DDIT (IT) 2(1), NAVI MUMBAI v. SWIWER OFFSHORE PTE LTD, MUMBAI

ITA 4994/MUM/2012 | 2009-2010
Pronouncement Date: 30-11-2017 | Result: Dismissed

Appeal Details

RSA Number 499419914 RSA 2012
Assessee PAN AALCS3672G
Bench Mumbai
Appeal Number ITA 4994/MUM/2012
Duration Of Justice 5 year(s) 3 month(s) 26 day(s)
Appellant DDIT (IT) 2(1), NAVI MUMBAI
Respondent SWIWER OFFSHORE PTE LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted L
Tribunal Order Date 30-11-2017
Date Of Final Hearing 15-03-2017
Next Hearing Date 15-03-2017
First Hearing Date 15-03-2017
Assessment Year 2009-2010
Appeal Filed On 03-08-2012
Judgment Text
INCOME-TAX APPELLATE TRIBUNAL LBENCH M UMBAI BEFORE S/SH. RAJENDRA ACCOUNTANT MEMBE R & RAVISH SOOD JUDICIAL MEMBER ./I.T.A./7939/MUM/2011 /ASSESSMENT YEAR: 2008-09 ./I.T.A./4884/MUM/2012 /ASSESSMENT YEAR: 2009-10 ./I.T.A./3563/MUM/2015 /ASSESSMENT YEAR: 2010-11 SWIWAR OFFSHORE PTE. LTD. C/O. DEVESH K. SHAH & CO. 106 BANAJI HOUSE 1 ST FLOOR 361 DR. D.N. ROAD FLORA FOUNTAIN MUMBAI-400 001. PAN:AALCS 3672 G VS. ADDL. DIT (INTERNATIONAL TAXATION) RANGE-2 SCINDIA HOUSE MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./4994/MUM/2012 /ASSESSMENT YEAR: 2009-10 ./I.T.A./3680/MUM/2015 /ASSESSMENT YEAR: 2010-11 DDIT (INTERNATIONAL TAXATION)4(2)(2) RANGE-2 SCINDIA HOUSE MUMBAI. VS. SWIWAR OFFSHORE PTE. LTD. C/O. DEVESH K. SHAH & CO. MUMBAI-400 001. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.V. RAJGURU-SR. DR ASSESSEE BY: SHRI MADHUR AGARWAL AND MS. INDIRA ANAND-AR.S / DATE OF HEARING: 05/09/2017 / DATE OF PRONOUNCEMENT: 30/11/2017 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) / PER RAJENDRA AM - CHALLENGING THE ORDERS DATED 2/9/2011 31/5/2012 &1 3/3/2015 OF CIT(A)-11 AND 56 MUMBAI THE ASSESSEE AND THE ASSESSING OFFICER(AO)HAVE FILE D APPEALS FOR THE ABOVE ASSESSMENT YEARS (AYS).ASSESSEE-COMPANY IS A TAX RESIDENT OF SINGAPO RE AND THE PRINCIPAL ACTIVITIES ARE OF SHIP-OWNERS OPERATORS AND CHARTERS.THE DETAILS OF D ATES OF FILING OF DATE OF FILING OF RETURN OF INCOME RETURNED INCOME DATE OF ASSESSMENT ORDER E TC. CAN BE SUMMARIZED AS UNDER :- A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. AS SESSED INCOME 2008-09 30.09.2008 RS.2 24 58 118/- 22.02.2011 RS.2 99 44 157/- 2009-10 24.09.2009 RS.4 65 40 938/- 09.02.2012 RS.6 88 57 928/- 2010-11 30.09.2010 RS.4 88 71 609/- 23.05.2013 RS.7 2 59 58 024/- AS THE ISSUES INVOLVED IN ALL THE APPEALS ARE ALMOS T SIMILAR SO WE ARE ADJUDICATING ALL THE APPEALS TOGETHER. ITA/7939/MUM/2011-AY.2008-09: 2. EFFECTIVE GROUND OF APPEAL RAISED BY THE ASSESSEE I S ABOUT TAXING ITS INCOME U/S.44BB OF THE ACT AS AGAINST SECTION 44B.DURING THE ASSESSMEN T PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD PROVIDED THREE VESSELS NAMELY M.V.SWI WAR VENTURER M.V. SWIWAR VICTOR AND 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 2 M.V.SWIWAR CHALLENGER TO INDIAN COMPANIES - BGEPIL ONGC AND RELIANCE INDUSTRIES AND TO CARRYOUT AND CONDUCT ACTIVITIES RELATING TO EXPL ORATION OR EXTRACTION OF MINERAL OIL IN PANNA MUKTA AND TAPTI FIELDS.THE AO OBSERVED THAT I T WAS NOT RELEVANT FOR WHAT PURPOSES THE SHIPS HIRED BY THE INDIAN ENTITIES WERE USED THAT T HE ASSESSEE HAD PROVIDED THE SHIP ON HIRE THAT THE INCOME WAS TO BE ASSESSED AS PER THE PROVI SIONS OF SECTION 44B OF THE ACT.HE REFERRED TO THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE HIRERS AND HELD THAT THE VESSELS HAD BEEN SPECIFICALLY SUPPLIED BY THE ASSESSEE TO THE C O-VENTURES ON HIRE THAT THE VESSELS WERE TO BE USED IN ACTIVITIES RELATED TO EXPLORATION AND PR ODUCTION OF MINERAL OIL THAT THE OWNER HAD NOT EARNED ANY INCOME FROM CARRIAGE OF PASSENGERS/G OODS/MAIL/LIVESTOCK THROUGH THE VESSELS THAT THE CHARTERER OF THE VESSEL WAS NOT USING THE VESSELS IN ITS BUSINESS ACTIVITIES.FINALLY HE HELD THAT INCOME OF THE ASSESSEE WAS TO BE ASSESSED U/S. 44BB OF THE ACT AND NOT U/S. 44B OF THE ACT. 2.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE DETAILED SUBMISSI ONS.AFTER CONSIDERING THE AVAILABLE MATERIAL HE HELD THAT THE ASSESSEE HAD GIVEN SPECIA L TYPE OF VESSELS KNOWN AS ANCHOR HANDLING /TUG SUPPLY VESSELS ON CHARTER THAT THOSE VESSELS W ERE SELF PROPELLING SMALL SHIPS USED FOR VARIOUS JOBS AT SEA PORTS AND OFF SHORE THAT THEY WOULD CARRY EQUIPMENTS LIKE CRANES WINCHES AND LONG STEEL WIRES ON BOATS FOR USE IN THE SEA T HAT VESSELS WERE USED TO PULL OTHER VESSELS TO PUSH BIG SHIPS OR TO ASSIST THEM IN TURNING FOR BER THING AT PORT THAT THEY WOULD ALSO CARRY FUEL/FRESH WATER IN BULK TO SUPPLY TO OTHER SHIPS O R RIGS AT SEA/OFF SHORE THAT THEY WERE USED FOR LIFTING HEAVY ANCHORS FROM SEA AS WELL AS TRAN SPORTING ONE ANCHOR FROM OTHER THAT VESSELS WERE NOT NORMAL TRANSPORTATION SHIPS TRANSPORTING M AN AND MATERIAL FROM ONE PORT TO ANOTHER THAT SAME WERE SPECIAL PURPOSE OCEAN GOING VESSELS WHICH HAD BEEN PREPARED TO BE USED IN ACTIVITIES RELATED TO EXPLORATION EXTRACTION OF MI NERAL OIL THAT HIRER OF SHIPS HAD USED THEM IN BUSINESS OF EXPLORATION /EXTRACTION OF MINERAL OIL. THE FAA REPRODUCED THE PROVISIONS OF SECTION 44BB OF THE ACT AND HELD THAT VESSELS OF T HE ASSESSEE WERE NO SIMPLE SHIPS THAT SAME WERE SPECIAL PURPOSE VESSELS FITTED WITH VARIOUS E QUIPMENTS THAT HIRERS WERE USING THEM FOR SPECIFIC PURPOSES AT OFF SHORE LOCATION IN INDIA TH AT THE ASSESSEE WAS ENGAGED IN BUSINESS OF PROVIDING SERVICES/FACILITIES AND SUPPLIED PLANT AN D MACHINERY (A SHIP ON HIRE) THAT WAS USED BY THE HIRER IN EXPLORATION/EXTRACTION OR PRODUCTIO N OF MINERAL OILS THAT AS PER THE EXPLANA - TION TO SEC.44B SHIP WAS A PLANT THAT SAME WAS USED BY THE HIRER IN ITS BUSINESS OF EXTRACTION / PRODUCTION OF MINERAL OIL.HE MADE REFERENCE TO THE CASES OF JINDAL DRILLING AND INDUSTRIES LTD(320 ITR 104); HYUNDAI HEAVY INDUSTRIES CO. LTD. (291ITR 482); ONGC LTD.(309 ITR 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 3 244);WAVEFIELD INSEIS ASA IN RE (320ITR290); SEABIR D EXPLORATION FZ LLC IN RE (320 ITR 286);WAVEFIELD INSEIS ASA IN RE(322ITR645);SEA BIRD EXPLORATION FZ LLC IN RE (326 ITR558); SUNDOWNER OFFSHORE INTERNATIONAL (BERMUDA) LTD (183 TAXMAN 365)AND RBF RIG CORPORATION(313ITR369)AND HELD THAT A SERVICE SUCH AS SOFTWARE MAINTENANCE TRANSPORT PROVISION SERVICES USED BY A HIRER IN THE ACTIVITY OF EXPLORA TION EXTRACTION AND PRODUCTION OF MINERAL OIL WOULD BE TAXABLE IN THE HANDS OF THE ASSESSEE U /S. 44BB OF THE ACT.FINALLY HE UPHELD THE ORDER OF THE AO. 2.2. BEFORE US THE AR ARGUED THAT THE ASSESSEE HAD PROVI DED THE SHIP ON HIRE THAT EVEN IF THE HIRER USED IN THE BUSINESS/ACTIVITY RELATED TO EXTR ACTION OR PRODUCTION OF MINERAL OIL PROVISIONS OF SECTION 44BB WERE NOT APPLICABLE THAT THE BUSINE SS OF THE ASSESSEE WAS LIMITED TO GIVING THE SHIP ON HIRE THAT THE VESSELS HAD BEEN USED IN TRANSPORTATION OF MAN AND GOODS SHIPPED FROM THE PORTS OF MUMBAI TO OFFSHORE LOCATIONS IN I NDIA THAT THE OFFSHORE LOCATIONS WERE THE PLACES WHERE THE HIRER WAS CARRYING THE ACTIVITIES RELATED TO THE EXPLORATION AND PRODUCTION OF MINERAL OILS THAT EVEN IF MAN AND THE GOODS SO TRAN SPORTED WERE USED BY THE HIRER IN THE ACTIVITIES OF EXTRACTION/PRODUCTION OF MINERAL OIL SECTION 44BB WOULD NOT BE APPLICABLE TO IT THAT THE PROVISIONS OF SECTION 44B WOULD BE APPLIE D AS THE ASSESSEE WAS ENGAGED IN SHIPPING BUSINESS.HE RELIED UPON THE CASES OF SCHLUMBERGER A SIA SERVICES LTD.(317 ITR 156) MANGLORE REFINERIES AND PETROCHEMICALS LTD.(225TAXM AN58)AND MITCHELL DRILLING INTERNATION -AL(P.)LTD.(380 ITR 130).HE FURTHER ARGUED THAT ASS ESSEE COULD OPT FOR LOWER TAXES BY OPTING FOR APPLICATION OF THE PROVISIONS OF SECTION 44B.IN THAT REGARD HE REFERRED TO THE CASE OF BOSOTTO BROTHERS LIMITED(8 ITR 41).THE DR SUPPORTED THE ORDER OF THE FAA AND ARGUED THAT THE SHIPS WERE USED FOR ACTIVITIES RELATED WITH EXP LORATION/PRODUCTION OF MINERAL OIL THAT THE AO HAD RIGHTLY TAXED THE ASSESSEE U/S.44BB OF THE A CT.HE RELIED UPON THE CASE OF HALLIBURTON OFFSHORE SERVICE INC.(300 ITR 265). 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE HAVE GONE THROUGH THE CASES RELIED UPON BY THE AR AND DR.WE H AVE ALSO PERUSED THE CASE OF ONGC AS AGENT OF SEA HORSE INC. (29 ITD 422). 2.3.1. WE FIND THAT THE ASSESSEE HAD GIVEN THREE SHIPS ON HIRE THAT THE SHIPS WERE USED FOR TRANSPORTING MEN/GOODS TO OFFSHORE LOCATIONS OF IND IA THAT THAT THE HIRER WAS CARRYING THE ACTIVITIES RELATED TO THE EXPLORATION AND PRODUCTIO N OF MINERAL OIL AT OFFSHORE LOCATION THAT THE AO AND FAA HELD THAT THE ASSESSEE HAD TO PAY TAXES AS PER THE PROVISIONS OF SECTION 44BB(@10%) WHEREAS THE ASSESSEE CLAIMED THAT TAX SH OULD BE LEVIED AS PER SECTION 44B 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 4 (@7.5%).THUS THE BASIC ISSUE TO BE DECIDED IS AS TO WHETHER THE PROVISIONS OF SECTION 44B OF THE ACT CAN BE APPLIED TO THE INCOME EARNED BY THE ASSESSEE. 2.3.2. IN OUR OPINION IT WILL BE USEFUL TO TAKE NOTICE OF THE HISTORY AND BACKGROUND OF BOTH THE SECTIONS I.E.SECTION 44B AND 44BB OF THE ACT.THESE S ECTIONS WERE NOT PART OF THE ORIGINAL ACT. BY WAY OF AMENDMENTS THEY WERE INCORPORATED IN THE ACT.SECTION 44B BECAME EFFECTIVE FROM AY.1975-76 WHEREAS SECTION 44BB WAS MADE APPLICABL E RETROSPECTIVELY FROM AY. 1983-84. CIRCULAR 169 DTD.23/06/1975 TALKS OF TAXATION OF S HIPPING PROFITS DERIVED BY NON-RESIDENTS. EXPLANATORY NOTES ON THE PROVISIONS OF THE FINANCE ACT 1975 READ AS FOLLOW: 37. UNDER THE EXISTING LAW TAXABLE PROFITS OF FOREIGN SHIPPING ENTERPRISES ARE DETERMINED BY SUITABLY APPORTIONING THEIR GLOBAL PROFITS BETWEEN THEIR INDIAN BUSINESS AND FOREIGN BUSINESS OR ON THE BASIS OF 'VOYAGE ACCOUNTS'.DIFFICULT AND COMPLICATED ISSUES ARISE IN SUCH ASSESSMENTS PARTICULARLY IN RELATION TO DEPRECIATI ON (INCLUDING UNABSORBED DEPRECIATION OF EARLIER YEARS) THE BALANCING CHARGE/ALLOWANCE AND THE APPORTIONMENT OF OVERHEAD EXPENSES. WITH A VIEW TO SIMPLIFYING AND RATIONALISING THE AS SESSMENTS IN SUCH CASES THE FINANCE ACT HAS MADE A SPECIAL PROVISION IN S. 44B OF THE IT AC T FOR THE COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENTS.UNDE R THIS PROVISION PROFITS AND GAINS OF A NON-RESIDENT FROM THE BUSINESS OF OPERATION OF SHIP S WILL NOT BE CALCULATED IN ACCORDANCE WITH THE PROVISIONS OF SS. 28 TO 43A OF THE IT ACT BUT W ILL INSTEAD BE TAKEN AT 7.5 PER CENT OF THE AGGREGATE OF THE FOLLOWING AMOUNTS NAMELY (I) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT O F INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF CARRIAGE OF PASSENGERS LI VESTOCK MAIL OR GOODS SHIPPED AT ANY PORT IN INDIA; AND (II) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED I N INDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE CARRIAGE OF PASSENGERS LIVESTOCK M AIL OR GOODS SHIPPED AT ANY PORT OUTSIDE INDIA. 38. IT SHOULD BE NOTED THAT THE NEW S. 44B OVERRIDE TH E PROVISIONS OF SS. 28 TO 43A ONLY AND ACCORDINGLY OTHER PROVISIONS (INCLUDING THOSE RELAT ING TO AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD AND SET OFF OF LOSSES) WILL CONTINUE TO APPLY IN THE CASE OF NON-RESIDENTS DERIVING PROFITS FROM SHIPPING BUSINESS. IN THIS CO NNECTION IT MAY BE MENTIONED THAT UNABSORBED DEPRECIATION ALLOWANCE IS CARRIED FORWAR D UNDER S. 32(2) OF THE IT ACT AND THE UNABSORBED DEPRECIATION ALLOWANCE OF EARLIER YEARS IS TREATED AS PART OF THE DEPRECIATION ALLOWANCE ADMISSIBLE IN THE RELEVANT PREVIOUS YEAR. SINCE THE PROVISIONS OF S. 32 ARE SPECIFICALLY OVERRIDEN BY THE NEW S. 44B THE UNABS ORBED DEPRECIATION FOR EARLIER YEARS WILL NOT BE ALLOWED IN DETERMINING THE PROFITS AND GAINS FOR THE ASST. YR. 1976-77 AND SUBSEQUENT YEARS. LOSSES INCURRED IN EARLIER YEARS OTHER THAN THE LOSSES DUE TO DEPRECIATION WILL HOWEVER BE ALLOWED TO BE SET OFF AGAINST THE PROFI TS FOR THE ASST. YR. 1976-77 AND SUBSEQUENT YEARS SUBJECT TO THE FULFILMENT OF THE EXISTING CON DITIONS IN THIS BEHALF. CIRCULAR 495 DTD.22/09/1987 DEALS WITH SECTION 44BB .EXPLANATORY NOTES ON THE PROVISIONS OF THE FINANCE ACT 1987 PERTAINING TO SECTION READ AS UNDER: NEW PROVISIONS FOR COMPUTING TAXABLE INCOME FROM A CTIVITIES CONNECTED WITH EXPLORATION OF MINERAL OILS. 21.1 A NUMBER OF COMPLICATIONS ARE INVOLVED IN THE COMP UTATION OF TAXABLE INCOME OF A TAXPAYER ENGAGED IN THE BUSINESS OF PROVIDING SERVI CES AND FACILITIES IN CONNECTION WITH OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO B E USED IN THE EXPLORATION FOR AND EXPLORATION OF MINERAL OILS. WITH A VIEW TO SIMPLIF YING THE PROVISIONS THE AMENDING ACT HAS INSERTED A NEW S. 44BB WHICH PROVIDES FOR THE DETER MINING OF THE INCOME OF SUCH TAXPAYERS AT 10 PER CENT OF THE AGGREGATE OF CERTAIN AMOUNTS WHI CH HAVE BEEN SPECIFIED. THIS AMOUNT WILL 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 5 INCLUDE THE AMOUNTS RECEIVED OR DUE TO BE RECEIVED IN INDIA ON ACCOUNT OF SUCH SERVICES OR FACILITIES OR SUPPLY OF PLANT AND MACHINERY. 21.2 THE AMENDMENT WILL NOT APPLY TO ANY INCOME TO WHIC H THE PROVISIONS OF SS. 42 44D 115A OR 293A OF THE IT ACT APPLY. 21.3 THIS AMENDMENT WILL COME INTO FORCE RETROSPECTIVEL Y FROM 1ST APRIL 1983 AND WILL ACCORDINGLY APPLY IN RELATION TO ASST. YR. 1983-84 AND SUBSEQUENT YEARS. CLEARLY SECTION 44B DEALS WITH COMPUTING OF PROFITS AND GAINS OF A NON-RESIDENT FROM THE BUSINESS OF OPERATION OF SHIPS WHEREAS SECTION 44BB IS ABOUT COMPUTATION OF TAXABLE INCOME OF A TAXPAYER ENGAGED IN THE BUSINESS OF PROVIDING SERVICES AND FACILITIES IN CONNECTION WITH OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE EXPLORATION FOR AND EXPLORATION OF MINERAL OILS. THE PARLIAMENT ENGRAFTED THE AFORESAID PROVISION IN THE ACT AS A MEASURE OF SIMPLIFICATION PROVIDING FOR DETERMINATION OF INCOME OF SUCH TAXPA YERS AT 10% OF THE AGGREGATE OF CERTAIN AMOUNT.BECAUSE OF THE NON OBSTANTE CLAUSE SECTION 2 8 OF THE ACT HAS NO APPLICATION.IN OTHER WORDS SECTION 44BB IS APPLICABLE WHERE THE ASSESSEE BEING A NON-RESIDENT IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CON NECTION WITH OR SUPPLYING PLANT AND MACHINERY ON HIRE USED OR TO BE USED IN THE PROSPE CTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS.SOME OF THE GENERAL PRINCIPLES GOVERNI NG THE SECTION CULLED OUT FROM VARIOUS JUDGMENTS CAN BE SUMMARISED AS UNDER: I. ONCE SECTION 44BB IS APPLIED TWO CONCLUSIONS BECOME INESCAPABLE.THE FIRST CONCLUSION IS THAT 10% OF THE RECEIPTS BY THE FOREIGN RESIDENT IS CHARGEABLE TO TAX AND THE OTHER CONCLUSION IS THAT 90% OF THE RECEIPTS OF THAT FOREIGN RESIDEN T AS WELL AS RECEIPTS OR GAINS OTHER THAN THOSE MENTIONED IN THE SECTION IS NOT CHARGEABLE TO TAX. II. IT WOULD BE LOGICALLY FALLACIOUS TO USE THE TAXABIL ITY OF 10% WHICH IS EXPRESSLY PROVIDED IN SECTION 44BB AND TO PASS OVER OR FAIL TO RECOGNISE THE EXEMPTION FROM TAX AS TO THE BALANCE 90% OF THE RECEIPTS AND 100% OF OTHER PROFITS AND G AINS WHICH IS ALSO PROVIDED FOR IN SECTION 44BB BY NECESSARY AND INESCAPABLE CONCLUSION. III .THE SECTION PROVIDES FOR TAXATION WITH REFERENCE T O PRE-ORDAINED CRITERIA WHICH ARE MENTION -ED IN PROVISION ITSELF-AMOUNTS RECEIVED OR PAYABLE TO AN ASSESSEE-NON-RESIDENT WHETHER IN INDIA OR OUTSIDE INDIA HAD TO BE INCLUDED FOR PURPO SE OF CALCULATING INCOME U/S.44 BB. IV. THERE IS NO COMPELLING REASON TO ASSIGN A NARROW AN D RESTRICTED MEANING TO THE EXPRESSION 'SERVICES' IN SECTION 44BB AND CONFINE IT TO SERVIC ES OTHER THAN TECHNICAL CONSULTANCY OR MANAGERIAL SERVICES.IN THE ABSENCE OF ANY WORDS OF LIMITATION OR EXCLUSION THE WORD 'SERVICES' SHALL BE UNDERSTOOD IN ITS PLAIN AND ORDINARY SENSE .IF THE LEGISLATURE WANTED TO GIVE A RESTRICTED 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 6 MEANING TO THE EXPRESSION 'SERVICES' EXPLICIT WORDS TO THAT EFFECT WOULD HAVE BEEN DEPLOYED. THE CONTEXTUAL SETTING AND THE COMPANY IN WHICH THE EXPRESSION 'SERVICES' IS FOUND IS SUGGESTIVE OF INFERENCE THAT FAR FROM EXCLUDING TEC HNICAL/CONSULTANCY SERVICES THEY WERE ALSO INTENDED TO BE BROUGHT WITHIN THE AMBIT OF SECTION 44BB.THE WORD 'SERVICES' FOLLOWED BY AN EXPANSIVE PHRASE 'IN CONNECTION WITH' ARE RELATABLE TO PROSPECTING FOR AND EXPLORATION OF MINERAL OIL.THAT MEANS ALL SERVICES ASSOCIATED WIT H PROSPECTING FOR AND EXPLORATION ACTIVITIES ARE BROUGHT WITHIN THE SCOPE AND REACH OF SECTION 4 4BB. V. ANOTHER CATEGORY OF ASSESSEES GOVERNED BY SECTION 4 4BB ARE THOSE SUPPLYING PLANT AND MACHINERY ON HIRE.BOTH THESE TWO CATEGORIES OF ASSE SSEES COVERED BY SECTION 44BB ENGAGE THEMSELVES IN CORE ACTIVITIES PERTAINING TO PROSPEC TING AND EXPLORATION OF OIL AND GAS AND THE PARLIAMENT THOUGHT IT FIT TO ACCORD A SPECIAL TREAT MENT TO THE INCOME DERIVED BY THESE TWO CATEGORIES OF NON-RESIDENTS IN INDIA. VI. BETWEEN THE COMPETING PROVISIONS NAMELY SECTION 9(1 )(VII) R/W SS. 44DA AND 44BB SECTION 44BB BEING A MORE SPECIFIC PROVISION WILL P REVAIL FOR THE PURPOSES OF COMPUTATION. SEC.44DA PROVIDES FOR METHOD OF COMPUTATION OF INCO ME BY WAY OF FEES FOR TECHNICAL SERVICES RECEIVED BY A NON-RESIDENT OR A FOREIGN CO MPANY CARRYING ON BUSINESS THROUGH A PE IN INDIA.IF THE NON-RESIDENT IS ENGAGED IN THE BUSI NESS OF PROVIDING SERVICES IN CONNECTION WITH THE PROSPECTING ETC.OF MINERAL OILS THE COMPUT ATION PROVISIONS RELATING TO FEES FOR TECHNICAL SERVICES WILL HAVE TO YIELD TO SECTION 44 BB.IN A CASE OF BUSINESS GOVERNED BY SECTION 44BB NORMALLY THE ENTERPRISE CONCERNED WOUL D BE HAVING A PE IN INDIA.IT IS DIFFICULT TO ENVISAGE A SITUATION OF A PERSON BEING ENGAGED I N PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH PROSPECTING AND EXTRACTION OF MINER AL OILS NOT HAVING A FIXED PLACE OF BUSINESS FROM WHERE THE OPERATIONS ARE CARRIED ON.T HUS THE EXISTENCE OF PE IS A COMMON FEATURE IN BOTH THE SECTIONS THOUGH THERE IS AN EXP LICIT REFERENCE TO PE UNDER SECTION 44DA. RENDERING OF TECHNICAL SERVICES THROUGH PE MAY BE A COMMON FEATURE OF BOTH THE SECTIONS ALTHOUGH IN THE CASE OF SECTION 44DA IT IS EXPLICIT LY MENTIONED. BUT WHAT IS IMPORTANT IS THE NATURE OF BUSINESS AND IT IS THAT FACTOR WHICH SERV ES AS AN INDICATOR TO APPLY ONE OF THE TWO SECTIONS.IF THE BUSINESS IS OF THE SPECIFIC NATURE ENVISAGED BY SECTION 44BB THE COMPUTATION PROVISIONS THEREIN WOULD PREVAIL OVER THE COMPUTATI ON PROVISIONS IN SECTION 44DA.IN OTHER WORDS THE INCOME RECEIVED BY A NON-RESIDENT ENTITY FOR THE TECHNICAL SERVICES PROVIDED IN RELATION TO PROSPECTING AND EXTRACTION OF MINERAL O IL WILL BE WHOLLY GOVERNED BY SECTION 44BB FOR THE PURPOSES OF COMPUTATION. 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 7 VII. EXPLANATION APPENDED TO SECTION 44BB PROVIDES THAT FOR THE PURPOSE OF THIS SECTION PLANT INCLUDES SHIPS AIRCRAFTS APPARATUS AND EQUIPMENTS USED FOR THE PURPOSE OF SAID BUSINESS AND MINERAL OILS INCLUDE PETROLEUM AND NATURAL GAS.THUS THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF SUPPLY OF SPARE PARTS OF SHIPS AIRCRAFT S APPARATUS AND EQUIPMENTS USED FOR THE PURPOSE OF THE BUSINESS IS SQUARELY COVERED U/S. 44BB. VIII. IF AN ASSESSEE DOES NOT CLAIM BENEFIT OF SECTION 44 BB(3) IT CANNOT CLAIM THAT AMOUNT WHICH IT RECEIVES BY WAY OF MOBILIZATION ADVANCE OU TSIDE INDIA SHOULD NOT BE INCLUDED FOR PURPOSE OF CALCULATING INCOME U/S.44BB. IX .SERVICES PROVIDED BY NON-RESIDENT IN CONNECTION WI TH MOVEMENT OF OFFSHORE RIGS SET UP BY ASSESSEE ON HIGH SEAS FOR EXPLORATION PROSPECTING AND PRODUCTION OF MINERAL OIL FROM THE SEA BED IS ASSESSABLE U/S.44BB AND NOT AS FEES FOR TECH NICAL SERVICES U/S.9(1)(VII). X. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SCHL UMBERGER SEA CO.INC.(157 CTR 538) HAS HELD THAT ONCE A NON-RESIDENT SUPPLIER OF MACHI NERY COMES WITHIN THE PURVIEW OF SECTION 44BB THEN IT CANNOT COME AGAIN UNDER THE PURVIEW OF THE OTHER PARTS OF THE ACT DEALING WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION. XI. SECTION 195A IS NOT APPLICABLE TO IT AND CONCEPT OF MULTIPLE-STAGE GROSSING UP OF INCOME IS ALSO NOT APPLICABLE TO DEEMED PROFITS TO BE COMPUTE D U/S.44BB. XII .IT IS OPEN TO AN ASSESSEE TO CLAIM LOWER PROFITS A ND GAINS IF HE KEPT AND MAINTAINED BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED U/S 44AA (2)AND GET ACCOUNTS AUDITED AND FURNISH REPORT. 2.3.4. CONSIDERING THE ABOVE WE HOLD THAT SECTION 44BB PRO VIDES COMPLETE CODE OF COMPUTATION OF INCOME FROM BUSINESS OF A NON RESIDE NT ENTITY OF THE NATURE SPECIFIED IN SECTION 44BB(1) THAT IF AN ASSESSEE EARNS INCOME FR OM THE BUSINESS OF OPERATION OF SHIPS IT WOULD BE TAXED AS PER THE PROVISIONS OF SECTION 44B OF THE ACT THAT IF THE SAME ACTIVITIES ARE CONNECTED WITH THE ACTIVITIES MENTIONED IN SECTION 44BB OF THE ACT THEN IT CANNOT CLAIM THAT INCOME ARISING TO IT FROM SUCH ACTIVITIES CANNOT BE TAXED U/S.44BB OF THE ACT.IN SHORT SECTION 44BB WILL PREVAIL OVER SECTION 44B AS IT IS A SPECI AL SECTION WHICH CAME ON STATUTE LATER AND DEALS WITH SPECIFIC ACTIVITIES.IF THE SERVICES PRO VIDED BY THE ASSESSEE ARE EXCLUDED VERY LITTLE PURPOSE WILL BE SERVED OF INCORPORATING SECTION 44B B FOR COMPUTING THE PROFITS IN RELATION TO THE SERVICES CONNECTED WITH EXPLORATION AND EXTRACT ION OF MINERAL OILS.THE PROVISION WILL THEN OPERATE IN A VERY LIMITED FIELD.IN OUR OPINION THE PARLIAMENT INTENT WAS NOT TO GIVE A LIMITED FIELD TO THE SECTION 44BB.THAT IS WHY FOR TAKING CA RE OF THE ACTIVITIES RELATED WITH OIL 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 8 EXPLORATION AND TO SEGREGATE THE GENERAL SHIPPING A CTIVITIES MENTIONED IN SECTION 44B A SPECIAL PROVISION I.E. 44BB WAS INTRODUCED.THE SHIP S WERE HIRED BY THE USER FOR TRANSPORTING MEN/MACHINES TO LOCATIONS WHERE IT WAS DOING EXPLOR ATION/PRODUCTION OF MINERAL OIL.THUS IT WAS NOT A CASE OF TRANSPORTING GOODS OR LIVESTOCK B Y SHIPS SIMPLICITOR.THE ACTIVITY WAS DIRECTLY AND CLOSELY RELATED WITH SERVICESRENDERE D BY PLANT AND MACHINERY AND THE SHIPS FOR THE PURPOSE OF SECTION 44BB HAVE BEEN TREATED AS PL ANT.AS THE SERVICES WERE RENDERED 'IN CONNECTION WITH' PROSPECTING FOR AND EXPLORATION AC TIVITIES SO IN OUR OPINION THE INCOME ARISING OUT OF SUCH ACTIVITIES HAS TO BE ASSESSED U /S.SECTION 44BB AND NOT U/S.44B OF THE ACT. 2.3.5. NOW WE WILL DEAL WITH ARGUMENT OF OPTING OF LOWER T AX RATES BY AN ASSESSEE.WE ARE OF THE HUMBLE OPINION THAT NO CHOICE HAS BEEN GIVEN T O THE ASSESSEES FOR OPTING A PARTICULAR SECTION UNDER WHICH THEY CAN OFFER THEIR TAXABLE IN COME AS FAR SECTION 44B AND 44BB ARE CONCERNED. LIKE SECTION 90(2)OF THE ACT WHICH GIVES AN OPTION TO THE ASSESSEE TO PREFER FOR LOWER TAX RATES SECTIONS 15-17 22-57 OF THE ACT DO NOT PROVIDE THAT THE ASSESEE CAN OPT FOR A PREFERENTIAL TREATMENT FOR PARTICULAR INCOME.I.E.CL AIMING LOWER RATE OF TAX.INCOME ARISING FROM PARTICULAR ACTIVITIES HAS TO BE ASSESSED UNDER PART ICULAR MANNER AND AT A PARTICULAR RATE. BECAUSE OF THE INTERNATIONAL TREATIES TAX-PAYERS HA VE BEEN GIVEN CHOICE TO OPT FOR A BENEFICIAL PROVISION BUT SAME CONCESSION IS NOT AVAILABLE TO THE ASSESSEES WHO ARE NOT HAVING INTERNATIONAL INCOME.BENEFICIAL TREATMENT OF ONE SE CTION CANNOT BE EXTENDED TO OTHER SECTIONS WITHOUT EXPLICIT MANDATE OF THE PARLIAMENT.WE HAVE GONE THROUGH THE CASE OF .IN OUR OPINION FACTS OF THE MATTER UNDER APPEAL ARE DIFFER ENT FROM THE CASE OF .THE MATTER DEALS WITH 1922 ACT AND IS NOT ABOUT SHIPPING INDUSTRY. LAW IS NOT A STATIC THING-RATHER IT IS A DYNAMIC CONCEPT.IT EVOLVES WITH TIME AND CHANGED CIRCUMSTAN CES BRING NEW CONCEPTS AND NEW IDEAS IN LAW.TAX LAWS ESPECIALLY THE ACT IS NOT AN EXCEPTION TO THIS GENERAL RULE.CONSIDERING THE FAST CHANGING ECONOMIC DEVELOPMENTS SECTIONS 44B AND 44B B WERE INTRODUCED IN THE ACT WITH SPECIFIC PURPOSES.BOTH OPERATE IN TOTALLY DIFFERENT FIELDS AS STATED EARLIER.WE HOLD THAT SECTION 44BB IS SPECIAL PROVISION AND SECTION 44B IS A GENE RAL SECTION IF BOTH ARE TO BE COMPARED.IN A WAY THE MATTER HELPS THE CAUSE OF REVENUE AS IT HOLDS THAT SPECIAL PROVISION SHOULD PREVAIL OVER GENERAL PROVISON.WE ARE OF THE OPINION THAT SE CTION 44BB IS A SPECIAL PROVISION AS COMPARED TO SECTION 44B.THE CASES RELIED UPON BY TH E ASSESSEE I.E. SCHLUMBERGER ASIA SERVICES LTD. MANGLORE REFINERIES AND PETROCHEMICAL S LTD.AND MITCHELL DRILLING INTERNATIONAL (P.)LTD.(SUPRA)DO NOT DEAL WITH THE REAL ISSUE I.E. IN CASE OF CONFLICT WHICH OF THE SECTION SEC.44 B OR 44BB WILL PREVAIL.THUS THE CASES DO NOT HELP THE CAUSE OF THE ASSESSEE. WE HAVE IN PARAGRAPH 2.3.4 SPECIALLY DEALT WITH THE ISSUE. 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 9 IN LIGHT OF THE ABOVE DISCUSSION WE HOLD THAT THE O RDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO CONFIRMING THE SAME W E DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. ITA.S/4884/2012 & 3563/MUM/2015 AY.S 2009-10 & 2010 -11: 3. FOLLOWING OUR ORDER FOR THE AY.2008-09 EFFECTIVE GR OUNDS OF APPEAL FOR BOTH THE YEARS ARE DECIDED AGAINST THE ASSESSEE. ITA.S/4994 /MUM/2012 3680/MUM/2015 AY.S 2009-10&20 10-11 4. EFFECTIVE GROUNDS OF APPEAL FILED BY THE AO FOR BOT H THE AY.S IS DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF SERVICE TAX PAYABLE TO THE GOVERNMENT BY THE ASSESSEE.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESS EE HAD CHARGED SERVICE TAX TO BGEPIL AS A PART OF THE BILLING FOR THE CHARTER HIRE CHARGES. IN THAT REGARD THE ASSESSEE CONTENDED THAT SUCH SERVICE TAX COLLECTED BY THE ASSESSEE WAS ON BEHALF OF THE GOVERNMENT THAT SAME HAD BEEN PAID TO THE GOVERNMENT ACCOUNT AS AND WHEN THE LIAB ILITY AROSE THAT IT ACTED AS A TRUSTEE FOR THE GOVERNMENT FOR THE SERVICE TAX COLLECTED AND PA ID THAT THE SAME COULD NOT BE INCLUDED IN THE GROSS RECEIPTS OF THE ASSESSEE FOR COMPUTING IT S INCOME CHARGEABLE TO TAX. THE AO HAD RELIED ON THE DECISION OF THE DELHI BENCH OF THE TR IBUNAL IN THE TECHNIP OFFSHORE CONTRACTING (ITA NO.4613/D/07) DATED 16.01.2009 AND HELD THAT S UCH SERVICE TAX RECEIPTS WOULD BE A PART OF THE GROSS RECEIPTS OF THE ASSESSEE CHARGEABLE TO TAX U/S.44BB OF THE ACT. 4.1. IN THE APPELLATE PROCEEDINGS THE FAA REFERRED TO TH E ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ISLAMIC REPUBLIC OF IRAN SH IPPING LINES (11 TAXMANN.COM 349) WHEREIN IT WAS HELD THAT THE DELHI BENCH OF THE TR IBUNAL IN THE TECHNIP CASE HAD NOT TAKEN NOTE OF THE BOMBAY HIGH COURT DECISION IN THE CASE OF SUDHARSHAN CHEMICAL INDUSTRIES.THE MUMBAI BENCH OF THE TRIBUNAL FURTHER NOTED THAT THE UTTARAKHAND HIGH COURT IN THE CASE OF SCHLUNBERGER ASIA SERVICES LTD.(317 ITR 156) HAD HE LD THAT CUSTOMS DUTY UNLIKE AMOUNTS RECEIVED TOWARDS REIMBURSEMENT WOULD NOT BE INCLUDI BLE IN THE TOTAL TURNOVER FOR COMPUTING PROFITS U/S.44BB OF THE ACT.HE FURTHER HELD THAT IN THE MATTER OF ORIENT OVERSEAS CONTAINER LINE(35 TAXMANN.COM 342) THE TRIBUNAL HAS HELD THA T THE AMOUNT OF SERVICE TAX BEING IN THE NATURE OF A STATUTORY PAYMENT CANNOT BE INCLUDED IN THE GROSS RECEIPTS FOR THE PURPOSE OF COMPUTING THE PRESUMPTIVE INCOME OF THE ASSESSEE U/ S.44BB OF THE ACT.ACCORDINGLY HE DIRECTED THE AO TO DELETE THE SAID AMOUNT OF SERVIC E TAX COLLECTION FROM THE GROSS RECEIPTS WHILE COMPUTING THE PROFIT CHARGEABLE TO TAX IN TER MS OF THE PROVISIONS OF SECTION 44BB OF THE ACT. 7939/M/11+4-SWIWAR OFFSHORE PTE.LTD. 10 4.2. BEFORE US THE DR STATED THAT MATTER COULD BE DECIDE D ON MERITS.THE AR SUPPORTED THE ORDER OF THE FAA. WE FIND THAT THE FAA HAS DECIDED THE ISSUE AFTER CO NSIDERING THE JUDGMENTS OF HIGH COURTS AND ORDERS OF THE TRIBUNAL.SERVICE TAX COLLECTED BY THE ASSESSEE HAS TO BE DEPOSITED IN THE GOVERNMENT BY ALL THE SERVICE-TAX-COLLECTORS.ON BEH ALF OF THE STATE THEY COLLECT THE TAX AND DEPOSIT IN THE TREASURY.THERE IS ELEMENT OF INCOME IN IT.WE HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY .SO CONFIRMING THE SAME WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO FOR BOTH THE AY.S. AS A RESULT ALL THE APPEALS FILED BY THE ASSESSEE AND THE AO STAND DISMISSED. ORDER PRONOUNCED I N THE OPEN COURT ON 30 TH NOVEMBER 2017. 30 2017 SD/- SD/- ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :30.11.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ 4. THE CONCERNED CIT / 5. DR L BENCH ITAT MUMBAI / . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER / DY./ASST. REGISTRAR /ITAT MUMBAI.