AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 1077
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....ment and supply component in respect of supply of drilling bits for execution of contract. These revenues were also offered to tax u/s 44BB. 4. Looking at the nature of the activities and scope of work of the contracts, the AO held that the contracts receipts are to be treated as Fee for Technical Services (FTS) in respect of equipment rental hire and claim of Section 44BB was denied and taxed the amount u/s 44DA of the I.T. Act. 5. We have gone through the provisions of Section 44BB and Section 44DA. 6. Section 44BB reads as under: " 44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, 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, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) 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 ....
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....rms professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effec-tively connected with such permanent establishment or fixed place of profession, as the case may be, shall be computed under the head "Profits and gains of business or profession" in accordance with the provisions of this Act: Provided that no deduction shall be allowed,- (i) in respect of any expenditure or allowance which is not wholly and exclusively incurred for the business of such perma-nent establishment or fixed place of profession in India; or (ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent estab-lishment to its head office or to any of its other offices. Provided further that the provisions of Section 44BB shall not apply in respect of the income referred to in this Section. This provisions has been inserted by the Finance Act, 2010 w.e.f. 01.04.2011 hence it is not applicable to the A.Y. 2009-10 and 2010-11 (2) Every non-resident (not being a company) or a foreign company shall keep and maintai....
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.... to be assessed u/s 44BB of the Act only. 11. Further, we also find that preferring appeal by the Revenue against the decision of the Hon'ble High Court in the case of M/s BJ Services Co. (ME) Ltd. cannot be a ground for confirming the appeal. Till the decision is reversed, the order of the Hon'ble High Court stands legally binding. 12. Since, the order of the ld. CIT(A) is on cogent reasoning, keeping in view the provisions of the Act which have been mentioned above, we decline to interfere with the order of the ld. CIT(A) on this issue. Profits Attributable on revenues - 5.08% or 2%: 13. The ld. CIT(A) determined the profits attributable to India operations at 5.08% of the revenues received by the assessee from ONGC on account of supply of imported drill bits as opposed to 2% of revenues as attributed by the assessee to India operations. While arriving at 5.08%, the ld. CIT(A) has rejected KOA Tools Limited as a comparable company on account that it incurred losses. 14. It was argued that ignoring the functional comparability of KOA Tools Limited which is against comparability study. The company operates in 3 segments i.e., segment tools, Trading of tools and parking. Since....
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....ument is hard to subscribe to since under section 44BB of the Act profit is determined not transaction-wise but with reference to the gross value of transactions done by the assessee during a particular period. The Service Tax has to be treated as part of the turnover following the logic of the decision in the case of Chowringhee Sales Bureau (P) Ltd. (87 ITR 542). Also the scheme of presumptive determination u/s 44BB of the Act was considered by Hon'ble Uttarakhand High Court in the case of CIT vs. Halliburton Offshore Services Inc. (300 ITR 265) it was held that this section is a complete code in itself and provides for taxation of all receipts whether arising in India or outside. Based on that decision the ITAT Delhi Bench in the case of DDIT (Inti Tax) vs. Technip Offshore Contracting BV 29 SOT 33 (Del) also held that Service Tax received by the assessee has to be considered as part of his gross receipt for the purposes of presumptive determination of his profit. This reasoning was also followed in another case of ACIT vs. Halliburton Offshore Services in para 4 of this order [IT Appeal No. 1659(Delhi) of 2006, order dated 13-05-2009]. (I) The Appellant has also relied upon ....
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....to mean sale proceeds received in India by the assessee in foreign exchange. Under the said definition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading of the above two clauses shows that they include anything which has nexus with the sale proceeds. Correspondingly, they show that they exclude everything which has no nexus with the sale proceeds. Further, the meaning of export turnover in clause (b) of the Explanation to section 80HHC, therefore, clearly show that export turnover did not include Excise Duty and Sales Tax. Export turnover is the numerator in the above formula whereas- total turnover is the denominator. The above formula has been prescribed to arrive at profits from exports. In the circumstances, the above two items, namely, Sales Tax and Excise Duty cannot form part of total turnover. In fact, if the denominator was to include the above two items and if the numeration exclude....
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....different view is being taken than the case of Sedco Forex (supra). This may give rise to a feeling that the principles of Judicial Discipline are being violated. However, it needs to be reiterated that for the present Appeal reliance has been placed on 2 decisions of the ITAT as also the fact that judicial precedents are not supposed to be mechanically followed. This point may also be discussed. 6.8 The judicial precedents should not be followed mechanically as held in Deena alias Deen Dayal vs. Union of India: ".....Any case, even a locus classicus is an authority for what it decides. It is permissible to extend the ratio of a decision to cases involving identical situations, factual and legal, but care must be taken to see that this is not done mechanically, that is, without a close examination of the rationale of the decision which is cited a precedent. Human mind, trained even in the strict discipline of law, is not averse to taking the easy course of relying on decisions which have become famous and applying their ratio to supposedly identical situations....." (p. 1166) It is also settled law that a decision is not an authority on point, which was not argued as held ....
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....r consideration has been recently adjudicated by the Uttarakhand High Court (Full Bench) in assessee's own case and Others (414 ITR 1) wherein the Uttarakhand High Court on similar facts has held that amount reimbursed to the assessee by ONGC representing service tax paid earlier by assessee to the Government of India and not "on account of provision of services in connection with exploration and production of mineral oil", would not form part of aggregate taxable amount as referred under section 44BB. 25. Key observations by the Division Bench in the said ruling are as under: * Section 44BB specifically states that "any amount paid or payable (in or outside India) or any amounts received or deemed to be received in India on account of the provision of services and facilities". Accordingly, chargeability under Section 44BB is restricted only to the amounts received/ receivable on account of provision of services and facilities in connection with exploration and production of mineral oil. * Service tax is a tax levied on "services" and cannot be treated as "service" itself. Hence, service tax does not form a part of consideration received/ receivable for services rendered in co....