TaxTMI 
TaxTMI 
2023 (12) TMI 1480
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.... "(i) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in allowing the appeal of the assessee by completely overlooking the amended provisions of section 9(1)(i), 9(1)(vii), 44AB, 44DA of the Act which were applicable to the AY under consideration. (ii) Whether the CIT (A) has erred in placing reliance on the judgment of the Hon'ble Supreme Court in the case of ONGC vs. CIT (Civil Appeal No. 731 of 2007) by failing to appreciate that the issue of taxability u/s 44BB vs. 44DA of the Act was not there before the Apex Court, and that the case before the Apex Court pertained to the AY 1985-86, and involved the issue of taxability u/s 44BB vs. 44D of the Act. (iii) Whether the CIT (A) has erred in failing to note that the Memorandum to Finance Bill 2010 makes it clear that any service which falls within the ambit of 44DA, even if it is in connection with prospecting for, or extraction or production of mineral oils as stipulated in section 44BB, has to be assessed u/s 44DA of the Act. (iv) Whether the CIT (A) has erred in ignoring the nature of activities and scope of work as per the contracts of the assess....
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....ting or addressing the issue of their functional dissimilarity with the assessee, as highlighted by the AO. (xii) Whether the CIT(A) was correct in holding that the net profit margin of average of Hazel Mercantile Limited" and "Aseem Global Limited" were applicable in the case of the assessee without adjudicating or addressing the issue of their locational difference with the assessee, as highlighted by the AO. (xiii) Based on above facts, whether the Ld. CIT(A) erred in not upholding the action of the AO in rejecting the Profit Attribution Report" submitted by the assessee. (xiv) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time of or before the hearing of the appeal." 4. Ground Nos. (i), (ii) and (iii) raised by the revenue are challenging the action of the ld CIT(A) in holding that the receipts on account of service tax are not includible in the gross revenue of the assessee for the purpose of computation of profit u/s 44BB of the Act. 5. We have heard the rival submission and perused the material available on record. The assessee is a non-resident foreign company incorporated under the laws of British....
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....e would not be eligible for inclusion in the value of gross receipts for the purpose of computation of profit u/s 44BB of the Act. Respectfully following the same the ground Nos. (i), (ii) and (iii) raised by the revenue are dismissed. 6. Ground Nos. (iv) to (vi) raised by the revenue are challenging the action of the ld CIT(A) in not including the amount received by the assessee on account of "equipment loss in hole" from gross revenue receipt for the purpose of computation of profits u/s 44BB of the Act. 7. We have heard the rival submissions and perused the materials available on record. The ld AO had considered the receipts on account of tools lost in hole amounting to Rs. 1,72,86,003/- as includible in the gross receipts. The assessee claimed the same to be in the nature of capital receipts on the ground that the same was received on account of destruction and loss of capital asset like drilling equipment which are provided by the assessee to oil exploration and production companies. It was pleaded that the money received is a mere reimbursement cost of equipment destroyed in the process of oil extraction and hence, the same would partake the character of capital receipt....
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....ssee as reimbursements for determining the taxable income of the assessee." 8. Respectfully following the same the ground Nos. (iv) to (vi) of the revenue are dismissed. 9. Ground No. (vii) raised by the revenue is general in nature and does not require any specific adjudication. 10. In the result, appeal of the revenue is dismissed. CO No. 192/Del/2017 (Assessee's appeal) 11. Though the assessee has raised several grounds in its cross objection, the only effective issue to be decided is with regard to attribution of profit on the activities of overseas sale of equipment of the assessee which has been considered by the ld AO as fee for technical services and the ld CIT(A) held the profit rate @3.13 % of gross sales to be attributed to Indian operation, as against the profit rate of 2% attributed by the assessee. 12. We have heard the rival submissions and perused the materials available on record. The assessee offered to tax in respect of sale of tools and equipments made overseas at profit rate of 2% of gross sales of Rs. 38,34,76,937/- as profit attributable to Indian operations carried out in India and accordingly, the same alone would be income deemed to a....
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....et profit margin were either negative or less than 1%, which has got absolutely no basis. Accordingly, he prayed for acceptance of comparables given by the assessee to be justified workings for adoptation of 2% profit attribution rate as against the comparables of the assessee wherein, arithmetic mean margin of the comparables were 1.69%. Similar issue had arose before the coordinate bench of this tribunal in the case of Smith International Inc. Vs. ADIT in ITA No. 4561/Del/2013 for AY 2009-10; 3824/Del/2014 for AY 2010-11 dated 10.11.2021, wherein, in that case, that assessee had offered 2% of gross sales as attributed to the Indian operations which was reworked by the ld CIT(A) @5.08% after ignoring the comparable companies (KOA tools India Ltd) which had incurred loss. The relevant observations of this tribunal are reproduced below :- "14. It was argued that ignoring the functional comparability of KOA Tools Limited which is against comparability study. The company operates in 3 segments i.e., segment tools, Trading of tools and parking. Since the profile of this company, in respect of its trading business is comparable to SIO in terms of functions performed, risks assu....