Service Tax paid by the assesee cannot form part of amount for the purpose of deemed profits under section 44BB

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Adverting first to ground no.1 in the appeal , facts, in brief, as per relevant orders are that e-return declaring income of ``28,24,41,510/- filed on 29.09.2008 by the assessee, a foreign company having permanent establishment in India, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), issued on 31st August, 2009. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee reflected income u/s 44BB of the Act in terms of two contracts with ONGC. While referring to memorandum of understanding entered in to between Transocean Offshore Deepwater Drilling Inc. and Sedco Forex International Drilling Inc. offering additional services on an integrated basis, along with the Jack-up- Rig “Trident II” to ONGC Ltd. for their drilling campaign in offshore India, the AO observed that the integrated services on the rig are not intricately linked to the hired rig while equipments and personnel were not part of the rig , but acquired from other NRC’s. Since the assessee was not found to be the owner of equipments and integrated services, the AO was of the opinion that the receipts could not be brought to tax u/s 44BB of the Act and have to be treated as fee for technical services u/s 9(1)(vii) of the Act. Further, while referring to decisions in CIT Vs. Halliburton Offshore Service Inc.,300 ITR 265(Uttarakhand); CIT Vs. Schlumberger Asia Services Ltd. (317 ITR 156); CIT & another & Atwood Oceanics Pacific Ltd. ,2010-TII-12-HCUkhand- Intl dated May 19, 2010; CIT Vs. R & B Falcon Drilling Co.,2009-TII-20- HC-Ukhand-INTL dated April 24, 2009; CIT Vs. M/s Sundowner Offshore International Burmuda Ltd.,2009-TII-07-Ukhand-INTL dated February 16, 2009; CIT Vs. M/s B.J. Service Co.,2007-TII-05-HC-Ukhand-Intl dated October 8, 2007; CIT Vs. Trans Ocean Offshore Incorporation,2007-TII-13-HC-Ukhand-Intl dated October 8, 2007; M/s Sedco Forex International Inc. Vs. CIT, 2007-TII-02-HCUkhand- Intl dated September 28, 2007; and CIT Vs. M/s Halliburton Offshore Service Inc.,2007-TII-04-HC-Ukhand-Intl dated September 20, 2007, the AO bought to tax reimbursement of fuel recharge and service tax, aggregating to `220,331,466/- in terms of provisions of sec. 44BB of the Act vide draft order dated 28.12.2010.

Citation :
M/s Sedco Forex Internat ional Drilling Inc., C/o Nangia & Co., CA, Suite no. 4A, Plaza M-6, Jasola, New Delhi (Appellant) Vs. Additional DIT, Internat ional Taxation,Subhash Road, Dehradun (PAN AACCS 9208 D) (Respondent)