| COURT: | Supreme Court |
| CORAM: | A.K. Sikri J., Ashok Bhushan J |
| SECTION(S): | 44BB, 5, 9 |
| GENRE: | International Tax |
| CATCH WORDS: | Accrual of income, mobilisation fee, Reimbursement of expenses |
| COUNSEL: | Ajay Vohra, Jay Savla, Lakshmikumaran, Porus Kaka |
| DATE: | October 30, 2017 (Date of pronouncement) |
| DATE: | November 1, 2017 (Date of publication) |
| AY: | - |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| S. 44BB: Amounts received as “mobilisation fee” on account of provision of services and facilities in connection with the extraction etc. of mineral oil in India attracts s. 44BB and have to be assessed as business profits. S. 44BB has to be read in conjunction with ss. 5 and 9 of the Act. Ss. 5 and 9 cannot be read in isolation. The argument that the mobilisation fee is “reimbursement of expenses” and so not assessable as income is not acceptable because it is a fixed amount paid which may be less or more than the expenses incurred. Incurring of expenses, therefore, would be immaterial. Also, the contract was indivisible | |
Section 44BB starts with non-obstante clause, and the formula contained therein for computation of income is to be applied irrespective of the provisions of Sections 28 to 41 and Sections 43 and 43A of the Act. It is not in dispute that assessees were assessed under the said provision which is applicable in the instant case. For assessment under this provision, a sum equal to 10% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘profits and gains of the business or profession’. Sub-section (2) mentions two kinds of amounts which shall be deemed as profits and gains of the business chargeable to tax in India. Sub-clause (a) thereof relates to amount paid or payable to the assessee or any person on his behalf on account of 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. Thus, all amounts pertaining to the aforesaid activity which are received on account of provisions of services and facilities in connection with the said facility are treated as profits and gains of the business.
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