JUDGMENT :

K.R. SHRIRAM, J.

1. Petitioner is a company incorporated under the relevant laws of Cayman Island and headquartered in Dubai, United Arab Emirates. Petitioner is engaged in the business of shallow water drilling for clients engaged in the oil and gas industry. Petitioner has been filing its Return of Income under the Income Tax Act, 1961. The petition is concerned with Assessment Year 2014-15.

2. The parent group of Petitioner on a global basis had acquired 38 rigs from one Transocean group sometime in late 2012 for which an Asset purchase Agreement had been executed. Pursuant to the said agreement, Petitioner had acquired a rig by name J.T. Angel (the said rig) which was recorded in the books of account of Petitioner at USD 13.6 million equivalent to Rs.74,22,94,527/- The said rig was already in operation for a contract between Oil and Natural Gas Corporation (ONGC) and Transocean Drilling Services (India) Pvt. Ltd. The said rig was on a bareboat charter basis. The arrangement continued upto July 2013 and from August 2013 to November 2013, the said rig was used under a nomination contract for providing drilling services to ONGC. From December 2013 to March 2014, the said rig required and underwent major repairs and refurbishment at the Pipavav Defence and Offshore Engineering Company Limited. After the repairs and refurbishment, the said rig was deployed for performing drilling services for ONGC upto May 2017. The agreement with ONGC was entered into by Shelf Drilling Offshore Services (India) Pvt. Ltd. (SDOSIPL) which sub-contracted the job work to Petitioner. During this period, Petitioner has computed its income on presumptive basis under Section 44BB of the Income-tax Act, 1961 (“the Act”) for Assessment Year 2013-14 and from Assessment Years 2015-16 till date. For Assessment year 2014-15, i.e. the year under consideration, after fulfilling the requisite conditions in Section 44BB(3) of the Act, Petitioner exercised the option available to it to compute its income other than on presumptive basis under Section 44BB. Petitioner had also maintained books of account which have been audited in accordance with Section 44AB.

3. On 29th November 2014 Petitioner filed its Return of Income for Assessment Year 2014-15 declaring a total loss of Rs.120,18,44,672/-. The loss had been arrived at by exercising its option not to be assessed on the presumptive basis of taxation as per Section 44BB(3) of the Act and computing its income under the regular provisions of the Act. Petitioner’s Return of Income for Assessment Year 2014-15 was selected for scrutiny by issue of notice dated 28th August 2015 under Section 143(2) of the Act. In the course of assessment proceedings, notices were issued under Section 142(1) of the Act along with detailed questionnaire. Petitioner submitted its response. Respondent no. 1 passed draft assessment order dated 26th December 2016 invoking the provisions of Section 145 of the Act and rejected Petitioner’s books of account. Despite Petitioner having exercised its option, Petitioner’s income from providing services in connection with prospecting for or extraction or production of mineral oils has been effectively computed under Section 44BB(1) of the Act, i.e. at 10% of its gross receipts. Petitioner’s total income accordingly, was computed at Rs.4,34,79,980/-.

4. Petitioner filed its objections before the Dispute Resolution Panel (DRP) against draft assessment order, in accordance with Section 144C of the Act. DRP did not accept Petitioner’s case and by an order dated 28th September 2017 gave its direction. Based on that, Respondent no. 1 passed a final assessment order dated 30th October 2017 under Section 143(3) read with Section 144C(13) of the Act.

5. Aggrieved by the said final assessment order, Petitioner filed an Appeal before the Income Tax Appellate Tribunal (ITAT). Petitioner made various submissions before the ITAT and after hearing the parties ITAT held that Respondent no. 1 and DRP erred in