Section 44BB composite receipts for FPSO operations taxable in full, with no split by place of work or mobilisation distance.

Receipts arising from a change order integrally linked to an FPSO chartering arrangement were treated as business profits forming part of the composite project consideration, not as fees for technical services, because the additional work remained within the contractual obligations to prepare the FPSO for the mineral oil project. The full consideration was held taxable in India under section 44BB, since the place where preparatory work was performed did not justify apportionment of a composite receipt. Installation of STP buoy and moorings was also treated as taxable under section 44BB as an essential element of mineral oil operations. Mobilisation receipts could not be split by travel inside or outside India. Insurance receipts for loss of hire were excluded from Indian tax.

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Issues: (i) Whether consideration received under the Change Order for fabrication and installation of living quarters, HVAC work, expediting deliveries, extension of dry-docking and mobilisation of the commissioning team was business profits or fees for technical services; (ii) whether such consideration, though relating to work performed outside India, was taxable in India and computable under section 44BB of the Income-tax Act, 1961; (iii) whether consideration for installation of STP buoy and moorings in India was taxable under section 44BB; (iv) whether mobilisation consideration could be split on the basis of travel outside India and within India; and (v) whether insurance receipts for loss of hire were taxable in India.

Issue (i): Whether consideration received under the Change Order for fabrication and installation of living quarters, HVAC work, expediting deliveries, extension of dry-docking and mobilisation of the commissioning team was business profits or fees for technical services.

Analysis: The Change Order was held to be an amendment to, and not a separate contract from, the original FPSO chartering arrangement. The additional work was treated as part of the contractual obligations undertaken to prepare and make available the FPSO for the oil and gas project. The receipts were not characterised as managerial, technical or consultancy services, and they were not brought within the definition of fees for technical services.

Conclusion: The consideration was held to be in the nature of business profits, not fees for technical services.

Issue (ii): Whether such consideration, though relating to work performed outside India, was taxable in India and computable under section 44BB of the Income-tax Act, 1961.

Analysis: The ruling treated section 44BB as a special presumptive code for receipts connected with prospecting for, or extraction or production of, mineral oil. It was held that there was no scope for splitting the consideration on the basis of where the preparatory work was performed, because the Change Order was inextricably linked with the main contract and the overall project in India. The place of performance outside India did not alter the character of the receipts for section 44BB purposes.

Conclusion: The entire consideration was held taxable in India under section 44BB.

Issue (iii): Whether consideration for installation of STP buoy and moorings in India was taxable under section 44BB.

Analysis: The installation of buoy and moorings was treated as an essential component of the FPSO operations connected with mineral oil production in India. The receipts were held to fall within the statutory scheme governing services and facilities in connection with mineral oil operations and not to stand apart as a distinct non-taxable stream.

Conclusion: The consideration for installation of STP buoy and moorings was held taxable under section 44BB.

Issue (iv): Whether mobilisation consideration could be split on the basis of travel outside India and within India.

Analysis: The ruling applied the principle that section 44BB does not contemplate apportionment of a composite mobilisation receipt by reference to territorial distance travelled. The entire receipt was linked to the mobilisation of the FPSO for use in the mineral oil project, and the computation mechanism under section 44BB was applied to the full amount.

Conclusion: The mobilisation consideration was held taxable in full under section 44BB without splitting it by distance travelled outside or inside India.

Issue (v): Whether insurance receipts for loss of hire were taxable in India.

Analysis: The receipts were found to arise under an insurance policy executed outside India and were not treated as consideration for services or facilities connected with mineral oil operations. They were therefore outside the Indian charging provisions on the facts accepted by the ruling.

Conclusion: The insurance receipts were held not taxable in India.

Final Conclusion: The ruling substantially upheld Revenue's position on the taxability of the Change Order and mobilisation receipts under the presumptive regime, while excluding the insurance receipts from Indian tax.

Ratio Decidendi: Receipts arising from amendments integrally linked to a mineral-oil FPSO contract are taxable under section 44BB as composite consideration for services and facilities in connection with mineral oil operations, and such receipts cannot be split by the geographic location of the underlying work.

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