मित्रों 20 मार्च 2018 को दिल्ली ट्रिब्यूनल ने फैसला देते हुए कहा है कि अगर कोई आयकरदाता 5 साल के लिए ड्रिलिंग रिग का मैनेजमेंट कंट्रोल लेता है और अगर उसकी कोई फीस चुकाता है तो वह फीस कैपिटल एक्सपेंडिचर मानी जाएगी और उस पर करदाता को डेप्रिसिएशन लेने का अधिकार होगा
ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) vs. DOLPHIN DRILLING LTD.
DELHI TRIBUNAL
ITA No. 197/Del/2013
Mar 20, 2018
(2018) 52 CCH 0193 DelTrib
Legislation Referred to Section 44BB(3)
Case pertains to Asst. Year 2004-05
Though the title in the ownership of the rig rested with Fred Oslan Drilling AS, Oslo, Norway, but, the title in the management rights of the rig moved from Dolphin Drilling, Singapore to the assessee w.e.f. 9th August, 2003, for which the assessee paid Rs.35.72 crore as fee for acquiring management rights of drill ship. In view of the above discussion, it is clear that the assessee acquired management rights of drillship in a bona fide and genuine transaction by paying a sum of Rs.35.72 crore. It is, therefore, held that the transaction between the assessee and Dolphin Drilling, Singapore, is a genuine transaction. (Para 6)
Coming to the said payment being of capital or revenue nature, it is found that the ld. CIT(A) held it to be of capital nature as against the assessee’s claim of revenue nature. On a specific query, the ld. AR submitted that consideration of Rs.35.72 crore was paid for acquiring management rights of drillship for a period of five years. In view of the fact that the assessee paid Rs.35.72 crore for acquiring management rights of drillship for a period of five years, the view canvassed by the ld. CIT(A) in treating this amount as capital expenditure, has to be countenanced. Once the payment made by the assessee is held to be capital expenditure, the assessee is entitled to depreciation as per law as has been held by the ld. CIT(A). (Para 7)
In so far as the aspect of accounting treatment restored by the Tribunal to the Assessing Officer in the first round is concerned, we find that there is no finding given by the ld. CIT(A) on this aspect. That apart, the accounting treatment of a particular amount as expenditure cannot change the character of real transaction for the purpose of its deductibility or otherwise. We, therefore, uphold the impugned order in treating the transaction of Rs.35.72 crore as payment for acquiring management rights of drillship as genuine; treating such expenditure as of a capital nature and not deductible in the year of payment in full; and direction to grant depreciation on this capital expenditure as per law. (Para 8)
R. S. SYAL, VP.
1. This appeal by the Revenue is directed against the order passed by the CIT(A) on 31.10.2012 in relation to the assessment year 2004-05.
2. Briefly stated, the facts of the case are that the assessee is a company incorporated with limited liability in United Kingdom, which filed its return declaring loss of Rs.44.40 crore. The assessee entered into a contract agreement with ONGC Ltd. for charter hire of Deep Water Drilling Rig DP drillship ‘Wellford Dolphin’ for offshore drilling. The assessee company did not own any drillship and, hence, entered into an agreement with another company, namely, Dolphin Drilling Pte Ltd., Singapore for charter hire of drillship. It entered into an agreement with another non-resident company ‘Alpha Crew’ incorporated in Norway, for supply of crew. The assessee, being a non-resident company engaged in the business of exploration of mineral oils etc., opted for the provisions of section 44BB(3) of the Act by maintaining necessary books of account. The assessee, inter alia, claimed deduction of Rs.35,72,02,369/- for acquiring rights of management of Drillship from Dolphin Drilling Singapore. The assessee claimed that it acquired a right of management of the drillship from Dolphin Singapore in consideration of Rs.35.72 crore to eliminate recurring payment @ 7% of gross revenue attributable to drillship, which it otherwise would have paid on year to year basis. Thus, it was claimed that a sum of Rs.35.72 crore was of revenue nature and hence deductible in full. The Assessing Officer doubted the genuineness of agreement with Dolphin Drilling Singapore and, hence disallowed the said sum of Rs.35.72 crore. Eventually, the matter came up for consideration before the Tribunal. Vide order dated 30.01.2009, the Tribunal in ITA No.1572/Del/2007, accepted the genuineness of the assessee’s claim of acquiring management right in the drillship. It, however, set aside the order of the CIT(A) and directed the Assessing Officer to adjudicate this issue afresh after considering the accounting treatment given by the assessee and Dolphin Drilling Singapore and also examining whether the expenditure is of capital or revenue nature.
3. The Assessing Officer, in the consequential proceedings, again, held the transaction as non-genuine. In that view of the matter, it was held that there was no question of considering such expenditure as of revenue or capital nature. The ld. CIT(A) accepted the genuineness of the transaction. He, however, held that the payment made by the assessee was a capital expenditure subject to depreciation as per law. The Revenue is aggrieved against the order passed by the ld. CIT(A).
4. We have heard both the sides and perused the relevant material on record. Primarily, it is noticed that the Tribunal in para 37.8 on the penultimate page of its order remitted the issue back to the file of the Assessing Officer for fresh consideration after observing that: ‘while adjudicating the issue afresh, the A.O. shall also decide all other aspects of the issue other than the aspect relating to the genuineness of the assessee’s claim of deduction on account of management right in the drillship.’ This shows that the Tribunal accepted the genuineness of the transaction of acquiring management rights of drillship. It has been clearly admitted by both the sides that the aforesaid order of the Tribunal has attained finality inasmuch as it has not been challenged by either side before the Hon’ble High Court. In that view of the matter, it becomes apparent that the genuineness of the assessee’s claim of having acquired management right in the drillship was accepted by the Tribunal in the first round.
5. Be that as it may, we reproduce chronology of events leading to acquiring managing rights in the drillship, given on page 4 of the impugned order, as under:-
• “Navis ASA (NAVIS) was the parent company of Navis Explorer AS (NAS).
• Originally, NAS was the sole owner of the rig as well as the management rights of the rig ‘Navis Explorer I.
• Vide agreement dated 1 November, 1998, NAS transferred the management rights of the rig ‘Navis Explorer I’ to M/s R&B Falcon (International & Deepwater Inc) (RBF).’
• On 30th June, 2000, Fred Olsen Energy ASA (FOE) entered into a sale/purchase agreement with RBF. Vide his agreement, FOE agreed to purchase:
a. The management rights of the rig ‘Navis Explorer I’: and
b. 38.47 per cent of shareholding in NAVIS.
• In the meanwhile, FOE continued to purchase more shares in NAVIS through other means and consolidated its holding to an extent that NAVIS merged with FOE subsequently.
• On 30th November, 2001, NAS sold rig ‘Navis Explorer I’ to Fred Olsen Drilling AS, Oslo, Norway (FOD).
• Subsequent to the acquisition, ‘Navis Explorer I’ was rechristened as ‘Belford Dolphin’ and was put into operation by FOD.
• FOE transferred the management right of ‘Belford Dolphin’ to NAS in December, 2001.
• On 1st January, 2002, NAS merged with Dolphin Drilling AS (DAS).
• In the result:
a. Title in the ownership of the rig now rested with FOD
b. Title in the management rights of the rig now rested with DAS
• With effect from 9 August, 2001, the Management Rights Agreement was transferred by DAS to Dolphin Drilling Limited (DOLPHIN) for a value of NOK 56,347,931.”
6. It is apparent from the above chronology of events that though the title in the ownership of the rig rested with Fred Oslan Drilling AS, Oslo, Norway, but, the title in the management rights of the rig moved from Dolphin Drilling, Singapore to the assessee w.e.f. 9th August, 2003, for which the assessee paid Rs.35.72 crore as fee for acquiring management rights of drill ship. In view of the above discussion, it is clear that the assessee acquired management rights of drillship in a bona fide and genuine transaction by paying a sum of Rs.35.72 crore. It is, therefore, held that the transaction between the assessee and Dolphin Drilling, Singapore, is a genuine transaction.
7. Coming to the said payment being of capital or revenue nature, it is found that the ld. CIT(A) held it to be of capital nature as against the assessee’s claim of revenue nature. On a specific query, the ld. AR submitted that consideration of Rs.35.72 crore was paid for acquiring management rights of drillship for a period of five years. In view of the fact that the assessee paid Rs.35.72 crore for acquiring management rights of drillship for a period of five years, the view canvassed by the ld. CIT(A) in treating this amount as capital expenditure, has to be countenanced. Once the payment made by the assessee is held to be capital expenditure, the assessee is entitled to depreciation as per law as has been held by the ld. CIT(A).
8. In so far as the aspect of accounting treatment restored by the Tribunal to the Assessing Officer in the first round is concerned, we find that there is no finding given by the ld. CIT(A) on this aspect. That apart, the accounting treatment of a particular amount as expenditure cannot change the character of real transaction for the purpose of its deductibility or otherwise. We, therefore, uphold the impugned order in treating the transaction of Rs.35.72 crore as payment for acquiring management rights of drillship as genuine; treating such expenditure as of a capital nature and not deductible in the year of payment in full; and direction to grant depreciation on this capital expenditure as per law.
9. In the result, the appeal of the Revenue is dismissed.
The order pronounced in the open court on 20.03.2018.