Income Tax Appellate Tribunal - Chennai
Aban Singapore Pte Limited,Hyderabad vs Dcit Intl Tax 1(1) , Chennai on 23 January, 2026
आयकर अपीलीय अिधकरण, 'डी' ायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH: CHENNAI
ी एबी टी. वक , ाियक सद एवं सु ी पदमावती यस, लेखासद के सम#
BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND
MS. PADMAVATHY.S, ACCOUNTANT MEMBER
आयकर अपील सं ./IT(TP)A No.12/Chny/2025
िनधा%रण वष% /Assessment Year: 2022-23
Aban Singapore Pte. Ltd., The Dy. Commissioner of Income
6-3-655/2/3, P. Murali &Co., Vs. Tax,
Chartered Accountants, International Taxation-1(1),
Somajiguda, Chennai.
Telangana State - 500 082.
PAN: AAQCA 2845Q
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ की ओर से/ Appellant by : Mr. P. Muralimohan Rao, C.A (virtual)
)*थ की ओर से /Respondent by : Mr. ARV Sreenivasan, CIT
सुनवाई की तारीख/Date of Hearing : 08.01.2026
घोषणाकी तारीख /Date of Pronouncement : 23.01.2026
आदे श / O R D E R
PER PADMAVATHY.S, A.M:
This appeal by the assessee is against the final order of the assessment passed by Dy. Commissioner of Income Tax, International Tax-1(1), Chennai (in short "AO") passed u/s. 143(3) r.w.s 144C of the Income Tax Act, 1961 in short "the Act") dated 23.01.2025 for Assessment Year (AY) 2022-23. The grounds of appeal raised by the assessee are as under:
1. The Final assessment order passed by the Dy. Commissioner of Income Tax, INTL TAX 1(1), and Chennai (hereinafter referred to as 'AO' is bad both in the eyes of law and on facts.
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2. The Ld. AO erred in making disallowance u/s 40(a)(i) towards non-
deduction of tax Rs. 14,91,33,600/- without appreciating the facts and circumstances of the case and without considering the submission made.
3. The Ld. AO ought to have appreciated the fact that the disallowance u/s 40(a)(i) of the Act is overridden by the provisions u/s 44BB of the Act.\
4. The Ld.AO ought to have appreciated the fact that the assessee company is a non-resident having incorporated in Singapore and not liable to tax of its global income in India.
5. The Ld.AO ought to have appreciated the fact that the provisions of the DTAA or ITA as per the section 90 of the Act, which are more beneficial to the assessee shall be taken into consideration for the purpose of tax liability.
6. The Ld. AO ought to consider the fact that the assessee company and the owner company of charter, both are residents of Singapore.
7. The Ld. AO ought to appreciate the fact that the agreement entered by Deep Drilling 8 Pte Ltd (DD8PL) with the assessee company and the payments made with respect to hiring of rig are in Singapore, which is outside India.
8. The Ld. AO ought to consider the fact that the DDSPL are Singapore based company and give charter for hire in Singapore which the assessee company takes to the project site i.e., India.
9. The Ld. AO ought to appreciate the fact that the DD8PL who are owners of rig are non-residents and do not have presence in India and not liable to tax in India, hence no TDS was deducted.
10. The Ld. AO ought to have appreciated the fact that the payments made to DD8PL are outside India and is not liable to deduct tax in India.
11. The Ld. AO ought to have considered the fact that merely by virtue of ASPL bringing the rigs of DDP8L i.e., taken on hire, cannot be the sole basis for extending the scope of Indian taxes to income earned by DD8PL outside India.
12. The Ld. AO ought to have appreciated the fact that the Hon'ble ITAT in assessee's own case deleted the addition proposed in preceding assessment year i.e.., 2019-20 vide ITTPA No. 38/CHY/2022.
13. Without prejudice to the above, the Ld. AO ought to have appreciated the fact that the payments to a foreign company for services in relation to prospecting for, or extraction or production of, mineral oil will be income chargeable to tax under the provisions of Sec. 44BB of the Income-tax Act, 1961.
14. The Ld. AO ought to have considered that the quantum of income to be taxed under section 44BB(1) of the Act, should be restricted to the amount specified in section 44BB(2) of the Act".
15. The Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.
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2. The assessee is a Non-Resident company incorporated in Singapore and engaged in the business of providing offshore drilling services and facilities relating to exploration and exploitation of mineral oil and natural resources to exploration and production companies. The assessee in the capacity as Indian Project Office (PE) filed a return of income for A.Y 2022-23 on 28.11.2022 declaring total income of Rs. 26,09,23,717/- u/s.
44BB of the Act. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O noticed during the course of assessment that the assessee has entered into sub-contracting agreement with Deep Drilling No.8 Pte. Ltd. and Aban Offshore Ltd. for performing the drilling contract with ONGC. The A.O further noticed that the assessee has not deducted TDS on the payments made to Deep Drilling No.8 Pte. Ltd. The A.O held that the income received by Deep Drilling No.8 Pte. Ltd. is taxable in India as royalty u/s. 9(1)(vi)(b) of the Act and therefore the assessee is liable to deduct tax from the payments made to the said party. The A.O rejected the submissions of the assessee that the impugned issue is covered by the decisions of the Tribunal in assessee's own case in earlier A.Y stating that the Revenue is in further appeal before the Hon'ble Madras High Court and that the relief was granted on the ground that Deep Drilling No.8 Pte. Ltd. does not have a PE in India which is not applicable to the year under consideration. The A.O accordingly disallowed a sum of Rs. 14,91,33,600/- u/s. 40(a)(i) of the Act. The assessee filed its objections before the DRP against the draft assessment passed by the A.O. The DRP rejected the contentions of the assessee and upheld the disallowance made by the A.O. the assessee is in appeal against the final assessment order passed by the A.O pursuant to the directions of the DRP.
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3. The Ld. Authorized Representative (AR), at the outset, submitted that the impugned issue is covered by the decision of the Co-ordinate Bench in assessee's own case from A.Y 2018-19 to 2021-22. The Ld. AR in this regard drew our attention to the following observation of the Co-ordinate Bench for A.Y 2019-20 (IT(TP)A No.38/Chny/2022 dated 20.07.2023).
"3. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. By filing detailed written submissions, the ld. Counsel for the assessee has submitted that the assessee is engaged in the business of making over and drilling of oil wells in offshore territories, specially covered under section 44BB of the Act. The provisions of section 44BB is a non-obstante clause that excludes the application of other provision of section 28 to 41 and section 43 and 43A of the Act covered under the head of profits and gains from Business or profession. It was further submission that the above said section introduces the concept of presumptive income received by the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India" shall be deemed to be the profits and gains chargeable to tax. The purpose of this provision is to tax what can be legitimately considered as income of the assessee earned from its business and profession at presumptive rates. It was further submission that by following the above provisions, the assessee has duly opted for scheme of presumptive taxation under section 44BB of the Act and declared income under clause 62 of schedule Part-A of the P & L in ITR filed on 30.11.2019. Once a non-resident company engaged in the business of extraction and exploration of mineral oils comes with the purview of section 44BB of the Act, it cannot come again under the purview of the other parts of the Act which are specifically excluded i.e., provision of section 40(a)(i) of the Act has no application. When section 44BB of the Act operates, it operates to exclude altogether the incidence of tax on profit and gains of business or profession which would otherwise be incident on the basis of other sections apart from section 44BB of the Act.
4. The ld. Counsel for the assessee has further submitted that in the present case, the payment being made by ASPL to DD8PL, DDP4PL is for the hire of rig DD8 and rig DD4 on bareboat charter basis. Therefore, the income which DD4PL and DD8PL earns from the charter hire contract is for the providing its rig to ASPL for exclusive use, and such income is independent of whether the rig is actually deployed by ASPL or not and independent of where the rig is deployed. Merely by virtue of ASPL bringing DD4PL's asset DD4 and DD8PL's IT(TP)A No.12/Chny/2025 Aban Singapore Pte. Ltd.
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asset DD8 in India cannot be the sole basis for extending the scope of Indian taxes to income earned by DDP4PL and DD8PL and not liable for withholding tax in India. It was also submitted that a lower deduction certificate under section 197 of the Act dated 14.01.2019 @ 4.3% (including EC/Surcharge) as per section 44AB of the Act for a period from 03.10.2018 to 31.03.2019 was also obtained by the assessee. The ld. Counsel for the assessee further submitted that the Assessing Officer has ignored the provisions of section 44BB of the Act and passed the final assessment order, which is contrary to law and relied on the decision of the Coordinate Bench of the Tribunal in the case of Frontier Offshore Exploration (India) Ltd. v. DCIT in I.T.A. No. 200/Mds/2009 dated 04.02.2011.
4. On the other hand, the ld. DR has submitted the following written submissions:
The only issue in this appeal was disallowance of a sum of Rs. 40,81,64,000/- by the AO by invoking Sec 40a(i) of the IT Act. It is discussed in detail at para-5 and 6 of the draft assessment order and the same has been upheld by DRP. The claim of the appellant was that they are Non-Resident assessee incorporated in Singapore. It is argued that return is filed as a project office in India by admitting loss u/s 44BB of the IT Act and hence invoking Sec 40(a)(i) does not arise.
In ground No. 4 of their appeal the assessee has claimed that DTAA provision was more beneficial to the assessee and hence it should have been taken into consideration.
In ground no. 5, 6.7,8 and 9 it was claimed that the owner of the rig to whom the payment was made was also a Non-Resident and hence payment of money by a non-resident to another non-resident cannot be disallowed us 40a(i) of the IT Act.
In ground no. 11 and 12 the appellant pleaded that their income would be chargeable to tax under the provisions of sec 44BB of the IT Act and the addition or taxing of income should have been restricted under the said section.
A. Facts contrary to the grounds of appeal and the claim of the appellant:
The facts in this case are totally contrary to the grounds of appeal raised by the assessee company and those facts are listed below:
1. Attention is drawn to paper book of the company filed on 13-02- 2023 where the return of income is enclosed from page no 1 to
87. As per page No. 1 of the ITR-6 the appellant declared that they had Permanent Establishment (PE) in India.
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2. Attention is drawn to page no. 2 of the ITR where it was categorically declared that the financial statement of the company was drawn up in compliance to Indian Accounting standards and they have maintained the Books of account as per section 44AA of the IT Act.
3. Whether it was subjected to Audit u/s 44AB?
Ans: Yes, their books of accounts were subjected to audit us 44AB and the audit details were given in page 2 of the ITR.4.
4. What is the business of the assessee?
4.1 The appellant's business activities were given at page no. 5 of the ITR where they have mentioned that they are engaged in service activities incidental to Oil and gas extraction excluding survey". The contract work was carried out in the territorial waters of India.
4.2 It is for these reasons Vedanta Limited, Hindustan Oil Exploration Company Limited and ONGC gave the contract during the relevant AY for a total sum of Rs. 90,45,76.927- and deducted tax us 195 for a sum of Rs 5,65,88,963/-.
4.3 This entire contract revenue of Rs.90,45,76,927/- was duly admitted as Revenue from Operations in the ITR in page no. 24. 4.4 Various expenditures were debited against this gross revenue and the company declared net loss of Rs. 6,50,42,976/- at page no. 28 of the return of Income. The expenses debited against the revenue was duly reported between page no. 26 to 28 of the return of income.
4.5 To provide the service to the above said companies, the appellant hired the bare boats from the subsidiary and paid the hire charges of Rs.40,81,64,000/. Those bare boats were used in the territorial waters of India and the income of the subsidiary was also accrued in India.
4.6 The appellant claimed that they have incurred business loss and that business loss of Rs. 6,50,42.976/- was duly reported as current year loss at page no. 60 of the return.
5. Whether it was a case of 44BB?
NO. Attention is drawn to page no 36 of the return where schedule BP Computation of Income from Business or profession was reported. It was categorically reported that Income u/s 44BB was NIL.
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6. Whether MAT was calculated? Yes. Even MAT calculation was also carried out from page 71 to 72 of Return of Income.
7. Whether Tax Audit Report was filed as per section 44AB?
7.1 Yes. Attention is drawn to page no. 102 to 113 of the paper book.
This is the tax audit report as per Form 3CA and Form 3CD. In the form 3CD at column 23, the related party transactions were reported. As per this a sum of Rs. 40,8 1,84,000/- was paid to Deep Drilling 8 PTE Limited Singapore which is a fellow subsidiary.
7.2 TDS compliance: In the same tax audit report attention is drawn to column no 34a where TDS compliance chapter XVII-B or XVII- BB was reported that the assessee was required to deduct tax. Accordingly, the assessee complied to section 192, section 194J, 195 and 194C of the IT Act. Even a TDS return in Form 24Q, 26Q and 27Q was filed and reported in 34b of the Tax Audit report.
7.3 As per sub-section (3) of section 44BB of the IT Act, notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains books of accounts as per section 44AA and get the accounts audited u/s 44AB of the IT Act. In such a situation AO shall proceed to assess the total income u/s 143(3) of the IT Act. In the present case, the assessment was concluded accordingly.
In summary assessee's grounds of appeal are against all these facts. During the course of hearing on 15-02-2023 the counsel for the assessee while arguing the stay application contended that they were assessable u/s 44BB of the IT Act and hence section 28 to 41 and section 43 and 43A are not applicable. This argument is devoid of any merit and baseless. Appellant chosen to declare their business loss by maintaining and auditing their books of accounts as per section 44AA and 44AB of the IT Act. They paid hire charges to the subsidiary. When the appellant complied to the TDS provisions us 195 of the IT Act for a sum of Rs. 4.58,31,205/- reported at column 34a, they ought to have deducted tax on boat higher charge of Rs. 40,81,84,000/- paid to the fellow subsidiary. On account of such wilful failure to deduct Tax the AO disallowed this higher charge payment u/s 40a(i) of the It Act.
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B. Other documentary evidences from the paper book are listed below:
1. Page No. 114 is the Bareboat Charter Agreement entered on 16- 01-2018 between the assessee and its subsidiary. Attention is drawn to the address of both the companies. Both of them were at the same address in Singapore i.e. 9, Temesak Boulevard, #19-02, Sunte Tower tow, Singapore 038989.
2. Assessee's project office is at "Janpriya Crest", 113, Pantheon Road. Egmore, Chennai which is a PE as per the assessee's declaration
3. As per the agreement, owner (subsidiary company) let out the Bareboat to the appellant for a period of six months on award of contract that is going to be used by Hindustan Oil Exploration Company.
4. The Bareboat Charter shall commence when the rig is delivered to the assessee(charterer). Offshore India within India's territorial waters and shall be valid until the rig is redelivered to the Owner in India's territorial waters or such other place as may be agreed by the owner.
5. It means that the Bareboat and the rig was used in the territorial waters of India and the income to the subsidiary accrued from India on account of this contract entered between assessee and its subsidiary.
6. Attention is drawn to point 23 of the contract where owner and charterer were located in the same address of Singapore.
7. Maintenance and operation of the rig was to be undertaken by the assessee and for this purpose Charter hire was paid as per clause 9 of the agreement.
8. Another agreement was entered on 17-07-2018 and that agreement is placed at page no. 122, as per this agreement the charter period is for one year and renewable automatically every year.
9. This Bareboat also delivered to the assessee in the territory of operation that is within the territorial waters of India. For this purpose also, charter hire was agreed between both the parties.
C. Analysis of the tax returns filed by the company from AY 2018-19:
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The appellant company filed the return of income for the AY 2018-19 onwards. The returns are analysed as under:
1. In the AY 2018-19, they did not admit any income by citing that the operation was carried out only for limited period of time and there was no PE in the relevant assessment year. A sum of Rs. 26,79,37, 1 38/- was shown as gross receipts and entire TDS of Rs. 1,24,60,303/- was claimed as refund. This gross receipt was on account of amount deducted by Vedanta Ltd. and it was claimed as exempt income in schedule EI of the Income Tax return as per DTAA.
2. In the AY 2020-21, the appellant filed return of income wherein they admitted that they had PE and the books of accounts were maintained as per sec 44AA of the IT Act. However, it was declared in return of income that their accounts were not liable for audit u/s 44AB of the IT Act. If so, they cannot file the profit and loss account by claiming various expenditure against the gross receipt of Rs. 138,34,60,727/- and declaring net loss of Rs. 3,15,48,560/-. Attention is drawn to page no. 2 and 36 of their return where it was categorically declared that no income was admitted u/s 44BB of the IT Act. If it was not a case of 44AB, they cannot admit loss.
It is evident from the returns of income that the appellant has been providing services constantly to major companies like Vedanta Limited, ONGC, and Hindustan Oil Exploration Company Limited since March 2018. These receipts were duly reflected in all their 26AS statement.
Those receipts are claimed as exempt in AY 2018-19 and from subsequent AY onwards it was duly offered to tax.
D.Payment of hire charges to deep drilling 8 Pte Ltd and TDS liability:
In the AY 2019-20 a sum of Rs.40,81,84,000 was paid as bareboat hire charges the Deep drilling -8 Pte Limited. It is recorded that this subsidiary has rendered service for more than 183 days in the territorial waters of India and hence even the income of the subsidiary is accrued in India. The appellant already declared that they had PE in the relevant AY 2019-20 and also get their accounts audited u/s 44AB by complying various TDS provisions. Hence, as per subsection (3) of section 44BB of the IT Act they ought to have deducted tax on this bar boat hire charges, which was not done.
Summary and Prayer:
1. In view of all these factual aspects, the AO, rightly held that the appellant hired Bareboat from the subsidiary and those Bare boats were used in the territorial waters of Republic of India for IT(TP)A No.12/Chny/2025 Aban Singapore Pte. Ltd.
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the business purposes and hence the hire charges was accrued to the subsidiary Deep Drilling PTE Limited from India that attracted the TDS provisions.
2. Assessee a non-resident company having Permanent Establishment (PE) in India bagged the contract from Vedanta Limited. ONGC and Hindustan Oil Exploration. For this purpose, they paid hire charges to its subsidiary.
3. On this hire charges payment, the appellant ought to have deducted Tax as applicable in line with TDS compliance of other provisions that was duly reported in Tax Audit Report.
4. As the appellant has chosen to carryout tax audit and declared net loss. The assessment was rightly carried out us 143(3) of the IT Act.
5. As they have failed to deduct tax the AO rightly invoked section 40(a)(i) of the IT act and disallowed the payments made by the assessee.
It is prayed that the appeal of the assessee may be dismissed.
5. We have heard both the sides, perused the materials available on record and gone through the draft assessment order, directions of the ld. DRP and final assessment order. We have considered the written submissions filed by the assessee. We have also carefully considered the detailed written submissions filed by the Revenue in light of certain judicial precedents. In this instant case before us we are called upon to decide whether the payments made to DD8PL for bare boat hire charges is liable to tax in India or not. The assessee has filed a return under section 44BB of the Act offered lower profit than the 10 percentage of aggregate receipts by maintaining the books of account and other documents and audited and furnished the tax audit report u/s 44AB of the Act. The ld. DR raised an objection that the assessee company is covered by the provision of Section 44BB of the Act. Section 44BB of the Act is an exclusive section that deals with the income arising from the exploration, extraction, ship or machinery used or to be used in connection with such exploration. As per the provisions of section 44BB(1) of the Act, a sum equal to 10% of the aggregate of the amount specified in sub-section (2) is deemed to be the profits and gains of such business chargeable to tax under the head "profits and gains of business or profession". It is because the provision of section 44BB of the Act has quantified the deemed income of the non-resident assessee at 10%, it has opened with the clause "Notwithstanding anything to the contrary" contained in sections 28 to 41 and sections 43 and 43A of the Act. The aggregate amounts are quantified in sub- section (2) of section 4BB of the Act to be the amount paid or payable, IT(TP)A No.12/Chny/2025 Aban Singapore Pte. Ltd.
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received or deemed to be received etc. As per the sub-section (3) of section 44BB of the Act, the non-resident can claim a lower profit. It is for the purpose of claiming lower profits that the non-resident must file a return and prove the same with support of his regular books of accounts and other documents and by complying with other conditions specified therein ie., 44AA, 44AB and 143(3) of the Act. In this regard the assessee relied upon the following judicial precedent:
i. Decision in case of Frontier Offshore Exploration (India) Ltd vs. DCIT Central Circle (1). Chennai vide ITA No 200/Mds/2009 where in it is held as "6. This is where the special provision of section 44BB comes into play. Where the statute has provided a special provision for dealing with a special type of income such a provision would exclude a general provision dealing with the income accruing or arising out of any business connection. Section 44BB is a special provision to the exclusion of all the contrary provisions provided in sections 28 to 41 and 43 and 43A of the Act. Once the provisions of sections 28 to 41 and sections 43 and 43A stand excluded the method of computing the business income of the non-resident on the basis of the books of account goes out of the picture."
ii. Coordinate Bench in case of Deep Drilling 5 Pte Ltd vs. DCIT, vide IT(TP)A No. 17/Chny/2021 wherein it is held that:
17. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that consideration received by the assessee for providing rig services to M/s.
CAIRN India Ltd., is not liable to tax in India as royalty u/s.9(1)(vi) and Article-12 of the India Singapore Tax Treaty. Further, income of the assessee is also not taxable as business profits in terms of the provisions of Sec.44BB of the Act, because business profits of an enterprise of a contracting state shall be taxable only in that state unless such enterprise is carried out its business in other contracting state through a Permanent Establishment. Since, there is no Permanent Establishment in the case of the assessee the question of taxation of business profits in India does not arise. Therefore, we are of the considered view that the AO as well as the ld. DRP completely erred in taxing income of the assessee in India. Hence, we direct the AO to delete the addition made towards income of the assessee in terms of Sec. 9(1) and Artlce-12 of the India Singapore Tax Treaty.
6. Further the assessee has argued that the provisions of section 195 of the Act will not applicable as the payments were made in outside India. The provisions of section 195 are to be invoked, only if such sum which is chargeable to tax under the Income-tax Act, 1961 on which TDS can be made. In the present case, a bareboat lease contract entered by the assessee and DD8PL in Singapore i.e., outside in India and the payment is also made in outside India. Further the payment done to DD8PL are bareboat charter are business receipts for the Singapore Company and the company does not having PE and not IT(TP)A No.12/Chny/2025 Aban Singapore Pte. Ltd.
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taxable in India. Based on the facts and circumstances, the provisions of section 195(1) of the Act is not applicable as the income is not chargeable to tax in India. In this regard, the assessee relied upon the following judicial precedent:
i. Decision of Hon'ble Supreme Court of India in case of Transmission Corporation of AP Ltd. vs. CIT vide citation [1999] 105 Taxmann 742 (SC) wherein held -
"Section 195 of the Income-tax Act, 1961 - Deduction of tax at source - Other sums - Whether scheme of tax deduction at source applies not only to amount paid which wholly bears 'income' character such as salaries, dividends, interest of securities, etc., but also to gross sums, whole of which may not be income or profits of recipient, such as payment to contractors and sub-contractors and payment of insurance commission -Held yes - Whether expression 'any other sum chargeable under the provisions of this Act' would mean 'sum' on which income- tax is leviable - Held yes- Whether expression 'any other sum chargeable under the provisions of this Act' would include cases where any sum payable to the non-resident is a trading receipt which may or may not include 'pure income' - Held, yes - Whether assessee who makes payments to non-residents under contract entered into is under obligation to deduct tax at source under section 195 and the obligation is limited only to appropriate proportion of income chargeable under Act -Held, yes."
ii. Decision of Hon'ble Supreme Court of India in case of GE India Technology Cen. (P) Ltd. vs. CIT, (2010) 193 Taxman 34 (SO), wherein, it is held -
Section 195 of the Income-tax Act, 1961 - Deduction of tax at source - Payment to non-resident - Whether the moment a remittance is made to a non-resident, obligation to deduct tax at source does not arise; it arises only when such remittance is a sum chargeable under Act, i.e., chargeable under sections 4, 5 and 9 - Held, yes - Whether section 195(2) is not a mere provision to provide information to ITO(TDS) so that department can keep track of remittances being made to non- residents outside India; rather it gets attracted to cases where payment made is a composite payment in which certain proportion of payment has an element of 'income' chargeable to tax in India and payer seeks a determination of appropriate proportion of sum chargeable - Held, yes.
iii. Decision of Hon'ble ITAT Delhi in case of ACIT Vs. Interocean Shipping (I) (P) Ltd., 51 ITD 582 (Delhi), wherein it is held that:
"The ship hired out by NR was not a ship but was a specially designed vessel of the nature of machinery which would ply in the ocean and assist in the construction of offshore platforms that were used for the exploration of mineral oil. Therefore, the claim of the department that the hire charges received by NR were taxable in the contracting State because of article 9, was to be rejected because the said article covers shipping income arising from the operation of ships.
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Article 7 of the DTA covers business profits to be taxed in the Contracting and the Contracted State, i.e., the other State, only when the enterprise which is a resident of the Contracting State has a permanent establishment in India, such as maintaining of an office, etc. In the instant case, it was undisputed that NR was a resident enterprise in the UK. It had as its business the hiring out of its vessel for offshore operations and it was not the case of the department that NR had any permanent establishment in India. Therefore, the hire charges paid to NR would be liable to be taxed in the U.K. In view of the provisions contained in article 7, since the hire charges was not subjected to Indian taxation, the question of deducting any tax from the hire charges payable to NR did not arise. The order of the Commissioner (Appeals) cancelling this order of the Assessing Officer was, therefore, upheld."
7. Having heard and examined the case and. basing on the judgements, it is clearly established that the payment of bareboat charter by ASPL to DD8PL does not liable to tax India as per the Article 7 read with Article 5 of the India Singapore DTAA and ASPL is not liable to deduct any withholding tax under section 195 of the Act as income earned by DD8PL is not chargeable to tax in India.
8. Thus, the assessee has exercised the option available under section 44BB of the Act by maintaining regular books of accounts and got the book audited and thus, the payment done to DD8PL are bareboat charter are business receipts for the Singapore Company and the company does not have PE and not taxable in India as per the DTAA between India and Singapore, the assessee is not liable to deduct any tax in India under section 195 of the Act. Therefore, no disallowance for the expenditure under section 40(a)(1) of the Act is warranted. Under the above facts and circumstances, we set aside the orders of authorities below and delete the addition made by the Assessing Officer and confirmed by the ld. DRP. Thus, the appeal filed by the assessee is allowed."
4. The Ld. AR further submitted that the provisions of Section 44BB of the Act begins with an non obstante clause stating that notwithstanding anything contained in section 28 to 43 and therefore, the A.O is not correct in making a disallowance u/s. 40(a)(i) of the Act. The Ld. AR also argued that when the assessee has paid the tax on presumptive income u/s. 44BB no separate disallowance can be made.
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5. The Ld. Departmental Representative (DR), on the other hand, submitted that the reliance placed by the assessee in earlier year orders of the Tribunal is factually distinguishable since the A.O for the year under consideration has treated the impugned payments in the hands of the recipient as royalty. The Ld. DR further submitted that the Tribunal in earlier year has given relief to the assessee on the ground that the recipient does have a PE in India and thus the impugned payments are not taxable in the hands of the recipient. Since, the A.O for the year under consideration was treated the payments as royalty, the claim of the assessee that the issues covered by the decisions of the Tribunal in the earlier years is not correct. The Ld. DR argued that the non obstante clause in Section 44BB of the Act cannot be extended to the liability to deduct tax u/s. 195 of the Act or to determine the taxability of income u/s. 9 of the Act. Accordingly, the Ld. DR supported the order of the lower authorities.
6. We have heard the parties, and perused the material available on record. From the perusal of the above findings of the Co-ordinate Bench, we notice that the Coordinate Bench while deciding the impugned issue has not only giving relief on the ground that the impugned payment are not taxable in the hands of the recipient but has also considered the fact that the assessee has exercised the option available u/s. 44BB of the Act to offer income on presumptive basis wherein no disallowance can be made u/s. 40(a)(i) of the Act. We further notice that the Tribunal has been holding consistently the similar view from AY 2018-19 to 2021-22. Therefore, we see merit in the arguments of the ld. AR that the impugned issue is covered by the decision of the Coordinate Bench in assessee's own case for earlier AYs. Therefore, IT(TP)A No.12/Chny/2025 Aban Singapore Pte. Ltd.
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respectfully following the decision of the Coordinate Bench, we hold that the disallowance made by the A.O u/s. 40(a)(i) of the Act deserves to be deleted.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on 23rd day of January, 2026 at Chennai.
(एबी टी. वक ) (पदमावती यस)
(ABY. T. Varkey) (Padmavathy.S)
याियक सद य / Judicial Member लेखा सद य /Accountant Member
चे नई/Chennai, दनांक/Dated: 23rd January, 2026.
EDN, Sr. P.S
आदे श क ितिल प अ े षत/Copy to:
1. अपीलाथ /Appellant
2. थ /Respondent
3. आयकर आयु /CIT, Chennai/Madurai/Coimbatore/Salem
4. िवभागीय ितिनिध/DR
5. गाड फाईल/GF