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12-04-2019, Reed Hycalog , Section 147, 148, 234B, Tribunal Delhi

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6 days 22 hours ago #9151 by amit
Section - 147, 148, 234B, 234C, 9(1), 208, 209(1)(d)
Order Date - 12-04-2019
Favouring - Assessee Partly
Court - Tribunal Delhi
Appellant - DCIT
Respondent - Reed Hycalog Limited
Justice - Amit Shukla JM & L.P. Sahu AM
Citation - 419Taxpundit186
Appeal No. - ITA No. 6985/Del/2014
Asstt. Year - 2006-07

Order

PER : L.P. Sahu, A.M.

The Revenue has filed the appeal and the assessee has filed the Crossobjection against the order passed by the ld. CIT(A)-II, Dehradun dated 13.10.2014 for the assessment year 2006-07 on the following grounds :

Grounds of Revenue’s appeal:

1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that income of the assessee from the business of supplying drill bits may be computed @ 1.34% of receipts on account of direct sales and @ 10% on receipts on account of consignment sales, as against the action of the Assessing Officer ('AO') in computing the income of the assessee at a deemed profit rate of 25% on gross receipts.

1.1 Whether on the fact and in the circumstances of the case, the Ld CIT(A) has erred in reversing the action of the AO in computing the income of the assessee at a deemed profit rate of 25% of the gros receipts from execution of the contract involving sales of drill bits in India on the ground that the assessee was not put to notice regarding computation of Income from both types of revenue streams @ 25% of gross receipts.

1.2 Whether on the fact and in the circumstances of the case, the Ld CIT(A) has erred in admitting and considering additional evidence in the form of PE Attribution Report filed by the assessee during the appellate proceedings when none of the conditions laid sown in Rule 46A of the Income tax Rule,1962 was satisfied in this case.

1.3 Without prejudice to the forgoing, the Ld CIT(A) has erred in ignoring the contention of the AO that the PE attribution analysis submitted during the appellate proceedings was not reliable as the assessee had taken as comparables a set of entities not engaged in a similar line of business.

1.4. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in holding that only 35% of the contractual revenue from direct sales of drill bits is attributable to the assessee's PE in India, ignoring the fact that the income of the assessee has been earned from execution of contract in India and therefore, the entire income from these contracts is liable to tax in India, particularly in view of the facts that the assessee had failed to produce copies of contracts/purchase orders during the assessment proceedings.

Grounds in Cross objection:

1. That oil the facts and circumstances of the case, the Ld. Commissioner of Income Tax Appeals ('CIT(A)') erred in not appreciating the fact that the assessment proceedings were reopened by the learned Assessing Officer ('AO') under section 147 of the Income Tax Act. 1961 ('the Act') without any 'reason to believe' that income has escaped assessment. Thus the reassessment notice issued under section 148 of the Act by the Td. AO is illegal, bad in law and is liable to be quashed.

2. That on the facts and circumstances of the case, the Hon'ble CIT(A) erred in not appreciating that the reasons furnished by the Td. AO amount to review of facts submitted along with the return of income. Reopening of assessment in order to review return of income is bad in law and liable to be quashed.

3. That on the facts and circumstances of the case, the Hon'ble CIT(A) erred in not appreciating that the Ld. AO has reopened the assessment without any new tangible material being brought on record and that reopening assessment without any new tangible material is bad in law and liable to be quashed.

4. That the Ld. CIT(A) as well as the Ld. AO has erred in law and in fact, in levying interest under section 234B of the Act and thereby disregarding the fact that the appellant is a non-resident, whose income is subject to tax deduction at source. Accordingly, interest under section 234B is not leviable to a non-resident.

5. On the facts and circumstances of the case, the Ld. AO has erred in law and in fac s, by levying interest under section 234C of the Act and thereby disregarding the fact that the appellant is a non-resident, whose income is subject to tax deduction at source. Accordingly, interest under section 234C of the Act is not leviable to a non-resident.

RELIEF:

Your respondent respectfully prays that:

a) The impugned order of the Ld. CIT(A) may be modified to the above extent and

b) Grant any other relief as may be deemed necessary.

2. The brief facts of the case are that Reed Hycolog Ltd. Partnership (RHLP) is a firm formed in the United State of America (USA). RHLP ultimately owned by Grand Prideco Inc., a US based company registered on US stock exchange. The assessee is a tax resident of USA and is eligible to claim benefits under the Double Taxation Avoidance Agreement entered into between India and USA (India-USA DTAA). The assessee is engaged in the business of manufacture and sale of Drillbits used in the extraction and production of mineral oil. The assessee filed its return of income alongwith computation of income and notes to computation, giving the basis for offering its income to tax on 06 03.2007 declaring total income at Rs.62,12,620/- as income from offshore direct sale and offshore consignment sales. During the impugned year, the total offshore direct sales was made by assessee in USD 10,33,302 and consignment sales amount to USD 12,94,334 and has offered income from direct sales at 1% of the gross receipts of Rs.4,54,70,972/- and on consignment sales 10% of gross receipts of
Rs.5,17,79,849/-. The return of income was processed u/s. 143(1) on 29.03.2008. Subsequently, the case was reopened by issuing notice u/s. 148 after recording the reasons on 29.03.2012. In response, the assessee vide letter dated 14.05.2012 stated that the return filed originally may be treated as return filed in response to notice u/s. 148. The reasons were provided to the assessee and the assessee filed objections which were disposed of by the Assessing Officer. The assessee company also filed writ petition before Uttarakhand High Court challenging the reopening of assessment which was rejected. The reasons recorded for reopening read as under :

“The assessee was engaged in sales of equipment i.e. drill bits used in extraction and production of mineral oil to ONGC, Cairn Energy India Pty Limited, Oil India, Reliance Industries Limited, GSPC Niko Resources Ltd., Hindustan Oil Exploration Company Ltd, Premier Oil, Aban Llyod Chiles Offshore Ltd., etc. During

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