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Director of Income Tax reported in 288 ITR Page 408. In respect of the Offshore Service Contract the Assessing officer held that the same would be taxable as fees for technical services and royalty and consequently the benefit of Section 44BBB of the Act as claimed by the petitioner would not be available.

8) The Commissioner of Income Tax (Appeals) by an order dated 30/11/2009 held that the petitioner was entitled to the benefit of Section-44BBB of the Act in respect of the offshore service contracts.

The Dispute Resolution Panel (DRP) in its directions for the A.Y. 2006-07 and 2007-08 has held that :
a) Receipts from offshore Services contracts are covered by provisions of section 44BBB of the Income Tax Act.
b) Receipts from Offshore Supply contracts are also covered by provisions of section 44BBB of the Income Tax Act.
ASN 7/22 WP-377.sxw The DRP has further held that Section 44BBB refers to computation of profits in case of foreign company engaged in the business of civil construction etc. In Turnkey Power Projects which are approved by the Central Government. The fact that this contract has been awarded on a turnkey basis to the assessee is evident from the contract dated 20/11/1998.

It is seen that the provisions of section 44BBB clearly indicates that sum payable for erection and construction of power plant is to be included in the amount for applying 10% of profit margin. In the case of power plaint being constructed on turnkey basis as envisaged in section 44BBB includes construction, erection and commissioning and these as such include equipment plant and machinery which are installed for setting up the power plant so as to make it a turnkey project .Accordingly, the sum payable for offshore supply should also be included for purposes of computing the profit @ 10%.

Accordingly, in order to compute the income u/s.44BBB, the revenue from all the contracts entered into by the assessee with Government of India or Indian Entity like Nuclear Power Corporation are to be included and, therefore, the profit rate of 10% as envisaged in section 44BBB is to be applied.

The details of payment received by the assessee in respect of all the 7 contracts are as under: