Dolphin Drilling Pte Limited, New Delhi v. ADIT, Dehradun

ITA 5280/DEL/2010 | 2006-2007
Pronouncement Date: 08-07-2011 | Result: Allowed

Appeal Details

RSA Number 528020114 RSA 2010
Assessee PAN AACCD0288Q
Bench Delhi
Appeal Number ITA 5280/DEL/2010
Duration Of Justice 7 month(s) 12 day(s)
Appellant Dolphin Drilling Pte Limited, New Delhi
Respondent ADIT, Dehradun
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 08-07-2011
Date Of Final Hearing 29-06-2011
Next Hearing Date 29-06-2011
Assessment Year 2006-2007
Appeal Filed On 26-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER & SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO. 5280/DEL/2010 ASSESSMENT YEAR: 2006-07 DOLPHIN DRILLING PVT. LTD. VS. ADIT C/O NANGIA & COMPANY CA INTERNATIONAL TAXATION SUITE-4A PLAZA M-6 JASOLA SUBHASH ROAD NEW DELHI. NEW DELHI. AACCD0288Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AJAY VOHRA ADV. SH. RAKES H NANGIA ADV. & SH. SANCHIT JAL LY ADV. RESPONDENT BY : SH. ASHWANI KUMAR MAHAJAN CIT(DR ) ORDER PER I.P. BANSAL J.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIR ECTED AGAINST THE ORDER PASSED BY ASSTT. DIRECTOR OF INCO ME TAX INTERNATIONAL TAXATION 13A SUBHASH ROAD DEHRADUN UNDER THE PROVISIONS OF SEC. 143(3)/144C(13) OF THE I.T. ACT 1961 DATED 29.10.2010. THIS ASSESSMENT ORDER HAS BEEN P ASSED IN ITA NO. 5280/D/2010 2 PURSUANCE OF DIRECTIONS ISSUED BY THE DISPUTE RESOL UTION PANEL -1 NEW DELHI DATED 29.09.2010 UNDER THE PROV ISIONS OF SEC. 144C OF THE ACT. GROUNDS OF APPEAL READ AS UNDER: - 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING ASSESSMENT U/S 144C/143(3) OF THE I.T. A CT 1961 (THE ACT) AT AN INCOME OF RS. 956 617 906/- AS AGAINST THE INCOME OF RS. NIL RETURNED BY THE APPELLANT. 2. THAT THE AO ERRED ON FACTS AND IN LAW IN NOT ACCEPT ING THE VALUE OF DRILLSHIP AS CLAIMED BY THE ASSESSEE ( USD 270 MILLION AS ON OCTOBER 10 2003) FOR THE PURPOS E OF COMPUTING DEPRECIATION ALLOWANCE U/S 32 OF THE I.T. ACT 1961. 3. THAT THE AO ERRED ON FACTS AND IN LAW IN SUBSTITUTI NG HIS OWN ESTIMATE OF (USD 130 MILLION AS ON OCTOBER 10 2003) AS THE VALUE OF DRILLSHIP AS OPPOSED TO THE V ALUE OF THE DRILLSHIP AS CLAIMED BY THE APPELLANT. THE A O HAS FURTHER ERRED IN NOT PROVIDING ANY BASIS FOR HIS ES TIMATE OF USD 130 MILLION. 4. THAT THE AO ERRED ON FACTS AND IN LAW IN NOT ACCEPT ING THE FINDING GIVEN BY THE TRIBUNAL IN ITA NO. 266/DEL/2007 WHEREIN THE COST OF THE DRILLSHIP AS O N OCTOBER 10 2003 WAS ACCEPTED AT A SUM OF USD 270M MILLION. LEVY OF INTEREST 5. THAT THE AO ERRED ON FACTS AND IN LAW IN LEVYING IN TEREST U/S 234B OF THE ACT ESPECIALLY WHEN THERE WAS NO ITA NO. 5280/D/2010 3 LIABILITY ON THE ASSESSEE TO PAY ADVANCE TAX U/S 209(1)(D) OF THE INCOME TAX ACT 1961. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER A MEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE T IME OF HEARING. 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT G ROUND NO. 1 IS A GENERAL GROUND ON WHICH NO SEPARATE ADJUDICA TION IS REQUIRED. IT WAS SUBMITTED THAT GROUND NOS. 2 3 & 4 RAISE AN ISSUE RELATING TO GRANT OF DEPRECIATION ON DRILLSHI P. IT IS THE CASE OF THE ASSESSEE THAT THE COST TO THE ASSESSEE FOR THE PURPOSE OF CLAIMING DEPRECIATION ON THE DRILLSHIP A S ON OCTOBER 10 2003 IS TO BE TAKEN AT USD 270 MILLION AGAINST THE VALUE ESTIMATED BY THE AO OF USD 130 MILLION. THEREFORE IT IS THE CASE OF THE ASSESSEE THAT THE DEPRECIATION ON THE D RILLSHIP SHOULD BE COMPUTED ON THE BASIS OF WDV WORKED OUT F OR A COST OF USD 270 MILLION AS ON OCTOBER 10 2003. F OR THIS PURPOSE LD. AR HAS RELIED UPON THE ORDER OF ITAT D ATED 30.11.2009 IN THE CASE OF ASSESSEE ITSELF IN ITA NO . 266/DEL/2007 WHEREIN FOR A.Y. 2004-05 SUCH CLAIM O F THE ASSESSEE WAS ACCEPTED AND IT WAS HELD THAT CIT(A) W AS RIGHT IN ALLOWING THE CLAIM OF DEPRECIATION TO THE ASSESS EE ON DRILLSHIP ON THE BASIS OF VALUE CLAIMED BY IT AT 27 0 MILLION ITA NO. 5280/D/2010 4 DOLLARS AS ON 10 TH OCTOBER 2003. HE HAS PLACED BEFORE US A COPY OF THE SAID ORDER WHICH WAS ALSO GIVEN TO LD. DR. HE SUBMITTED THAT DRP RELYING UPON THE SAME ORDER OF T HE TRIBUNAL ON ANOTHER ISSUE HAS WRONGLY OBSERVED THAT THE MATTER WAS RESTORED BACK TO THE FILE OF AO. HE SUB MITTED THAT IT IS FACTUALLY WRONG AS THE ISSUE RELATING TO DEPR ECIATION CLAIMED ON DRILLSHIP WAS ACCEPTED BY THE TRIBUNAL B Y UPHOLDING THE ORDER OF CIT(A) ON THAT ISSUE BUT WHA T WAS RESTORED BY THE TRIBUNAL TO THE FILE OF AO WAS THE ISSUE REGARDING DISALLOWANCE OF EXPENSES U/S 40(A)(I). H E CARRIED US THROUGH THE RELEVANT OBSERVATIONS OF THE TRIBUNA L IN THIS REGARD AND IT WAS FOUND THAT THE ISSUE REGARDING DE PRECIATION ON DRILLSHIP WAS NOT RESTORED BACK TO THE FILE OF A O AND FINDINGS OF LD. CIT(A) WHICH WENT IN FAVOUR OF ASSESSEE ON T HIS ISSUE WERE UPHOLD IN PARA 8 OF THE SAID ORDER. IN PARA NO . 9 & 10 THE TRIBUNAL HAS DISCUSSED THE ISSUE WITH REGARD TO GRO UND NO. 3 WHICH RELATED TO THE DISALLOWANCE MADE IN REGARD TO EXPENSES U/S 40(A)(I). THEREFORE WE FOUND THAT LD. DRP HAS WRONGLY OBSERVED IN ITS ORDER THAT THE ISSUE RELATING TO DE PRECIATION CLAIMED ON DRILLSHIP WAS RESTORED BY THE ITAT TO TH E FILE OF AO. ITA NO. 5280/D/2010 5 3. IN THIS FACTUAL BACKGROUND THE AFOREMENTIONED GR OUND NOS. 2 3 & 4 ARE ARGUED BY BOTH THE PARTIES BEFORE US AND AFTER HEARING BOTH THE PARTIES WE FOUND THAT THIS ISSUE IS SQUARELY COVERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL. FOR THE SAKE OF CONVENIENCE THE OBSERVAT IONS OF TRIBUNAL IN PARA 8 ARE REPRODUCED BELOW: - 8. WE FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED ADEQUATE DOCUMENTS IN SUPPORT OF THE VALUE OF THE DRILLSHIP. THE TOTAL PURCHASE CONSIDERATION OF USD 270 000 000 PAYABLE TO FRED OLSEN ENERGY AS IS CLEARLY REFLECTED IN THE PURCHASE AGREEMENT AND THE SAME IS ADEQUATE AND CONCLUSIVE PROOF OF THE SAME. WHEN THE ACTUAL CONSIDERATION IS DULY EXPLAINED AND AGREED AS PER THE AGREEMENT BY WHICH THE DRILLSHIP CHANGED HANDS THERE IS NO QUESTION OF THE SAME BEING CERTIFIED BY ANY COMPETENT AUTHORITY. THE CIT(A) HAS RECORDED A CATEGORICAL FINDING TO THE EFFECT THAT THERE IS NO DOUBT WHATSOEVER THAT THE ASSET BELFORD DOLPHIN IS OWNED BY THE ASSESSEE AND THAT IT HAS BEEN USED BY THE ASSESSEE. IF THE ASSESSEE IS IN THE BUSINESS OF GIVING DRILLSHIP ON HIRE SUCH INCOME HAS TO BE ASSESSED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IF NOT SUCH INCOME HAS TO BE ITA NO. 5280/D/2010 6 ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER IN BOTH CASES ASSESSEE IS ENTITLED TO DEPRECIATION ON THE DRILLSHIP. THE SHIP HAS BEEN PURCHASED FROM ITS SISTER CONCERN AND CONSIDERATION HAS BEEN PAID BY WAY OF ALLOTMENT OF 270 MILLION SHARES OF ONE DOLLAR EACH TO ITS SISTER CONCERN NAMELY FRED OLSEN ENERGY AS. IN SUPPORT OF THE MARKET VALUE OF THE DRILLSHIP ASSESSEE HAS SUBMITTED TWO VALUATION REPORTS ONE BY R.S. PLATOU WHO ESTIMATED THE COST BETWEEN 260-270 MILLION DOLLARS AND SECOND BY NOBLE DENTON WHO ESTIMATED THE COST AT 270 MILLION DOLLARS. THE CHRONOLOGY OF EVENTS REGARDING THE DRILLSHIP BELFORD DOLPHIN IS THAT IN NOVEMBER 2001 NAVIS EXPLORER AS SOLD THIS SHIP TO FRED OLSEN DRILLING AS FOR 344 MILLION DOLLARS. IN OCTOBER 2003 FRED OLSEN DRILLING AS TRANSFERRED IT TO FRED OLSEN ENERGY AS FOR 270 MILLION DOLLARS AND IN THE SAME MONGH IT WAS SOLD BY FRED OLSEN ENERGY AS TO DDPL ALSO FOR 270 MILLION DOLLARS. THE ASSESSEE HAS ALSO SUBMITTED DETAILS OF THE WDV OF THE DRILLSHIP IN THE HANDS OF THE PREVIOUS OWNER NAMELY FRED OLSEN ENERGY AS. THE WDV OF BELFORD DOLPHIN AS ON OCTOBER 2003 WAS US DOLLAR 331428774 WHILE IT HAS BEEN SOLD BY FRED OLSEN DRILLING US$ 270 CORE. THUS THE ACTUAL COST OF THE DIRLLSHIP TO THE ASSESSEE IS WHAT HAS BEEN CLAIMED BY IT BEFORE ITA NO. 5280/D/2010 7 THE AO. THE ASSESSEE HAS DULY FURNISHED FROM 3CEB WHICH IS A REPORT U/S 92E OF THE I.T. ACT ALONG WITH ITS RETURN OF INCOME BEFORE THE AO. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING CLAIM OF DEPRECIATION. 4. IN THIS VIEW OF THE SITUATION GROUNDS NO. 2 3 & 4 ARE ALLOWED AND AO IS DIRECTED TO COMPUTE DEPRECIATION ON DRILLSHIP BY TAKING THE VALUE OF THE SAID DRILLSHIP AT 270 MILLION USD AS ON OCTOBER 10 2003 AND BY COMPUTING THE DEPRECIATION ALLOWED ON THAT VALUE THE WDV FOR THE PRESENT YEAR WILL BE COMPUTED ON WHICH THE DEPRECIATION SHO ULD BE GRANTED TO THE ASSESSEE AS PER RATE DESCRIBED UNDER THE PROVISIONS OF THE ACT. THEREFORE THESE GROUNDS ARE ALLOWED. 5. NOW COMING TO GROUND NO. 5 IT IS THE SUBMISSION OF THE ASSESSEE THAT NO INTEREST U/S 234B IS CHARGEABLE UP ON IT AS ASSESSEE HAD NO OBLIGATION TO PAY ADVANCE TAX AS PE R PROVISIONS OF SEC. 209(1)(D) OF THE ACT AS ITS ENTI RE RECEIPTS WERE LIABLE FOR DEDUCTION OF TAX. HOWEVER LD. AR WAS REQUIRED TO MENTION THAT WHETHER AFTER GRANT OF DEPRECIATION ON DRILLSHIP AS PER VALUE OF 270 MILLION DOLLAR AS ON 10 TH OCTOBER 2003 ITA NO. 5280/D/2010 8 WHETHER ANY ASSESSABLE INCOME IS LEFT. LD. AR INF ORMED US THAT DISALLOWED CLAIM OF DEPRECIATION ON DRILLSHIP WILL BE OF RS. 122 CRORE APPROXIMATELY AS AGAINST ASSESSED INCOME OF RS. 95 CRORE APPROXIMATELY AND HENCE IF THE RELIEF GRA NTED TO THE ASSESSEE IS TAKEN INTO CONSIDERATION THEN ASSESSEE WILL BE LEFT WITH NO ASSESSABLE INCOME FOR THE YEAR UNDER CONSID ERATION UNDER THE ACT. THEREFORE IT IS FOUND THAT THE QUE STION OF LEVY OF INTEREST U/S 234B WILL NOT ARISE AT ALL. IN THI S VIEW OF THE SITUATION WE DECLINE TO ADJUDICATE THIS GROUND AS THE SAME HAS BECOME ACADEMIC AFTER OUR DECISION ON GROUNDS N O. 2 3 & 4. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY 2011 SD/- SD/- (K.G. BANSAL) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08.07.2011 *KAVITA ITA NO. 5280/D/2010 9 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR