Uttarakhand High Court
Commissioner Of Income Tax vs B.J. Services Co. Middle East on 8 October, 2007
Equivalent citations: (2007)213CTR(UTTRANCHAL)545, [2008]300ITR392(UTTARANCHAL)
Author: P.C. Verma
Bench: P.C. Verma
JUDGMENT
1. This appeal under Section 260A of the IT Act, 1961 (hereinafter referred to as 'the Act') has been preferred by the Revenue challenging the order dt. 21st March, 2006 passed by the Tribunal, Delhi Bench 'D', New Delhi in ITA No. 2887/Del/2000 for the asst. yr. 1998-99.
2. Facts, in brief, are that return of income was filed by a non-resident company M/s B.J. Services Co. Middle East, disclosing Rs. 3,27,770 for computing the amount referred under Sub-section (2) of Section 44BB of the Act, which was 5 per cent of the total receipts towards handling charges on the original cost. It was found from the return filed by the assessee that total amount received by the assessee for supply of spare parts to the Oil & Natural Gas Corporation (for short, ONGC) was Rs. 69,45,264. The AO, therefore, took into account the total amount received by the non-resident company for supply of spare parts to ONGC under Sub-section (2) of Section 44BB for determining the profits and gains and imposed the tax @ 10 per cent under Sub-section (1) of Section 44BB of the Act.
3. Feeling aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) held that the assessee was entitled for deduction of Rs. 66,17,495 out of Rs. 69,45,264 as Rs. 66,17,495 was received as cost of materials etc. as the actual reimbursement of expenses of such materials incurred by the assessee in execution of the contract with the ONGC and these reimbursements were on actual basis and were not in any way on a fixed percentage basis.
4. Against the aforesaid order of the CIT(A), the Revenue preferred Appeal No. 2887/Del/2000 before the Tribunal. The Tribunal, for the same reason, upheld the order of the CIT(A) and dismissed the appeal of the Revenue. The Tribunal having rejected the contentions of the Revenue in this regard, the Department has come up in appeal before us.
5. We have heard learned Counsel for the parties and perused the record.
6. The substantial question of law which arises for consideration in this appeal is as under:
Whether the learned Tribunal was legally correct in law and on facts in holding that the amount received by the non-resident company as reimbursement on account of supply of spare parts cannot be included in the contract receipts for computing taxable profit under Section 44BB?
7. It is the fact that the amount of Rs. 69,45,264 was received by the assessee non-resident company for supply of materials which included Rs. 3,27,770 on account of handling charges.
8. Sub-section (1) of Section 44BB specifically provides that aggregate of amounts specified in Sub-section (2) shall be taken into account, 10 per cent of which shall be deemed to be profits and gains. Sub-section (2) provides that amounts referred shall be amount paid or payable to the assessee (whether in or out of India) and the amount received or deemed to be received in India 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. Explanation appended to Section 44BB provides that for the purpose of this section, plant includes ships, air crafts, 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 is squarely covered under Section 44BB. Therefore, the AO was right in calculating the 10 per cent of total amount of Rs. 69,45,264, which was received by the assessee non-resident company from the ONGC. The claim of the assessee that the amount of Rs. 66,17,495 could not be included for the purpose of calculating the amount referred to in Sub-section (2) of Section 44BB as it was reimbursement while the assessee himself has claimed 5 per cent handling charges on the original cost of material i.e. spare parts. Therefore, Rs. 69,45,264 was the cost of spare parts and was duly received by the assessee non-resident company and hence was an amount referred to under Sub-section (2) of Section 44BB of the Act as it was a receipt during the course of business.
9. For the reasons recorded above, the orders of the Tribunal and CIT(A) are set aside. The order of AO is confirmed. The question is answered in favour of Revenue and against the assessee.