I. T. A. No. 700/ Mum/ 2009 [Unreported] Valentine Maritime (Gulf ) LLC vs ADIT A.Ys.: 2005-06, Dated: 27 November 2013 Counsel for assessee: Hero Rai; Counsel for revenue: Ajay Srivastava

Facts:
The taxpayer was a non-resident company engaged in the business of providing technical/engineering services. During the relevant assessment year the taxpayer executed a contract with an Indian company (“ICo”) for laying/installation of pipes for three pipeline projects for offshore oil exploration (“the Contract”). The taxpayer contended that it was a company incorporated in UAE and accordingly, was entitled to qualify as tax resident under India UAE DTAA.

During the relevant assessment year, the taxpayer had received payments under the Contract towards materials, mobilisation, installation, etc. The taxpayer had contended that since it was engaged in the business of providing services and facilities in connection with prospecting, extraction or production of mineral oils, the payments received by it were assessable in terms of section 44BB of the Act. The AO concluded that the taxpayer did not qualify to claim benefits under India-UAE DTAA. The AO considered the payments received by the taxpayer in light of the Contract as well as original bidding documents and observed that having regard to the various clauses of the Contract pertaining to the scope of services performed by it, the taxpayer was also providing technical services. The AO further observed that in terms of the decision in Sedco Forex International Inc vs. CIT [2008] 170 Taxman 459 (Uttarkhand), deduction in respect of mobilization, demobilisation expenses was not available. The AO bifurcated the payments received by the taxpayer for assessability under two heads, namely, as deemed income section u/s. 44BB and as FTS. The CIT(A), however, concluded that the entire amount was assessable u/s. 44BB of the Act.

The issue before the Tribunal was: whether part of the payment received by the taxpayer can be assessed as FTS and whether the other part could be assessed u/s. 44BB of the Act.

Held:
the taxpayer was given a turnkey project for laying and installation of pip lines. It is a settled proposition of law that when a contract consists of a number of terms and conditions each condition does not form separate contract. The contract has to be read as a whole as laid down by the Supreme Court in case of Chaturbuj Vallabhdas [AIR 1954(SC) 236].

Perusal of various decisions cited by the taxpayer shows that works/services performed by the taxpayer do not come within the purview of section 9(i)(vii) of the Act (i.e. FTS). The AO grossly erred in considering part