2013 (8) TMI 11 - HC - Income Tax

High Court: Section 44BB not retroactive pre-2011; excludes non-residents with Indian establishment. Assessing Officer scrutiny crucial.

Director of Income-tax (International Taxation) Versus Western Geco International Ltd.

The High Court clarified that Section 44BB of the Income Tax Act did not apply retroactively before 1st April, 2011, and does not cover non-resident ... Application of Section 44BB - Tribunal held that assessee is sully covered u/s 44BB - Held that:- Section 44BB deals with all kind of services in connection with prospecting for, or extraction or production of mineral oils; Section 44DA deals with, amongst others, fees for technical services from a non resident, not being a company, or a foreign company, after 31st March, 2003. At the same time, Section 115A deals with technical service fees in case of a foreign company - in respect of fees received by a non-resident assessee for providing service in connection with prospecting for, or extraction or production of mineral oil, such assessee would be covered by Section 44BB until before proviso to Sub-section (1) of Section 44BB was inserted - Assessing Officer did not make any inquiry, whether the assessee had a fixed place of business or profession in India or a permanent establishment in India - Therefore matter remitted back to A.O. - Decided against Revenue. Issues:1. Applicability of Section 44BB of the Income Tax Act prior to 1st April, 2011.2. Interpretation of Section 44BB in relation to non-resident assessee providing services in connection with mineral oils.3. Determination of whether the assessee has a permanent establishment in India or a fixed place of profession in India.Analysis:1. The High Court addressed the issue of the applicability of Section 44BB of the Income Tax Act before 1st April, 2011. The proviso to Sub-section (1) of Section 44BB was inserted post this date and was not applicable retroactively. Section 44BB pertains to non-resident assessee engaged in providing services related to mineral oils. The Court clarified that the proviso did not apply before 1st April, 2011, and the Section itself does not cover assessee with a permanent establishment or fixed place of profession in India.2. The judgment focused on the interpretation of Section 44BB concerning non-resident assessee providing services in connection with mineral oils. The Court differentiated between Section 44BB, Section 44DA, and Section 115A of the Income Tax Act. While Section 44BB covers services related to mineral oils for non-residents, Section 44DA deals with fees for technical services, and Section 115A pertains to technical service fees for foreign companies. The Court upheld that until the insertion of the proviso, Section 44BB applied to non-resident assessee providing services in connection with mineral oils.3. The Court also delved into the determination of whether the assessee had a permanent establishment or fixed place of profession in India. It noted that the Assessing Officer had not conducted an inquiry into this aspect, leading to a remittal of the matter back to the Assessing Officer for examination. The Court emphasized that the issue of permanent establishment or fixed place of profession needed thorough examination, and the case required a fresh consideration (de novo) on all issues. Consequently, the Court dismissed the appeal, highlighting the need for a comprehensive assessment of the factual circumstances regarding the assessee's presence in India.