2009 (12) TMI 6 - AAR - Income Tax

Non-resident Company's Income from Seismic Services in India Falls under Section 44BB

Seabird Exploration FZ LLC

The Authority held that the income derived in India by a non-resident company providing seismic data acquisition services to oil and gas companies falls ... Seismic data acquisition and processing services are an integral part of the process of prospecting for, or extraction of mineral oil which includes petroleum and gas - Applicability of section 44BB or Section 44DA – CBDT circular – held that - The Circular, therefore, clarified that Section 44BB was applicable. We cannot accept the contention of the departmental representative in view of the discussion at paragraphs 7.4 and 7.5 of the above ruling and the background in which the Circular was issued was also explained. No case has been made out for reconsideration on this aspect. Moreover the conclusion was reached irrespective of the circular and on the interpretation of Section 44BB for which elaborate reasons were given. - Therefore, it is held that the income earned by the applicant in India is covered under the provisions of 44BB of the Income-tax Act, 1961 Issues: Application of section 44BB of the Income-tax Act, 1961 to income derived in India by a non-resident company providing seismic data acquisition services to oil and gas companies.Analysis:1. The applicant, a company incorporated in Dubai, provides seismic data acquisition services to oil companies in India. The applicant sought a ruling on whether its income in India falls under section 44BB of the Income Tax Act, 1961.2. The applicant contended that its services are integral to the process of prospecting for mineral oil, making section 44BB applicable. The Revenue argued that the income is for technical services falling under section 9(1)(vii) and should be computed under section 44DA, not section 44BB.3. Section 44BB provides a special provision for computing profits in connection with the business of exploration of mineral oils by non-residents. It applies to services provided in connection with prospecting for mineral oils, regardless of where the payment is made.4. The Authority referenced a previous ruling involving a similar issue and held that section 44BB is applicable, rejecting the Revenue's contention. The Authority emphasized that the Circular cited by the Revenue did not change the applicability of section 44BB in this case.5. The Authority concluded that the income earned by the applicant in India is covered under section 44BB of the Income-tax Act, 1961. The ruling was pronounced on December 22, 2009, in favor of the applicant.