TaxTMI 
TaxTMI 
2016 (12) TMI 443
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng and it is a turnkey project hence the assessee had an option to declare the income as per section 44BB . The assessee also relied on CBDT Circular No.552 dated 9.2.1990. The Assessing Officer rejected the assessee's claim for computing the income as per 44BBB of the Act since the assessee has not satisfied the following conditions: (a) It was not turnkey power project approved by the Central Government at the time of signing the contract. (b) It was also not financed by an international and payment as was required by the then prevailing condition of sec. 44BBB. 4. The assessee submitted a letter from the Chief Engineer to the Assessing Officer certifying that the project in question was a turnkey project which reads as under: "the project may please be treated at part with the power projects approved by Govt. of India with tax treatment under section 44BBB of the Income-tax Act, 1961. The document cannot be construed as an approval from the Central Government, in the facts of the case." The Assessing Officer did not accept the letter placed by the assessee before him since the document used the expression: "may be construed and it was not the turnkey project approved by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f above, certified for limited tax purpose that the subject contract form part of turnkey power project approved by the Central Government, in its behalf. In view of above, the project may please be treated at par with Power Projects approved by Government of India with tax treatment under section 44BBB of the Income Tax Act, 1961." Further, the ld. AR further clarified that the earlier the subject of Power was included in the ministry of energy and w.e.f.02/07/1992 the department Ministry of Energy Sources was dispensed with and the Ministry of Power started functioning independently. Hence all the relevant official communication is issued from the Ministry of Power which should be considered on par with the communication issued by Ministry of Energy. The CBDT in Circular No. 552 dated 9.2.1990 clarified that an approval issued by the Department of Power in the Ministry of Energy shall be deemed to be approval of the Central Government for the purpose of sec. 44BBB of the Act. 6. On the other hand, the ld. DR supported the orders of the lower authorities. 7. We heard the rival submissions and perused the material placed before us. The assessee has signed the agreement for the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee has satisfied all the conditions for the purposes of computing the income u/s 44BBB as a turnkey project. Therefore we set aside the orders of the lower authorities and direct the Assessing Officer to compute the income as per sec. 44 BBB of the Act. This ground of appeal is allowed. 8. Ground No.2 is related to Design Engineering & Technical and Supervisory services to the extent of Rs. 21,38,263/- treated as technical services and taxed u/s 115 A r.w. sec. 44D of the Act. 9. The Assessing Officer taxed the Design Engineering and Supervisory Services u/s 44AD of the Act. The relevant part of the assessment order is extracted hereunder for the sake of convenience. "4. Claim for Design Engineering and Technical and Supervisory Services: 4.1 An amount of Rs. 21,38,623 has been debited under the above head. On analysis of the details it is found that the same has been incurred in connection with purely technical and design services. Actually, this is a part of consideration received from TNEB, and repatriated by the non-resident company to the head office. The charge is in the nature of rendering of any managerial technical, or consultancy services as envisaged in the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a portion of it cannot be carved out and be treated as Fees for technical services. The activities in the work are Physical activities for erection of plant and machinery & testing and commissioning. And they are not stand alone services which form part of the total project of supply and erection of plant and machinery in connection with a power project. The assessee relied on source Rule which was explained in [1994] 50 ITD 348 (CAL.)IN THE ITAT CALCUTTA BENCH 'E', Deputy Commissioner of Incometaxv. Schlumberger Seaco as under: "the definition of the words "fees for technical services" as contained in Explanation 2 to section 9(1)(vii) has been explained by the Circular as under :- "16.3 The expression 'fees for technical services has been defined to mean any consideration (including any lump sum consideration) for the rendering of managerial. technical or consultancy services, including the provision of services of technical or other personnel). It, however, does not include fees of the following types, namely :- (i)Any consideration received for any construction, assembly, mining or like project undertaken by the recipient. Such consideration has been excluded from the defi....