TaxTMI 
TaxTMI 
2016 (2) TMI 501
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....osed to the appellant's claim that the same constituted income which did not accrue or arise to the appellant inside India. The Commissioner of Income Tax(Appeals) has not appreciated that the work performed outside India would not be included while calculating the aggregate amount referred in sub-section (2) of Section 44BB of the Act." 3. The facts in brief are that the assessee, a non-resident company, provided specialized vessels along with crew members to another non-resident company, namely, "Allsea Marine Contractor SA", who in turn was engaged in carrying out survey work for another company, namely, M/s B.G. International Production India Ltd. In the previous year relevant to the assessment year under consideration, M/s. B.J. International Production India Ltd. was engaged by M/s Reliance Industries Ltd. for laying pipelines for gas production facility in KG Basin. The assessee filed its return of income on 04.01.2010, declaring total income of Rs. 20,04,62,410/-. The return of income of the assessee was selected for scrutiny and notice under Section 143(2) of the Income-tax Act, 1961 (for short "the Act") was issued on 16.09.2010. In the course of scrutiny proceedings, ....
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....considered for the purpose of computation of aggregate amount and thus, the claim of the assessee that the revenue from the activity outside India was excluded from Section 44BB of the Act, was rejected by him. Aggrieved, both the assessee and the Revenue are before us in appeal and cross objection. 4. In sole ground raised by the assessee in appeal qua including revenue from part of contract executed outside Indian taxable territory, for the purpose of aggregate amount referred under sub-section (2) of Section 44BB of the Act, the learned Authorized Representative fairly admitted that the issue was decided against the assessee in the case of Sedco Forex International Drilling Inc. 299 ITR 238 by the Hon'ble Uttaranchal High Court, being the jurisdictional High Court and thus the judgment is a binding precedent. 5. On the other hand, the Commissioner of Income Tax (Departmental Representative) concurred with the submissions of the learned Authorized Representative. 6. We have heard the rival submissions and perused material on record. The Hon'ble Uttaranchal High Court in the case of Sedco Forex International Drilling Inc.(supra) has decided the issue in dispute as under: ....
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.... shall be deemed to be the profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession' : Provided that this sub-section shall not apply in a case where the provisions of s. 42 or s. 44D or s. 115A or s. 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-s. (1) shall be the following, namely : (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf 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; and (b) the amount received or deemed to be received in India by or on behalf of the assessee 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 outside India. (3) Notwithstanding anything contained in sub-s. (1), an assessee may claim ....
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.... ITR 79 (SC); (6) Anglo-French Textile Co. Ltd. vs. CIT (1954) 25 ITR 27 (SC); (7) Hukum Chand Mills Ltd. vs. CIT 1976 CTR (SC) 217 : (1976) 103 ITR 548 (SC); (8) CIT vs. Avtar Singh Wadhwan (2001) 165 CTR (Bom) 414 : (2001) 247 ITR 260 (Bom); (9) CBDT vs. Chowgule & Co. Ltd. & Ors. (1991) 98 CTR (Kar) 124 : (1991) 192 ITR 40 (Kar); (10) V.M. Salgaocar & Bros. Ltd. vs. Deputy Controller, RBI & Ors. (1991) 93 CTR (Kar) 49 : (1991) 187 ITR 381 (Kar); (11) CIT vs. Best & Co. (P) Ltd. (1966) 60 ITR 11 (SC); (12) CIT vs. Dunlop Rubber Co. Ltd. (1982) 29 CTR (Cal) 25 : (1983) 142 ITR 493 (Cal); (13) CIT vs. Industrial Engineering Projects (P) Ltd. (1993) 109 CTR (Del) 73 : (1993) 202 ITR 1014) (Del); (14) CIT vs. Tata Engineering & Locomotive Co. Ltd. (2001) 165 CTR (Bom) 67 : (2000) 245 ITR 823 (Bom); (15) Godhra Electricity Co. Ltd. vs. CIT (1997) 139 CTR (SC) 564 : (1997) 225 ITR 746 (SC); (16) CIT vs. Tejaji Farasram Kharawalla Ltd. (1968) 67 ITR 95 (SC); (17) Union of India & Anr. vs. A. Sanyasi Rao & Ors. (1996) 132 CTR (SC) 81 : (1996) 219 ITR 330 (SC); (18) CIT vs.....
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..... 200 degrees celsius. The arrangement also was to include marine facilities (jetty and island breakwater) for transmission and supply of LNG to purchasers; to test and commission the facilities relating to receipt and unloading, storage and regasification of LNG and to send out regasified LNG by means of a turnkey fixed lump sum price time certain engineering procurement, construction and commission contract. The project was to be completed in 41 months. The contract indisputably involved : (i) offshore supply, (ii) offshore services, (iii) onshore supply, (iv) onshore services and (v) construction and erection. The price was payable for offshore supply and offshore services in US dollars, whereas that of onshore supply as also onshore services and construction and erection partly in US dollars and partly in Indian rupees. 13. While determining the tax liability of the appellant, the Hon'ble apex Court has taken into consideration s. 5(2), s. 9(1)(i) and s. 9(1)(vii) of the IT Act and considered the question of imposition of tax on income arising from a business connection of the appellant. Sri Porus Kaka heavily relied upon para 98 of the aforesaid judgment which contain....
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....placed as we have observed that the amount referred in sub-s. (2) of s. 44BB are four types of amounts and all the four types of amounts are mutually inclusive and has to be taken into account either all of them or any of them and its clauses themselves provide that whether the payment is made inside India or outside India. 17. In the present case, a finding has been recorded by the Tribunal that it was not in dispute before the Tribunal that the payment was made to the appellant company outside India and the mobilization fee as claimed by the assessee was paid to the appellant by ONGC has no nexus with the actual amount incurred by the appellant company for transportation of drilling units of rigs to the specified drilling locations in India. Hence, the mobilization fee is not the reimbursement of expenditure. ONGC was liable to pay a fixed sum as stipulated in the contract regardless of actual expenditure which may be incurred by the assessee company for the purpose. In view of the fictional taxing provision contained under s. 44BB, the AO was right in adding the amount of Rs. 99,04,000 for the asst. yr. 1986-87 and amount worth Rs. 64,64,530 for the asst. yr. 1987-88 re....
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....g the fact that proviso to section 44DA brought about by the Finance Act, 2011 was only clarificatory in nature and its application has to be read in to the main provisions with effect from the time the main provision came in to effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling Vs. Commissioner of Income Tax, delivered on 17.11.2005. 5. Whether on facts and circumstances of the case, the Commissioner of Income Tax(Appeals) had erred in holding that interest u/s 234B was not chargeable in this case by relying upon the decision of Hon'ble Uttarakhand High Court in the case of Maersk (334 ITR 79) where as the department has contested the issue and has filed SLP before the Apex Court against in the case of Jacobs Civil Incorporated/Mitsubishi involving similar issue. 6. Whether on facts and circumstances of the case, the Commissioner of Income Tax(Appeals) had erred in not appreciating the finding giving by the Assessing Officer who had held that the fee for Technical Services/Royalty received by the assessee which is a non-resident company from another non-resident company was correctly estimated @ 25% of gr....
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....ow these grounds in favour of the assessee." 10.3 We have seen that Vessels and the status as second leg contractor of the assessee has not changed as compared to AY 2008-09, thus the facts and circumstances of the assessee remained same as were in AY 2008-09. Thus, in view of the above discussion, following the findings of the Tribunal in the case of assessee itself for AY 2008-09, we hold that income from hiring of the vessels was rightly held as taxable under Section 44BB of the Act by the ld CIT(A) and no interference is required in finding of the ld CIT(A) on the issue in dispute. Accordingly, we dismiss the grounds No. 1 and 2 of appeal of the Revenue. 11. In respect of grounds nos. 3, 4 and 6 of the Revenue , the ld CIT(DR) contended that the amendment brought out by the Finance Act, 2011 to the proviso to Section 44BB and Section 44DA of the act , was in the nature of a clarificatory amendment and, therefore, its application should be read into the main provisions with effect from the time the main provisions came into effect, as held in the judgment of the Apex Court in the case Sedco Forex International Drilling Incorporation Vs. Commissioner of Income Tax, (2005)27....
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....lready been dealt the arguments of the Commissioner of Income Tax(Departmental Representative ) that the effect of amendment carried out in Section 44BB and Section 44DA are not having retrospective effect. The relevant para of the judgment of the Tribunal is as under: "65. The department's contention is that section 44DA inserted by the Finance Act, 2010 w.e.f. 01-04-2011 in section 44BB is retrospective and, therefore, royalty and fees for technical service should be taxed u/s 44DA and not u/s 44BB. In our opinion, the amendment cannot be held to be retrospective particularly because it brings substantial change in the taxability of assessee. It is well settled law that an amendment to the taxing statute if results in higher tax burden on assessee then it is prospective in nature and not retrospective. We find that this issue has been dealt elaborately by Hon'ble Jurisdictional High Court (Uttrakhand) in B.J. Services (supra). We are not inclined to accept the contentions advanced on behalf of the revenue, reproduced earlier, for the simple reason that the issue is squarely covered by the decision of Hon'ble Jurisdictional High Court, decision of Hon'ble Delhi High Court....
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....the National Highway Authority of India which was also executed by the assessee. For the asst. yr. 2001-02 the assessee filed its return of income declaring an income of Rs. 96,83,278. This return was picked up for detailed scrutiny and notice under s. 143(2) of the IT Act, 1961 was issued. Thereafter, the assessment was framed on 26th March, 2004. The AO had inter alia found that there was short payment of taxes in as much as the advance tax was not paid by the assessee on due dates and therefore, the AO was of the opinion that the assessee had incurred interest liability under s. 234B of the Act. After giving show-cause notice in this behalf, the AO added the liability of interest under s. 234B of the Act. 3. We may point out at this stage itself that the plea of the assessee was that all the projects which were being executed by the assessee at the relevant time, it was the obligation and the statutory duty of the National Highway Authority of India to deduct the tax at source and the assessee being a non-resident, 100 per cent tax at source was to be deducted. For this reason there was no liability of the assessee to pay any advance tax and thus interest under s. 234B ....
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....on the interpretation of the contracts regarding on period and off period salary were conflicting. Ultimately, the legislature has stepped into clarify the position by the Finance Act of 1999. In this connection, it is important to note that s. 234B imposes interest, which is compensatory in nature and not as a penalty [see Union Home Products Ltd. & Ors. vs. Union of India (1995) 129 CTR (Kar) 217 : (1995) 215 ITR 758, 766 (Kar)]. Secondly, although s. 191 of the Act is not overridden by ss. 192, 208 and 209(1)(a)(d) of the Act, the scheme of ss. 208 and 209 of the Act indicates that in order to compute advance tax the assessee has to, inter alia, estimate his current income and calculate the tax on such income by applying the rates in force. That under s. 209(1)(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot be faulted. As stated above at the relevant time there were conflicting decisions of the Tribunal. A bona fide dispute was pending. The assessee had to estimate his current ....
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....ar assessment, on the amount by which the advance tax falls short of the assessed tax. The 'assessed tax' has been defined in s. 215(5) of the Act, as meaning the tax determined on the basis of the regular assessment as reduced by the amount of tax deductible in accordance with the provisions of ss. 192 to 194, s. 194A, etc. As per this definition, 'assessed tax' represents the tax determined by regular assessment as reduced by the amount of tax deductible in accordance with the provisions of s. 194A of the Act. Therefore, the expression 'assessed tax' used in s. 215(1) of the Act has to be understood as the tax finally assessed as reduced by the amount of tax deductible in accordance with the provisions of s. 194A of the Act. As already stated, that tax is deductible at source on the interest income under s. 194A of the Act cannot be disputed. So long as s. 215 of the Act permits the levy of interest only on the difference between the assessed tax and advance tax actually paid, we have to take note of the amount of tax deductible at source under s. 194A of the Act, and this has been specifically provided in sub-s. (5) of s. 215 of the Act. It is significant....
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.... make a deduction of tax at source as contemplated by the statute does not deduct or after deducting fails to pay the tax, then such a person or authority is liable to pay simple interest on the amount of tax not deducted from the date on which such tax was deductible to the date on which the said tax was actually paid. Thus, in respect of interest income on which deduction of tax at source should have been made, the liability to pay interest is fastened on the person or authority who failed to make deduction as required under s. 194A. Therefore, in respect of the tax payable on the said interest income, the assessee also cannot be taken to be liable to pay interest. Otherwise, it will mean that there are two persons under the Act to pay interest on tax on the same income. The legislature would not have contemplated such a situation where in respect of the tax on interest income, two persons are liable to pay interest for the delayed payment of tax. We are, therefore, inclined to hold that whatever there is a possibility of a deduction of tax at source, the person who had failed to deduct tax at source is liable to pay interest and not the assessee, as otherwise, there will be char....
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....s. 234B of the Act. But in the instant case, the provisions of s. 234B of the Act would not be attracted at all. 7. Sec. 2(1) of the Act defines "advance tax" to mean the advance tax payable in accordance with the provisions of Chapter XVII-C of the Act. These provisions are contained from s. 207 onwards. Sec. 209 falls under this chapter. Sub-s. (1) thereof deals with four situations under which the advance tax payable by the assessee is to be computed. Admittedly, these cases do not concern with cls. (a) to (c). Clause (d) of sub-s. (1) of s. 209, which is relevant reads as under : "(d) The income-tax calculated under cl. (a) or cl. (b) or cl. (c) shall, in each case, be reduced by the amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable." 8. This clause categorically uses the expression "deductib....