Commissioner Of Income Tax & Another. ……… v. J. Ray Mc. Dermott Middle East Inc

IN THE HIGH COURT OF UTTARAKHAND AT NAINITALIncome Tax Appeal No. 12 of 2007 Commissioner of Income Tax & another. ………. Appellants Versus J. Ray Mc. Dermott Middle East Inc. ..………. Respondent Mr. H.M. Bhatia, Advocate for the appellants. Mr. S.K. Posti, Amicus Curiae for the respondent. JUDGMENT Coram: Hon’ble Barin Ghosh, C.J. Hon’ble U.C. Dhyani, J. BARIN GHOSH, C. J. (Oral) Heard learned counsel for the appellant and the learned Amicus Curiae. The learned counsel engaged by the assessee, subsequent to the engagement of Amicus Curiae, however, did not show his face in the Court. 2. The respondent assessee executed various contracts with various Indian Companies during the relevant year. In respect of those contracts, it received certain payments. For the relevant year, it filed its return and disclosed such payments and offered to pay tax computed under Section 44BB of the Act. One of the Indian Companies, with which the assessee had entered into contracts, was Enron Oil and Gas India Ltd. With Enron Oil and Gas India Ltd., assessee entered into some contracts, for which, it received some payment and offered those payments to be taxed in India. The assessee, at the same time, entered into Agreement No. 70711 dated 15[th]August, 1995 with Enron Oil and Gas India Ltd. In terms of the said contract, assessee, a non-resident company, was required to provide service to Enron Oil and Gas India Ltd. at Jebel Ali, outside India. This contract was entered at the time when Enron Oil and Gas India Ltd. was engaged in the fabrication, outfitting and manufacturing of load out platform for Tapti and Panna field development. In respect of the said contract, assessee received US $ 55,983/-. This amount was not offered for being taxed in India. The Assessing Officer located this agreement and the fact of receipt of the said sum, as mentioned above. The Assessing Officer included the said receipt as taxable income and determined tax payable thereon by taking recourse to Section 44BB of the Act. The Commissioner (Appeals) upheld the assessment order. The Tribunal has reversed the assessment order as well as the appellate order. The Tribunal noticed that the assessee is a non-resident company. It entered into a contract with an Indian Company, but agreed to provide administrative and personnel support outside India. It noticed that the payment, pursuant to the contract, was received outside India. The Tribunal held that the said contract did not show that the administrative and the support services provided under the contract were absolutely necessary for providing offshore construction and installation activities for Tapti and Panna field development. The Tribunal found that there was nothing to establish direct or immediate nexus between the services rendered in India and administrative and support services provided outside India. The Tribunal, accordingly, held that such income would not attract the provisions of Section 5(2), read with Section 9(1)(i) of the Act. 3. The contract, in question, has not been placed before us. The learned counsel for the appellants, however, has not disputed the findings pertaining to the contract, as recorded by the Tribunal. Furthermore, it was not the contention of the Assessing Officer, nor it was the contention of the Revenue before the Tribunal, that the said contract, being Agreement No. 70711 dated 15[th] August, 1995, was to provide administrative or support services for fabrication, outfitting and manufacturing of load out platform for Tapti and Panna field development; on the other hand, it was contended that Agreement No. 70711 was entered during the period of fabrication, outfitting and manufacturing of load out platform for Tapti and Panna field development. In those circumstances, merely because the agreement in question was entered at the time when the fabrication activity for Tapti and Panna was going on, it could not be contended that the agreement related or the subject matter thereof was for the fabrication of Tapti and Panna field development. As aforesaid, independently also, it could not be established that the said agreement had any nexus with the activities for construction of Tapti and Panna field development. That being the situation, income derived from the said agreement, entered outside India, for providing administrative and support services outside India and, in respect whereof, remuneration has been received outside India, will not come within Section 5(2), read with Section 9(1)(i) of the Act and, accordingly, is not taxable in India. 4. We, accordingly, conclude the matter and dismiss the appeal. G (U.C. Dhyani, J.) (Barin Ghosh, C. J.) 20.11.2012 20.11.2012