Offshore oil support receipts taxable under presumptive rules; treaty still allowed limited Indian taxation, excluding service tax from the base.

Offshore logistics and support services connected with oil exploration, including cargo transport, standby, rescue and surveillance operations, were treated as income from prospecting for or extraction of mineral oils and therefore fell within the presumptive regime of section 44BB; they were not characterised as fees for technical services or royalty. After the applicant became a Norwegian tax resident, the India-Norway DTAA did not give exclusive taxing rights to Norway, because Article 23(4) still permitted taxation in India on a restricted presumptive basis. Amounts collected as service tax were excluded from the income base, as service tax is a statutory levy and not consideration for services.

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Issues: (i) whether the applicant's receipts under the consortium contract were taxable under section 44BB of the Income-tax Act, 1961, or were chargeable as fees for technical services or royalty; (ii) whether, after the applicant became a tax resident of Norway, the income from the Indian offshore contract was taxable only in Norway or was still taxable in India under Article 23 of the India-Norway DTAA; (iii) whether service tax collected from the contract counterparty was includible in the amount taken for computation under section 44BB or Article 23(4).

Issue (i): whether the applicant's receipts under the consortium contract were taxable under section 44BB of the Income-tax Act, 1961, or were chargeable as fees for technical services or royalty.

Analysis: The contract showed that the applicant was engaged in sea logistics support, transportation of cargo, men and materials, standby and rescue operations, surveillance, and related offshore support for oil exploration activities. Those services were found to be connected with prospecting for or extraction of mineral oils and not to constitute technical services in the relevant sense. The receipts therefore fell within the presumptive scheme of section 44BB and were taken outside the charge as fees for technical services; the royalty objection was also not accepted on that basis.

Conclusion: The receipts were held taxable under section 44BB of the Income-tax Act, 1961, and not as fees for technical services or royalty.

Issue (ii): whether, after the applicant became a tax resident of Norway, the income from the Indian offshore contract was taxable only in Norway or was still taxable in India under Article 23 of the India-Norway DTAA.

Analysis: Although the applicant became a Norwegian tax resident from January 2010, the treaty provisions governing offshore activities did not exclude Indian taxation. Article 23(4) permitted taxation in India, but limited the taxable base to 7.5% of the sums receivable and restricted the tax rate to 50% of the rate otherwise applicable. The treaty, therefore, did not make Norway the exclusive taxing state for the income arising from the Indian offshore operations.

Conclusion: The income after January 2010 was held taxable in India under Article 23(4) of the India-Norway DTAA, and not only in Norway.

Issue (iii): whether service tax collected from the contract counterparty was includible in the amount taken for computation under section 44BB or Article 23(4).

Analysis: Service tax was treated as a statutory levy payable to the Government and not as consideration for services rendered. The contractual allocation of the burden did not alter the statutory incidence, but the amount collected as service tax and remitted onward could not be treated as part of the income base for the presumptive computation.

Conclusion: Service tax was held not to form part of the consideration for computation under section 44BB or Article 23(4).

Final Conclusion: The applicant succeeded on the characterization of its receipts as offshore oil-related support income under the presumptive regime, but the treaty claim of exclusive taxation in Norway was rejected and the income was held taxable in India after 1 January 2010 under the treaty restriction.

Ratio Decidendi: Offshore logistics and support services rendered in connection with prospecting for or extraction of mineral oils are assessable under section 44BB, and treaty provisions governing offshore activities may still permit Indian taxation on a limited presumptive basis while excluding statutory levies such as service tax from the income base.

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