AI Drafter 
TaxTMI 
TaxTMI 
2024 (6) TMI 981
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....sessee by the Tribunal's orders in immediate preceding year i.e., A.Y 2019-20. For this, the Ld. Counsel for the assessee drew our attention to Ground No.2, which reads as under: "2. The Ld. A.O erred in making disallowance u/s. 40(a)(ia) towards non-deduction of TDS without appreciating the facts and circumstances of the case and without considering the submission made." 3. The Ld. Counsel for the assessee stated the brief facts that the assessee is a Non-Resident company incorporated in Singapore and engaged in the business of drilling of oil wells in off shore territories and provision and facilities relating to exploration and exploitation of mineral oils and natural resources. The assessee has provided drilling services, jack up drilling rig deep driller 8 (DD8), which was brought into India on bareboat charter (the issue in dispute). The A.O during the course of draft assessment order u/s 144C of the Act dated 08.03.2022, on examination of Form 3CEB for the relevant assessment order 2020-21 noted that the assessee-company has made payment on account of sub contract charges to Deep Drilling 8 Pte Ltd., Singapore being bareboat charges of Rs. 55,12,69,200/-. The A.O....
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.... Order stated that the Section 44BB of Income Tax Act is a special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. In the present case, the DD8 remained in India for more than183 days during the year under consideration the income of the recipient of the bareboat- DD8 the hire charges are taxable in India as business income u/s 44BB of the I.T Act Article 7 read with Article 5 of India Singapore tax treaty deals with the taxation of business income of an entity having a permanent establishment situated in India. Since the assessee does not fulfil the conditions laid in the Article of it being treated as business income, therefore, the assessee will not come under section 44BB of the Income Tax Act. The assessee would also not come under fee for technical services covered under the special provision 115A read with section 44D of the Income Tax Act. The AO has correctly treated it as equipment royalty as per section 9(1)(vi) read with Article 12 of the DTAA between India and Singapore. 3.11. During the course of DRP proceedings, assessee has pleaded to give relief by placing reliance on the judgement o....
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.... 44BB of the Act and therefore, the assessee is not liable to deduct TDS u/s. 195 of the Act. Further, it was noted by the Tribunal that M/s. Deep Drilling 8 Pte Ltd. does not have PE in India and hence, the payment made by the assessee are not taxable in India as per DTAA between India and Singapore. Therefore, no disallowance u/s. 40(a)(i) of the Act was maintainable, the Tribunal finally held in Para 5.8 as under: "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 carefully considered the detailed written submissions filed by the Revenue in light of certain judicial precedents. In this instant case before us we are called upon to decide whether the payments made to DD8PL for bare boat hire charges is liable to tax in India or not. The assessee has filed a return under section 44BB of the Act offered lower profit than the 10 percentage of aggregate receipts by maintaining the books of account and other documents and audited and furnished the tax audit report u/s 44AB of t....
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.... 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 assessee the question of taxation of business profits in India does not arise. Therefore, we are of the considered view that the AO as well as the ld. DRP completely erred in taxing income of the assessee in India. Hence, we direct the AO to delete the addition made towards income of the assessee in terms of Sec. 9(1) and Artlce-12 of the India Singapore Tax Treaty. 6. Further the assessee has argued that the provisions of section 195 of the Act will not applicable as the paymen....
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....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 machinery which would ply in the ocean and assist in the construction of offshore platforms that were used for the exploration of mineral oil. Therefore, the claim of the department that the hire charges received by NR were taxable in the contracting State because of article 9, was to be rejected because the said article covers shipping income arising from the operation of ships. Article 7 of the DTA covers business profits to b....