TaxTMI 
TaxTMI 
2024 (9) TMI 958
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....g services and had entered into a contract with Oil and Natural Gas Corporation Limited (ONGC) for charter hire of Anchor Moored Drilling Rig "Olinda Star" for drilling operations to be carried out in offshore waters of India. The assessee filed its return of income for the year under consideration dated 15.03.2022, declaring total income at Rs. 22,42,84,694/-. The assessee's case was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. It is observed that the assessee is liable to be taxed u/s. 44BB of the Act at a deemed profit of 10% on the gross receipts received by it for the work of extraction or production of mineral oils. 4. During the assessment proceedings, the ld. A.O. observed that the assessee had excluded the impugned amount of Rs. 27,28,69,105/- which was received as 'reimbursement of service tax' from the total receipts while computing the deemed profit u/s. 44BB of the Act. After duly considering the assessee's submission, the ld. A.O. passed the draft assessment order dated 05.12.2022 u/s. 144C(1) of the Act, proposing the impugned amount @ 10% to be added to the income as per section 44BB o....
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....ection 145A of the Act was not there before the Hon'ble High Court while deciding the issue which is extensively relied upon by the ld. AR. Further, the ld. DR relied on the decision of the Hon'ble Apex Court in the case of Sedco Forex International Inc. vs. CIT[2017] 87 taxmann.com 29 (SC). The ld. DR relied on the decision of the lower authorities. 9. We have heard the rival submissions and perused the materials available on record. The Revenue's case is that section 44BB of the Act being a deeming provision having a non obstante clause which excludes the charging section 28 of the Act and there upon the computation methodology provided in the subsequent sections, is a special provision inclusive of the charging provision and the computation of income for non residence engaged in the business of providing services or facilities in connection with or supplying plant and machinery for hire used for extraction or production of mineral oil. This implies that the provision itself is a complete code for determination of the profit and gains for such undertaking. The said provision is reproduced hereunder for ease of reference: Special provision for computing profits and gains....
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....024: (4) Notwithstanding anything contained in sub-section (2) of section 32 and sub-section (1) of section 72, where an assessee declares profits and gains of business for any previous year in accordance with the provisions of sub-section (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assessee for such previous year. Explanation.-For the purposes of this section,- (i) "plant" includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business; (ii) "mineral oil" includes petroleum and natural gas.] 10. The assessee in the present case comes under the purview of the said provision which is an undisputed fact, except to the extent that the service tax collected by the assessee from its customers for the services provided by it on account of activities pertaining to exploration of mineral oils ought not to have been excluded from the aggregate amount while computing the profit and gains as per sub section 2 of section 44BB of the Act. Further, the Revenue's contention is that whether or not there is a profit element in such receipt is immaterial for determination of th....
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....lar No/4/2008 which is reproduced hereunder for ease of reference: CHAPTER XVII-B OF THE INCOME-TAX ACT, 1961 - COLLECTION AND RECOVERY OF TAX - DEDUCTION AT SOURCE - CLARIFICATION REGARDING TDS UNDER CHAPTER XVII-B ON SERVICE TAX COMPONENT COMPRISED OF PAYMENTS MADE TO RESIDENTS CIRCULAR NO. 1/2014 [F.NO.275/59/2012-IT(B)], DATED 13-1-2014 The Board had issued a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component. Representations/letters has been received seeking clarification whether such principle can be extended to other provisions of the Act also. 2. Attention of CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated 1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional se....
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....erence to these should be checked by the auditing parties. [F.No.275/73/2007-IT(B)] 12. The assessee also placed reliance on the following decisions: 1. DIT vs. M/s. Schulumberger Asia Services Limited 317 ITR 156 2. Pr. CIT(IT) vs. Boskalis International Dredging International CV (ITA No. 55 of 2017) 3. DIT vs. Mitchell Drilling International Pvt. Ltd. (94 CCH 0031) 4. ACIT vs. McDermott International Management (ITA Nos. 2373 & 2374/Del/2023 vide order dated 09.02.2024) 13. In the above factual matrix of the case, it is observed that the CBDT Circulars mentioned by the assessee has been controverted by the Revenue on the ground that the said Circulars pertain to resident payees only where the charging section 28 and the computation sections are applicable for determining the profits and gains of business and profession and the same does not apply in case of a non resident tax payers when there is a special provision exclusively for this purpose. We do not find force in the argument of the Revenue on this aspect for the reason that the Hon'ble Delhi High Court in the case of DIT vs. Mitchell Drilling International (P) Ltd. (supra) has also dealt with this issue and ....
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....chnical services and no TDS is required to be made on the service tax component under Section 194J of the Act. 14. From the above it is pertinent to point out that though the CBDT Circulars is a clarification on the issue of excluding service tax component while computing the income of the assessee who is a resident, the intention of the said Circular nevertheless is to exclude the service tax component while deducting TDS on the rent paid or payable for the purpose of computing the income of the assessee. This, in our view, would also be applicable in the present case where the assessee being a non resident is given the benefit of special rate of tax as per section 44BB of the Act where the intention of the legislature is only to tax the assessee @ 10% on the amount paid or payable to the assessee, received on account of the business activity of the assessee. The word 'amount' here cannot be interpreted to mean the GST/service tax which is collected by the assessee from its customers and paid to the Government. The CBDT Circular mentioned above has categorically excluded the service tax component, while computing the income of the assessee and the same could not be interpreted di....
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....ion, Section 44BB(2) would only be the amount paid by the ONGC to the assessee on account of (i) provision of services in connection with or (ii) supply of plant and machinery on hire used in, the prospecting, extraction and production of mineral oils. As the amount reimbursed by the ONGC, towards the service tax paid by assessee earlier to the Government, is not an amount paid to the assessee towards the services provided by the latter in connection with the prospecting, extraction or production of mineral oils, it is not required to be included in the amounts specified in clauses (a) and (b) of Section 44BB(2). 29. As shall be elaborated later in this order, service tax is a tax levied on services, and cannot be treated as the Service itself. It is difficult, therefore, to accept the submission of the revenue that the amount reimbursed by the ONGC, towards service tax paid earlier by the assessee to the Government, should be included in the amount paid to the assessee on account of provision of services and facilities. Even otherwise, it is not every amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee under Sectio....