SEDCO FOREX INTERNATIONAL INC. THROUGH IT'S CONSTITUTED ATTORNEY MR. NAVIN SARDA versus COMMISSIONER OF INCOME TAX. MEERUT & ANR.

Citation: [2017] 11 S.C.R. 399 · Decided: 30-10-2017 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Disposed off

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Judgment (excerpt)

[2017] II S.C.R. 399 
SEDCO FOREX INTERNATIONAL INC. THROUGH IT'S 
A 
CONSTITUTED ATTORNEY MR. NAVIN SARDA 
v. 
COMMISSIONER OF INCOME TAX. MEERUT & ANR. 
(Civil Appeal No. 4906 of20 I 0) 
OCTOBER 30. 2017 
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.] 
Income Tax Act, 1961: 
s.4488 - Scope and illlerpretation - s.4488 starts. with non-
obstante clause, and the formula contained therein for computation 
of income is to be applied irrespective of the provisions of ss.28 to 
B 
c 
41 and ss.43 and 43A of the Act - For assessment under this 
provision, a sum equal to 10% of the aggregate of the. amounts 
specified in sub-section "(2) shall be deemed lo be the profits and 0 
gains of such business chargeable to tax under the head 'profits 
and gains of the business or profession' - Sub-section (2) mentions 
two k)nd~ of amounts which shall he deemed as pl·ofits and gains or 
the business chargeable to tax in- India - Silb-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 f01; or extraction or production of. 
mineral oils in India - Tims, all amounts pertaining to the said 
activity which are received oi:i account of provisions of service;; 
andfacilities in connection with the said facility are treated as profits 
and gains of the business. - This clause clarifies that the amount so 
paid .v!wl! be taxable whether these .are received in India or outside 
India - Clause (b) deals with amount received or deemed lo be 
received in India in ·connection with such services and facilities as 
stipulated therein - Thus, whereas clause (a) mentions the amount 
which is paid ar payable, clause (b) deals with the amounts which 
are received or deemed to be received in India - In respect of amount 
paid or payable under clause (a) of sub-section (2), it is immaterial 
wheiher these are paid in India or outside India -On the other hand, 
amount received or deemed to be received have to be in India. 
399 
E 
F 
G 
H 
400 
A 
B 
c 
SUPREME COURT REPORTS 
(2017] ll S.C.R. 
s.44BB - Special provision for calculating profits and gains 
in connection with business of exploration of mineral oils -Assessee-
Non-resident company entered into contract with ONGC for hire of 
their rig for can:ving out oil exploration activities in India - Payment 
of mobilisation fees for mobilisationimovement of rig from foreign 
soil/country to the off shore side al 11Iumbai - Whether said amount 
received is to be i11cluded for comp11tatio11 of deemed profits a11d 
gains of the business chargeable to tax under s.44BB of the Act -
Held: 
Clause (a) and (b) of sub-section (2) of s.44BB stipulates 
that the amount paid 1111der the said contracts as mobilisation fee 
on account of provision of services a11d facilities in connection with 
the extraction etc. of mineral oil in India and against the supply of 
plant and machinery on hire used for such extraction, clause (a) is 
attracted - Thus, this provision contained in s.44BB has to be read 
i11 co11ju11ction with ss.5 and 9 of the Act a11d ss.5 a11d 9 of the Act 
cannot be read in isolation - The said amo1111t paid to the assessees 
D 
as mobilisation fee is treated as profits and gains of business a11d, 
therefore, it would be "income" as per s.5 - This provision also 
treats this i11c:ome as eamed in India, fictionally, thereby salisfyi11g 
the test of s.9 of the Act as well - Circular 110.495 dated September 
22 1987 issued by CBDT. 
E 
s.44BB - Assessee-Non-residen/ company entered into 
co11tracls with ONGC for hire of their rigfor carrying out oil 
exploration activities i11 India - Reimbursement of cost of tools lost 
in hole by ONGC - Taxability of - Held: Not taxable - This amount 
is not covered by sub-section (2) of s.4488 of the Act as ONGC had 
lost certain tools belonging to the assessee, and had compens.ated 
F for the said loss by payi11g the amount in question. 
G 
Disposing of the appeals, the Court 
HELD: 1.1 Indian Income Tax Act, admittedly, follows a 
territorial system of taxation. As per this system only that income 
of a non-resident is taxable in India which is attributable to 
operations within the Indian Territory. Therefore, in the first 
instance it is to be seen whether a particular income arises or 
accrues or deem to arise or accrue within India. In order to seek 
this answer, the princip

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