TaxTMI 
TaxTMI 
2023 (7) TMI 1420
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.... 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 appreciate the fact that the DD4PL and DD8PL who are owners of rig are non-residents and do not have....
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....nce 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 application of other provision of section 28 to 41 and section 43 and 43A of the Act covered under the head of profits and gains from Bus....
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....d 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 into consideration. In ground no. 5, 6.7,8 and 9 it was claimed that the owner of the rig to whom the payment was made was also a Non-Resident and hence pay....
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....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 paid to Deep Drilling 8 PTE Limited Singapore which is a fellow subsidiary. 7.2 TDS compliance: In the same tax audit report attention is drawn to column no 34a where TDS compliance chapter XVII-B or XVII-BB was reported that the assessee was required to deduct tax. Accordingly, the asse....
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....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 automatically every year. 9. This Bareboat also delivered to the assessee in the territory of operation that is within the territorial waters of India. For this purpose also, charter hire was agreed between both the parties. C. Analysis of the tax returns filed by the company from AY 2018-19: The appellant company filed the return of income for the AY 2018-19 onwa....
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....erritorial 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 IT Act. 5. As they have failed to deduct tax the AO rightly invoked section 40(a)(i) of the IT act and disallowed the payments made by the assessee. It is prayed that the appeal of the assessee may be dismissed. 5. We have heard both the sides, perused the materials available on record and gone through the draft assessment order, directions of the ld. DRP and final assessment order. We have considered the written submissions filed by the assessee. We have also ....
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....n. 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 Ltd., is not liable to tax in India as royalty u/s.9(1)(vi) and Article-12 of the India Singapore Tax Treaty. Further, income of the assessee is also not taxable as business profits in terms of the provisions of Sec.44BB of the Act, because business profits of an enterprise of a contracting state shall be taxable only in that state unless such enterprise is carried out its business in other contracting state through a Permanent Establishment. Since, there is no Permanent Establishment in the case of the assess....
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....argeable 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 made to non-residents outside India; rather it gets attracted to cases where payment made is a composite payment in which certain proportion of payment has an element of 'income' chargeable to tax in India and payer seeks a determination of appropriate proportion of sum chargeable - Held, yes. iii. Decision of Hon'ble ITAT Delhi in case of ACIT Vs. Interocean Shipping (I) (P) Ltd., 51 ITD 582 (Delhi), wherein it is held that: "The ship hired out by NR was not a ship but was a specially designed vessel of the nature of machin....