AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 1420
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....(a)(i) towards non-deduction of tax without appreciating the facts and circumstances of the case and without considering the submission made. 3. The Ld.AO ought to have appreciated the fact that the assessee company is a non-resident having incorporated in Singapore and not liable to tax of its global income in India. 4. The Ld.AO ought to have appreciated the fact that the provisions of the DTAA or ITA as per the section 90 of the Act, which are more beneficial to the assessee shall be taken into consideration for the purpose of tax liability. 5. The Ld. AO ought to consider the fact that the assessee company and the owner company of charter, both are residents of Singapore. 6. The Ld. AO ought to appreciate the fact that the agreement entered by Deep Drilling 4 Pte Ltd (DD4PL) and Deep Drilling 8 Pte Ltd (DD8PL) with the assessee company and the payments made with respect to hiring of rig are in Singapore. 7. The Ld. AO ought to consider the fact that the DD4PL and DD8PL are Singapore based company and give charter for hire in Singapore which the assessee company takes to the project site i.e., India. 8. The Ld. AO ought to ap....
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....has completed the assessment by passing a draft assessment order under section 144C of the Act dated 30.09.2021 proposing for disallowance under section 40(a)(i) of the Act towards non-deduction of TDS on the bare boat charter hire expenses claimed in the profit and loss account to the extent of Rs..40,81,64,000/-. Against the draft assessment order, the assessee filed its objection before the ld. Dispute Resolution Panel-2, Bengaluru. The ld. DRP sustained the adjustment proposed by the Assessing Officer and rejected the objections of the assessee. Considering the direction of ld. DRP, the Assessing Officer has passed the final assessment order dated 12.07.2022 assessing total income of the assessee at Rs..34,31,21,024/- after setting off current year loss of Rs..6,50,42,976/-. 3. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. By filing detailed written submissions, the ld. Counsel for the assessee has submitted that the assessee is engaged in the business of making over and drilling of oil wells in offshore territories, specially covered under section 44BB of the Act. The provisions of section 44BB is a non-obstante clause that excludes the ....
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.... of the Act for a period from 03.10.2018 to 31.03.2019 was also obtained by the assessee. The ld. Counsel for the assessee further submitted that the Assessing Officer has ignored the provisions of section 44BB of the Act and passed the final assessment order, which is contrary to law and relied on the decision of the Coordinate Bench of the Tribunal in the case of Frontier Offshore Exploration (India) Ltd. v. DCIT in I.T.A. No. 200/Mds/2009 dated 04.02.2011. 4. On the other hand, the ld. DR has submitted the following written submissions: The only issue in this appeal was disallowance of a sum of Rs. 40,81,64,000/- by the AO by invoking Sec 40a(i) of the IT Act. It is discussed in detail at para-5 and 6 of the draft assessment order and the same has been upheld by DRP. The claim of the appellant was that they are Non-Resident assessee incorporated in Singapore. It is argued that return is filed as a project office in India by admitting loss u/s 44BB of the IT Act and hence invoking Sec 40(a)(i) does not arise. In ground No. 4 of their appeal the assessee has claimed that DTAA provision was more beneficial to the assessee and hence it should have been taken int....
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.... of the return of income. 4.5 To provide the service to the above said companies, the appellant hired the bare boats from the subsidiary and paid the hire charges of Rs. 40,81,64,000/. Those bare boats were used in the territorial waters of India and the income of the subsidiary was also accrued in India. 4.6 The appellant claimed that they have incurred business loss and that business loss of Rs. 6,50,42.976/- was duly reported as current year loss at page no. 60 of the return. 5. Whether it was a case of 44BB? NO. Attention is drawn to page no 36 of the return where schedule BP Computation of Income from Business or profession was reported. It was categorically reported that Income u/s 44BB was NIL. 6. Whether MAT was calculated? Yes. Even MAT calculation was also carried out from page 71 to 72 of Return of Income. 7. Whether Tax Audit Report was filed as per section 44AB? 7.1 Yes. Attention is drawn to page no. 102 to 113 of the paper book. This is the tax audit report as per Form 3CA and Form 3CD. In the form 3CD at column 23, the related party transactions were reported. As per this a sum of Rs. 40,8 1,84,000/- was....
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....n 3. As per the agreement, owner (subsidiary company) let out the Bareboat to the appellant for a period of six months on award of contract that is going to be used by Hindustan Oil Exploration Company. 4. The Bareboat Charter shall commence when the rig is delivered to the assessee(charterer). Offshore India within India's territorial waters and shall be valid until the rig is redelivered to the Owner in India's territorial waters or such other place as may be agreed by the owner. 5. It means that the Bareboat and the rig was used in the territorial waters of India and the income to the subsidiary accrued from India on account of this contract entered between assessee and its subsidiary. 6. Attention is drawn to point 23 of the contract where owner and charterer were located in the same address of Singapore. 7. Maintenance and operation of the rig was to be undertaken by the assessee and for this purpose Charter hire was paid as per clause 9 of the agreement. 8. Another agreement was entered on 17-07-2018 and that agreement is placed at page no. 122, as per this agreement the charter period is for one year and renewable....
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.... PE in the relevant AY 2019-20 and also get their accounts audited u/s 44AB by complying various TDS provisions. Hence, as per subsection (3) of section 44BB of the IT Act they ought to have deducted tax on this bar boat hire charges, which was not done. Summary and Prayer: 1. In view of all these factual aspects, the AO, rightly held that the appellant hired Bareboat from the subsidiary and those Bare boats were used in the territorial waters of Republic of India for the business purposes and hence the hire charges was accrued to the subsidiary Deep Drilling PTE Limited from India that attracted the TDS provisions. 2. Assessee a non-resident company having Permanent Establishment (PE) in India bagged the contract from Vedanta Limited. ONGC and Hindustan Oil Exploration. For this purpose, they paid hire charges to its subsidiary. 3. On this hire charges payment, the appellant ought to have deducted Tax as applicable in line with TDS compliance of other provisions that was duly reported in Tax Audit Report. 4. As the appellant has chosen to carryout tax audit and declared net loss. The assessment was rightly carried out us 143(3) of the I....
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....d upon the following judicial precedent: i. Decision in case of Frontier Offshore Exploration (India) Ltd vs. DCIT Central Circle (1). Chennai vide ITA No 200/Mds/2009 where in it is held as "6. This is where the special provision of section 44BB comes into play. Where the statute has provided a special provision for dealing with a special type of income such a provision would exclude a general provision dealing with the income accruing or arising out of any business connection. Section 44BB is a special provision to the exclusion of all the contrary provisions provided in sections 28 to 41 and 43 and 43A of the Act. Once the provisions of sections 28 to 41 and sections 43 and 43A stand excluded the method of computing the business income of the non-resident on the basis of the books of account goes out of the picture." ii. Coordinate Bench in case of Deep Drilling 5 Pte Ltd vs. DCIT, vide IT(TP)A No. 17/Chny/2021 wherein it is held that: 17. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that consideration received by the assessee for providing rig services to M/s. CAIRN India Lt....
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.... provisions of this Act' would mean 'sum' on which income-tax is leviable - Held yes- Whether expression 'any other sum chargeable under the provisions of this Act' would include cases where any sum payable to the non-resident is a trading receipt which may or may not include 'pure income' - Held, yes - Whether assessee who makes payments to non-residents under contract entered into is under obligation to deduct tax at source under section 195 and the obligation is limited only to appropriate proportion of income chargeable under Act -Held, yes." ii. Decision of Hon'ble Supreme Court of India in case of GE India Technology Cen. (P) Ltd. vs. CIT, (2010) 193 Taxman 34 (SO), wherein, it is held - Section 195 of the Income-tax Act, 1961 - Deduction of tax at source - Payment to non-resident - Whether the moment a remittance is made to a non-resident, obligation to deduct tax at source does not arise; it arises only when such remittance is a sum chargeable under Act, i.e., chargeable under sections 4, 5 and 9 - Held, yes - Whether section 195(2) is not a mere provision to provide information to ITO(TDS) so that department can keep track of remittances being mad....