Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

July 2010

Mauritius company performing contract for transportation and installation of platforms to be used in mineral oil exploration—Part of income pertained to activities carried on outside India— Whether entire income taxable in India—Income under presumptive t

By Geeta Jani
Dhishat B. Mehta
Chartered Accountants
Reading Time 2 mins
fiogf49gjkf0d

New Page 2 

13 JDIT v. J. Ray McDermott Eastern Hemisphere Ltd. (2010) TII 41 ITAT (Mum.-INTL) Article 4 of India-Mauritius DTAA; S. 5, S. 9(1)(i), S. 44BB of Income-tax Act A.Y. : 2003-04. Dated : 30-4-2010

Mauritius company performing contract for transportation and installation of platforms to be used in mineral oil exploration—Part of income pertained to activities carried on outside India— Whether entire income taxable in India—Income under presumptive tax provision can be taxed only if it is otherwise chargeable to tax.

Facts :

MCo, a tax resident of Mauritius, undertook and executed a contract for transportation and installation for certain well platform projects to be used in mineral oil exploration. The contract was undertaken and performed with an Indian company. Certain portion of the receipts of MCo pertained to work carried on outside India.

While furnishing its return of income, MCo did not offer the receipts pertaining to the work carried on outside India on the ground that in terms of Explanation (a) to S. 9(1)(i) of the Income-tax Act, they were not chargeable to tax. MCo also contended that, alternatively, such receipts cannot be attributed to its PE in India.

While assessing the income, the AO held that : income pertained to work to be carried out in India; source of income is related to work to be carried out in India; and hence the entire receipts are taxable in India. Further, S. 44BB does not distinguish between income for activities carried on in India and for those carried on outside India.

The CIT(A) reversed the order.

The Tribunal relied on the decision on Saipem SPA v. DCIT, (2004) 88 ITD 213 (Delhi ITAT) and McDermott ETPM Inc v. DCIT, (2005) 92 ITD 385 (Mumbai ITAT).

Held :

The Tribunal held that :

  • Only the income which is reasonably attributable to operations carried on in India is taxable in India.

  • Income computed on presumptive basis can be taxed in India only if it is otherwise chargeable under the provisions of the Income-tax Act.

You May Also Like