore Service Inc. 300 ITR 265 has summed up the findings on account of receipts vide para 5 & 6 which are reproduced below:- "Section 44BB provides that the deemed profits and gains under sub sec.(1) shall be at the rate of 10% of the aggregate amount specified in sub sec. (2). We proceed to analyze sub sec.(2) clause (a) of sub sec. (2) refers to the amounts (A) paid to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with or supply of plant and machinery on hire used, or to ....
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....ceipts received by the assessee necessarily forms part of gross receipts and in view of the above ground No.2 & 3 is also dismissed. 11. As regards ground No.4 regarding receipt of service tax issue, this issue has been examined by the Tribunal in the case of Sedco Forex Drilling Inc. 139 ITD 188 wherein it has been held that service tax being a statutory liability cannot form part of gross receipts for the purpose of deemed profit u/s 44BB. The relevant findings of the Tribunal are reproduced below:- "As regards reimbursement of amount in respect of service tax, as pointed out by by the ld. AR, the ITAT Delhi Bench in their decision in Technip Offshore Contracting BV(supra) concluded that service tax collected by the assessee being directly in connection with services or facilities or supply specified u/s 44BB of the Act provided by the assessee to ONGC, have to be included in the total receipts for the purpose of determination of presumptive profit u/s 44BB of the Act. It is well established that section 44BB of the Act is a special provision, treating 10 per cent of the aggregate amount specified in sub-s. (2) of s. 44BB as deemed profits and gains of such non-resident assesse....