TaxTMI 
TaxTMI 
2017 (12) TMI 302
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....58 118/- 22. 02. 2011 Rs. 2 99 44 157/- 2009-10 24. 09. 2009 Rs. 4 65 40 938/- 09. 02. 2012 Rs. 6 88 57 928/- 2010-11 30. 09. 2010 Rs. 4 88 71 609/- 23. 05. 2013 Rs. 72 59 58 024/- As the issues involved in all the appeals are almost similar so we are adjudicating all the appeals together. ITA/7939/Mum/2011-AY. 2008-09: 2. Effective Ground of appeal raised by the assessee is about taxing its income u/s. 44BB of the Act as against section 44B. During the assessment proceedings the AO found that the assessee had provided three vessels namely M. V. Swiwar Venturer M. V. Swiwar Victor and M. V. Swiwar Challenger to Indian companies - BGEPIL ONGC and Reliance Industries and to carryout and conduct activities relating to exploration or extraction of mineral oil in Panna Mukta and Tapti fields. The AO observed that it was not relevant for what purposes the ships hired by the Indian entities were used that the assessee had provided the ship on hire that the income was to be assessed as per the provisions of section 44B of the Act. He referred to the Agreements entered into by the assessee with the hirers and held that the vessels had been specifically su....
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.... ITR 244);Wavefield Inseis ASA in RE (320ITR290); Seabird Exploration FZ LLC in RE (320 ITR 286);Wavefield Inseis ASA in RE(322ITR645);Seabird Exploration FZ LLC in RE (326 ITR558); Sundowner Offshore International (Bermuda) Ltd (183 taxman 365)and RBF Rig Corporation(313ITR369)and held that a service such as software maintenance transport provision services used by a hirer in the activity of exploration extraction and production of mineral oil would be taxable in the hands of the assessee u/s. 44BB of the Act. Finally he upheld the order of the AO. 2. 2. Before us the AR argued that the assessee had provided the ship on hire that even if the hirer used in the business/activity related to extraction or production of mineral oil provisions of section 44BB were not applicable that the business of the assessee was limited to giving the ship on hire that the vessels had been used in transportation of man and goods shipped from the ports of Mumbai to offshore locations in India that the offshore locations were the places where the hirer was carrying the activities related to the exploration and production of mineral oils that even if man and the goods so transported were used by the hi....
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....ir Indian business and foreign business or on the basis of "voyage accounts". Difficult and complicated issues arise in such assessments particularly in relation to depreciation (including unabsorbed depreciation of earlier years) the balancing charge/allowance and the apportionment of overhead expenses. With a view to simplifying and rationalising the assessments in such cases the Finance Act has made a special provision in s. 44B of the IT Act for the computing profits and gains of shipping business in the case of non-residents. Under this provision profits and gains of a non-resident from the business of operation of ships will not be calculated in accordance with the provisions of ss. 28 to 43A of the IT Act but will instead be taken at 7. 5 per cent of the aggregate of the following amounts namely- (i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of carriage of passengers livestock mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers livestock mail or goods shipped at any port o....
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.... the business of operation of ships whereas section 44BB is about computation of taxable income of a taxpayer engaged in the business of providing services and facilities in connection with or supply of plant and machinery on hire used or to be used in the exploration for and exploration of mineral oils. The Parliament engrafted the aforesaid provision in the Act as a measure of simplification providing for determination of income of such taxpayers at 10% of the aggregate of certain amount. Because of the non obstante clause section 28 of the Act has no application. In other words section 44BB is applicable where the assessee being a non-resident is engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used or to be used in the prospecting for or extraction or production of mineral oils. Some of the general principles governing the section culled out from various judgments can be summarised as under: i. Once section 44BB is applied two conclusions become inescapable. The first conclusion is that 10% of the receipts by the foreign resident is chargeable to tax and the other conclusion is that 90% of the receipts of ....
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....f fees for technical services received by a non-resident or a foreign company carrying on business through a PE in India. If the non-resident is engaged in the business of providing services in connection with the prospecting etc. of mineral oils the computation provisions relating to fees for technical services will have to yield to section 44BB. In a case of business governed by section 44BB normally the enterprise concerned would be having a PE in India. It is difficult to envisage a situation of a person being engaged in providing services or facilities in connection with prospecting and extraction of mineral oils not having a fixed place of business from where the operations are carried on. Thus the existence of PE is a common feature in both the sections though there is an explicit reference to PE under section 44DA. Rendering of technical services through PE may be a common feature of both the sections although in the case of section 44DA it is explicitly mentioned. But what is important is the nature of business and it is that factor which serves as an indicator to apply one of the two sections. If the business is of the specific nature envisaged by section 44BB the computa....
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.... cannot be taxed u/s. 44BB of the Act. In short section 44BB will prevail over section 44B as it is a special section which came on statute later and deals with specific activities. If the services provided by the assessee are excluded very little purpose will be served of incorporating section 44BB for computing the profits in relation to the services connected with exploration and extraction of mineral oils. The provision will then operate in a very limited field. In our opinion the Parliament intent was not to give a limited field to the section 44BB. That is why for taking care of the activities related with oil exploration and to segregate the general shipping activities mentioned in section 44B a special provision i. e. 44BB was introduced. The ships were hired by the user for transporting men/machines to locations where it was doing exploration/production of mineral oil. Thus it was not a case of transporting goods or livestock by ships simplicitor. The activity was directly and closely related with 'services'rendered by plant and machinery and the ships for the purpose of section 44BB have been treated as plant. As the services were rendered 'in connection with' pro....
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.... 2. 3. 4 specially dealt with the issue. In light of the above discussion we hold that the order of the FAA does not suffer from any legal or factual infirmity. So confirming the same we decide the effective ground of appeal against the assessee. ITA. s/4884/2012 & 3563/Mum/2015 AY. s 2009-10 & 2010-11: 3. Following our order for the AY. 2008-09 effective grounds of appeal for both the years are decided against the assessee. ITA. s/4994 /Mum/2012 3680/Mum/2015 AY. s 2009-10&2010-11 4. Effective grounds of appeal filed by the AO for both the AY. s is deleting the addition made by the AO on account of service tax payable to the Government by the assessee. During the assessment proceedings the AO found that the assessee had charged service tax to BGEPIL as a part of the billing for the charter hire charges. In that regard the assessee contended that such service tax collected by the assessee was on behalf of the Government that same had been paid to the Government account as and when the liability arose that it acted as a trustee for the Government for the service tax collected and paid that the same could not be included in the gross receipts of the assessee for computing its in....