TaxTMI 
TaxTMI 
2024 (12) TMI 765
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....e definition of royalty as prescribed u/s 9(1)(vi) of the Act or Article 12 of the Tax Treaty and if the assessee wanted to be governed by the provisions of Tax Treaty, the revenue earned by the assessee would be taxable as per Article 12 of the Tax Treaty. On the other hand, taxability of the income earned by the assessee was held to be falling within the ambit of section 115A if the assessee doesn't have a PE in India/section 44DA if the assessee has a PE in India. The AO observed that as the vessel was provided by the assessee company for the purpose of providing services/facilities for extraction or production of mineral oil in India, therefore, such services fall within the provisions of section 44BB of the Act and that this section does not embargo any addition on the assessee to have earned for PE in India. Further, the AO has taken into consideration a letter issued from the assessee for withholding tax certificate u/s 197 of the Act wherein the assessee had claimed applicability of section 44BB. Therefore, the amount of Rs. 30,50,33,034/- were held to be received for provision of offshore services vessel and taxable u/s 44BB of the Act. The ld. DRP has sustained this addit....
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....in law, the Ld. AO has erred in not granting complete credit of TDS amounting to INR 1,33,23,843 as claimed in the return of income filed for the relevant AY. 7. On the facts and circumstances of the case and in law, the Ld. AO has erred in erroneously levying Interest under section 234B and 234D of the Act. 8 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under Section 270A of the Act without appreciating that the Appellant has neither underreported nor misreported its income for the relevant AY. All the above grounds are without prejudice to each other. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the hon'ble members to decide this appeal according to law." 3. The ld. counsel for the assessee has submitted that the Revenue does not dispute the fact that number of days for which the vessel stayed in India was from 5th January, 2019 to 25th February, 2019 and that makes it 52 days. It was submitted that when there is admittedly no PE of the assessee in India, the receipt in the f....
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....52 days. This is supported by the customs clearance certificate which was filed before the ld. tax authorities below. 7. We then find that the nature of contract between the assessee and the charterer was a project time charter party for offshore services vessel and, as appearing from the agreement, copy of which is available at page No.12 to 46 of the paper book, the period of hire was 30 running days (firm period) inclusive of the dates of delivery and re-delivery and of 'off service' time. It further comes up from the agreement that the schedule of price and rates was by way of Annexure-E and copy of which is available at page No.43 of the paper book. The vessel spread day rates were USD 41,560 per day apart from other payments for these the tax invoice was raised by the assessee and the copy of which have been made available at page 118 and 119 of the paper book. We find that as for the charter for the following period which comes to 35 days, the payments were made from 07.01.2019 to 10.02.2019. Thus, it is established that for the purpose of Article 5of Indo-Singapore DTAA, the assessee does not have a PE in India. 8. Now, once that is established that assessee has no PE in ....
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....uring the Charter Period any such equipment becomes lost, damaged or unserviceable, other than as a result of the Owners negligence, the Charterers shall either provide, or direct the Owners to provide, an equivalent replacement at the Charterers' expense Charterers to Provide (a) While the Vessel is on hire the Charterers shall provide and pay for all fuel, lubricants, water, dispersants, fire fighting loam and transport thereof, port charges, pilotage and boatmen and canal steersmen (whether compulsory or not), launch hire (unless incurred in connection with the Owners business), light dues, tug assistance, canal, dock, harbour, tonnage and other dues and charges, agencies and commissions incurred on the Charterers' business, costs for security or other watchmen, and of quarantine (if occasioned by the nature of the cargo carried or the ports visited whilst employed under this Charter Party but not otherwise) (b) At all times the Charterers shall provide and pay for the loading and unloading of cargoes so far as not done by the Vessels crew, cleaning of cargo tanks, all necessary dunnage, uprights and shoring equipment for securing deck cargo, all cordage except as to b....
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....ring of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. Thereafter, hon'ble supreme court had held as follows; "The above facts would indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act." 11. However, no issue about taxability of receipt by a foreign resident, not having PE in India, from hire of vessel on time charter basis was examined in any form. So the reliance on the ONGC Case (supra) by the ld. Tax authorities was not justified. 12. This issue has been examined by the Mumbai Bench in the case Smit Singapore Pte Ltd. Vs. DCIT [2021] 125 taxmann.c....
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....ome is covered by the charging provisions contained in Section 5 of the Act. Indian Income Tax Act, admittedly, follows a territorial system of taxation. As per this system only that income of a non-resident is taxable in India which is attributable to operations within the Indian Territory. Therefore, in the first instance it is to be seen whether a particular income arises or accrues or deem to arise or accrue within India. In order to seek this answer, the principles contained in Section 9 have to be applied only when it becomes an income taxable in India as per Section 9, in case of non-resident, the question of computation of the said income would arise. To recapitulate the scheme of the Act in this behalf, it may be stated that Section 4 is the charging section for levying a tax on the income of any person under the Act and provides that income-tax shall be levied at the rates provided by the Finance Act on the 'total income' of the previous year of every person. The expression 'total income' has been defined in Section 2(45) of the Act to mean the total amount of income referred to in Section 5 computed in the manner laid down under the Act. 39) The scope of the total inco....
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....under this provision, we have to give a go-by to Sections 5 and 9 of the Act. To this extent, remarks of the High Court may not be correct. Law in this behalf is settled by the judgment of this Court in A. Sanyasi Rao case as can be discerned from the following discussion in the said judgment. "We are further of the view that the basis of a charge relating to income tax is laid down in Sections 4 to 9 of the Act. Section 4 is the charging section. Income-tax is levied in respect of the total income of the previous year of every person. Section 5 deals with the scope of total income. Section 6 deals with the residence in India. Section 7 deals with the income deemed to be received. Section 8 deals with dividend income. Section 9 deals with the income deemed to accrue or arise in India. xxx xxx xxx The crucial words in Section 9(1) to the effect that "all income accruing or arising, whether directly or indirectly, through or from any business connection" occurred in Section 42 of the Income Tax Act, 1922 as well. The said section came up for consideration before this Court in Anglo- French Textile Co.Ltd. v. CIT [(1953) 23 ITR 101... xxx xxx xxx The counsel for the revenue Dr....
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....us, a reading of the above section shows that the section provides that notwithstanding anything contained in sections 28 to 41 and section 43 & 43A, 10% of the gross receipt of a non-resident engaged in the business of providing services or facilities or supplying plant & machinery on hire which is used in prospecting for or extraction of mineral oils shall be deemed to be the profits & gains of business. Thus, this section has rightly been contended by ld. Counsel of the assessee that it is a computation provision. Thus, this section provides a presumptive taxation rate for computation of profits but does not override provision of sections 5, 9 or section 90 of the Income-tax Act, 1961. Case law referred by the ld. Counsel for the assessee in this regard i.e. Sedco Forex International vs. CIT 399 ITR 1 (SC) fully supports this proposition. In this regard, Hon'ble Supreme Court had expounded that sections 4, 5 & 9 are to be kept in mind, where assessment is done u/s 44BB. It is settled proposition that unless Revenue is able to prove that the assessee has a PE in India, its business profits cannot be subject to tax in India. This view is supported by ITAT decision in the case of R....