COMMISSIONER OF INCOME-TAX Vs. MCDERMOTT INTERNATIONAL INC

JUDGEMENT

(1.) THIS appeal, preferred under Section 260A of the Income Tax Act, 1961 (hereinafter referred as the Act) is directed against the judgment and order dated 30.09.2005, passed by the Income Tax Appellate Tribunal, Delhi Bench 'A', Delhi (hereinafter referred as ITAT), in Income Tax Appeal No. 2173(M) of 2000, for the assessment year 1995 -96, whereby the appeal of the respondent/assessee was allowed by the Tribunal and the order passed by the Commissioner of Income Tax (hereinafter referred as CIT), under Section 263 of the aforesaid Act, is set aside.

(2.) HEARD learned Counsel for the parties and perused the record.

(3.) BRIEF facts of the case are that the respondent/assessee is a nonresident company incorporated under laws of Panama. It is engaged in the business of designing, fabrication, construction and installation of platforms, decks, pipelines, jackets and various other similar activities. Its work in question pertains to procurement, fabrication and transportation of structures, pipelines etc. in marine spread to off -shore India and the installation of the structures and pipelines at Bombay High oilfield which is located beyond 12 nautical miles from the continental shelf or the exclusive economic Zone of India. The charges received by the respondent/assessee for such activity are described as 'mobilization and demobilization charges'. The assessment year to which this appeal pertains is 1995 -96, in which assessee received the mobilization and demobilization charges under a contract with Oil and Natural Gas Commission (hereinafter referred as ONGC), McDermott ETPM East Inc. and Mazagaon Dock Ltd. The return submitted by the respondent/assessee for the aforesaid assessment year shows that it received US 18,95,870 relating to the work done outside India and amount of US 84,20,514 with regard to the work done inside India. The return was filed with the relevant invoices and details. The Assessing Officer (hereinafter referred as AO), on scrutiny of the return and the relevant contract, passed order under Section 143(3) of the Income Tax Act on 26.03.1998, wherein he assessed only 50 per cent of the total amount of mobilization/demobilization charges received by the respondent/assessee as an amount received in respect of the work outside India and remaining 50 per cent was assessed as amount received for the work inside India. Accordingly, under Section 44BB of Income Tax Act, the AO assessed the tax at Rs. 3,09,34,992/ - i.e. 10 per cent of Rs. 30,93,49,925/ -. The assessee was not satisfied with the order passed by the AO and preferred appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred as CIT(A)] challenging the assessment. Meanwhile, it appears that under Finance (No. 2) Act, 1998, Kar Vivad Samadhan Scheme, 1998 (for brevity hereinafter referred as KVSS) was introduced and a declaration was made under Section 89 of said Act by the assessee. The AO accepted the declaration and issued certificate in form 2A, under Section 90 of the Finance (No. 2) Act, 1998. However, on 20th January 1999, CIT issued a notice under Section 263 of the Act to the assessee, proposing to revise the assessment on the ground that AO was not justified in accepting that 50 per cent of the mobilization/demobilization charges cannot be treated towards work carried out outside India, as according to him (CIT) in cases of mobilization/demobilization charges it is difficult to say whether the aforesaid charges can be attributed to the activities of installation outside India, or not. After considering the objections of the assessee against said notice, CIT passed order dated 09.02.2000, under Section 263 of the Act, directing the AO to pass assessment order denovo. Said order was challenged by the respondent/assessee before the ITAT, which allowed the appeal vide impugned order dated 30.09.2005 and set aside the order passed by CIT, under Section 263 of the Act. Hence, this appeal by Revenue.