TaxTMI 
TaxTMI 
2017 (10) TMI 534
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....ce solutions to its various clients in on shore and off shore oil and gas, minerals, infrastructures, manufacturing fields etc. The assessee entered into an agreement with M/s BG Exploration and production India P Ltd ('BG'), an Indian company, on 05th November, 2004 to develop three new platforms, upgrade three existing platforms and associated fields in "Panna, Mukta and Tapti" fields, off the west coast of India. The work scope includes project management, engineering, procurement, fabrication, transportation, installation, pre-commissioning and commissioning assistance for Three four legged jackets and topside platforms (PH, PJ and STD) in water depths ranging from 23m to 52m, four infield pipelines and associated risers ranging from 4" to 18" diameter for a route length of approximately 30 km and modifications to three existing platforms (PPA, PB and TPP). It was a turnkey project. The project operations are to be carried out partly inside India and partly outside India as per the terms of Contract. It was stated that the contract clearly demarcates the work to be carried out inside India and outside India and the prices attributable to the same. 3. We shall first take up t....
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....E keeping in view the nature of work which related to oil wells. In the light of above discussion, it is thus conclusively established that assessee had a PE in India and whatever payments were received though for the work performed outside the Indian territorial waters, the same are liable to tax in India, since the work related to the oil/gas wells and which is expressly covered under article 5(2)(f) and (j) of the treaty. Accordingly the AO held that the entire payments received by the assessee for the works carried out in India and outside India shall be subjected to tax in India. 4. The AO noticed that the provisions of sec. 44BB(1) provides for taxation of receipts @ 10%. However the assessee can declare lower profits in terms of sec. 44BB(3) if he keeps and maintain such books of account and other documents as required u/s 44AA(2) of the Act. The assessee had declared lower profits on the basis of a statement prepared under software. Further the assessee had also declared profit under percentage completion basis, instead of computing income on actual receipts. The AO was not satisfied with the same and accordingly rejected the workings furnished by the assessee under s....
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....urnkey basis. He submitted that the Ld CIT(A) has also noted that the project was executed as a turnkey project. Further the entire liability for the execution of the project is placed upon the assessee and it is the assessee who has carried out the project in two parts to suit its convenience, i.e, one part of work was prepared outside India and the entire project was executed in India. He submitted that the splitting of works to suit the convenience of the assessee would not take away the liability to pay tax in India on the work carried out outside India. In this regard, the Ld D.R placed reliance on the decision dated 06-01-2016 passed by the Co-ordinate bench in the case of M/s Orpak Systems Ltd (ITA No.8863/Mum/2011), wherein the co-ordinate bench had followed the decision rendered by Hon'ble Madras High Court in the case of Ansaldo Energia SPA Vs. ITO (2009)(310 ITR 237), wherein it was held that the subdivision of a composite contract according to the convenience of contractor had to be ignored when the contractor has taken up entire responsibility for executing the project. Accordingly the Ld D.R contended that the receipts pertaining to operations carried out outside Indi....
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....ering the receipts relating to Indian operations. Now the assessee has agreed with the view taken by the AO that the receipts relating to operations carried outside India relating to the project carried on in India also requires to be taken into account for determining the income of the assessee. In this view of the matter, the whole scenario relating to computation of income gets changed from the point of view of the assessee. However, we decline to give any direction to the AO in this regard with regard to the manner of computation of income and we leave it to the wisdom of the AO. The Ld A.R also submitted that the assessee would be in a position to furnish the accounts to the satisfaction of the AO. Hence, in the interest of natural justice, we are of the view that the assessee may be provided with an opportunity to represent its case relating to determination of income before the AO. Accordingly we set aside the order passed by Ld CIT(A) on the issues relating to rejection of books of account and determination of income and restore them to the file of the AO with the direction to examine the same afresh. The assessee is also directed to furnish the financial statements and oth....