TaxTMI 
TaxTMI 
2012 (4) TMI 280
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....h exploration, extraction and production of mineral oil as per section 44-BB of the Act; 1.4 That on the facts and circumstances of the case and in law, the AO has erred in holding that the services rendered by the appellant to be in the nature of fee for technical services (FTS) thereby, liable to be taxed as per the provisions of section 9(1)(vii) of the Act; 1.5 That on the facts and circumstances of the case and in law, the AO has erred in holding 25 per cent of the gross receipts from Eni as profits earned on the project; 1.6 That on the facts and circumstances of the case and in law, the AO has erred in deeming the above mentioned profit rate on conjectures and surmises; 1.7 That on the facts and circumstances of the case and in law, the AO has erred in failing to provide credit to the appellant in respect of taxes deducted at source by ONGC and Eni as per the provisions of section 195 of the Act; 1.8 That on the facts and circumstances of the case and in law, the AO has erred in levying interest under section 234-B and initiating penalty proceedings as per the provisions of section 271-B of the Act." 2. The main effective ground of appeal of assessee is that the AO has....
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....l services' as defined in Explanation 2 of S. 9(l)(vii) of the Act. Accordingly, the receipts have been assessed to tax under Sec. 115A read with section 9(1)(vii) of the Act at Rs. 700,33,44,265/- as against the returned income of Rs. 71,37,25,225/-. As per assessing officer the assessee has neither undertaken any construction, assembly, mining or like project nor has it rendered services to those companies that have undertaken these projects. The assessee is thus not covered under sec. 44BB(1) as it does not fall under the exclusionary clauses of Explanation 2 to sec. 9(1)(vii) of the Act. It has further been observed by the assessing officer that CBDT Instruction No. 1862 deals with 'mining or like project' and therefore, the same will apply in the case of those assessees who are engaged in the drilling operations and not in the cases of the assessee who are engaged in carrying out seismic surveys. The A.O. has relied on Ruling of AAR P/6 reported as 234 ITR 371 and the decision of Uttaranchal High Court in the case of CIT v. ONGC Ltd 299 ITR 438 for the proposition that payment for seismic survey is covered by sec.115A and not sec. 44BB(1) of the Act. 4. Ld AR of t....
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....the receipt for preparing feasibility report for implementation of 'CSS' in Lanwa oil fields in Mehsana district in Gujarat was covered by sec. 44BB. Relying on this decision ld AR of the assessee submitted that not all operations concerning "extraction of mineral oil" must necessarily be physical operations inside the crust of the earth. The exploration is carried through a procedure known as "divining". The word "divine" as per Chambers 20th Centaury Dictionary (1983 edition) means "to search for (underground water, etc.), especially with a divining rod". Such procedure does not involve any physical operations under the surface of the earth. However, according to the Revenue authorities, the normal digging operations under the surface of the earth have to be considered to be "extraction of mineral oil". Thus, as per the Authorities below in order to be taxable under section 44BB of the Act, the assessee ought to have carried out some such operations under the surface of the earth. 6. Ld AR of the assessee read out section 44BB (1) which is reproduced as under: "44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in ....
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....t is integral to prospecting for mineral oil. As per Webster's Encyclopedic Unabridged Dictionary word 'Prospect' means outlook or over view a region or in a particular direction. Mining means (a) an apparent indication of ore or native metal; (b) a spot giving such indications; (c) workings, or an excavation, in a mine. Section 3 of the Petroleum Concession Rules, 1949, defines word 'prospecting' to mean "the operations necessary to ascertain whether any geological structures favourable for accumulation of oil are present and are capable of yielding petroleum or natural gas in commercially workable quantities. It includes a drilling of deep test wells in such number as would he necessary to verify the geological structure of the oil and gas-bearing formations and their productive extent. In view of the definition of words "prospecting" and "mining" he has submitted the assessee was engaged in execution of the projects connected with prospecting or mining of mineral oil and hence eligible for assessment u/s 44BB(1) of the Act. He placed reliance on the Ruling of Advance Authority in Geofyzika Torun (Supra), wherein it has been held that income from executing pro....
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....reover, the receipts under the contracts are covered by Instruction no. 1862. Both these contentions have been upheld by various Benches of ITAT and AAR in the cases referred to above. Ld AR of the assessee referred to the decision of Hon'ble Supreme Court in the case of Union of India v. Indian Charge Chrome and Anr (7 SCC 314) wherein Hon'ble Court took into consideration the dictionary meaning of term project as "a proposal for undertaking; an undertaking". A bare perusal of the impugned contracts would show that these are for implementing independent, self-contained and planned undertaking from beginning to its end; culminating in delivery of 2D and 3D seismic data. Moreover, the contractor has to ensure quality control, collects data on its own, which it warrants. He referred to Clause 19 dealing with 'Indemnification'; Clause 20 dealing with 'Performance Guarantee'; and Clause 21 dealing with 'Insurance' under the said contracts. He has emphasized that all the crew and technicians on board report to the assessee who alone is accountable for them. The entire contract is performed by the assessee on its own as independent contractor without invol....
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....;ble High Court was entirely different. The question before the court in that case was as to whether the revenue received by the non-resident contractor for providing technical personnel to ONGC for assisting the latter in carrying mining activity was FTS or "salaries". In fact, section 44BB has not even been referred to in that judgment. Therefore, that judgment is not relevant for deciding the issue at hand. 11. Ld. AR of the assessee relied on the unreported decision of Hon'ble Uttarakhand High Court in the case of ONGC as agent of Scan Drilling Company (Income tax reference no 2 of 2001). The Court held that manning, management and operation of drill ships for exploration purpose would fall within the ambit of 'mining or like project' and accordingly fall outside the purview of FTS. 12. As regards the reliance placed by the assessing officer on the Ruling of AAR in the case of P/6 of 1995 (234 ITR 371) it has been submitted that this Ruling is also not applicable on the facts of the present case. In the said ruling, the question before the AAR was on applicability of sec. 44BB as compared to sec. 44D of the Act. This year (A Y 2007-08), Sec. 44D is not in operatio....
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....g, Germany in ITA No. 2143/Del/2004. 14. In view of above ld. AR of the assessee has submitted that (i) the assessee has provided services in connection with prospecting and extraction of mineral oil. It is therefore covered by section 44BB of the Act; (ii) the assessee is implementing a 'mining or like project', which is excluded from the definition of FTS as per Explanation 2 to section 9(1)(vii) and, therefore, the provisions of section 115A do not apply to it; (iii) without prejudice. even if it is held to be rendering technical services as defined in Explanation 2 to section 9(1)(vii) of the Act, it can be taxed u/s 44BB only and not under section 115A of the Act. This would be in accordance with Instruction No, 1862 of 1990, which is binding on tax authorities; and (iv) the AO may be directed to tax the receipts from the four contracts with ONGC and a contract with Eni in accordance with the provisions of Section 44BB of the Act. 15. On the other hand ld CIT(DR) submits that section 44BB(1) starts with non-obstante clause "notwithstanding anything to the contrary contained in sections......" and hence this sub section over-rides sections 28 to 41 & 43 and 43A, which....
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....in the meaning of Explanation 2 to section 9(1 )(vii), the consideration received on account of 'fee for technical services' is subject to tax as per provisions of section 44D or 44DA or 115A of IT Act, 1961. 17. Section 44D(b) provides that no deduction of expenditure or allowance is to be given from gross FTS if date of contract is between 01-04-1976 and 31-03-2003. The Finance Act, 2003 inserted section 44DA w.e.f. 01-04-2004, according to which if the contract is made after 31-03-2003 and non-resident has a PE in India and the contract is effectively connected with such PE, then income from FTS will be computed u/s 44DA of the Act. The net effect of sections 44D and 4DA is that if relevant contract is dated before 31.03.2003, then no deduction on account of expenditure or allowance is allowable and FTS is to be taxed on gross basis u/s 115A, but where contract is dated after 31-03-2003, then FTS is taxed on net basis if two conditions are satisfied and tax rate to be applied will be the same as that for foreign corporation. In a case, if two necessary conditions as mentioned in 44DA are not satisfied, then in case of contract dated after 31-03-2003, FTS will be taxed o....
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....rea under the contract it is clear that the assessee has provided services of technical personnel also which is covered in definition of FTS. Under the head 'Work', the terms of contract require that: "The work that the contractor will perform shall comprise of obtaining and recording of (adhering to the quality specification) 1. 3D CDP seismic reflection data. 2. Navigation and positioning data unambiguously tied with seismic and bathymetric data. 3. Bathymetric data along with navigation data. 4. On board processing of seismic trace data for QC." Ld. CIT(DR) on the basis of terms & conditions relating to the work to be performed by the assessee contractor submitted that the assessee was required to do 3D seismic survey, process & pack the data on CD and hand it over to ONGC. Admittedly, the job assigned to assessee is highly technical. It could only be done by a person having specialized technical knowledge and not by any other person. The assessee has also provided the services of technical personnel. Thus, the services provided by the assessee are technical services within the definition as given in Explanation 2....
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....44DA has to be read with 115A. Rather, section 115A excludes 44DA from its purview by its very first sentence. Therefore 44DA and 115A operate in separate independent fields. Hence, proviso to section 44BB(1) stands and it limits the applicability of main provisions of 44BB(1). Reliance of assessee on decisions of B C Srinivas Shetty and Eli Lily is misplaced as section 115A is both computation and charging section and it is a complete code in itself. Therefore, it cannot be said that there is no section available for computation of FTS. Both computation of FTS and calculation of tax payable are contained in 115A itself. 21. The second contention of ld. Counsel for assessee is that services provided are not FTS because first exception to definition of FTS as contained in Explanation 2 to section 9(1)(vii) operates. In this regard, nature of work done by the assessee has to be considered. Page 78 of paper book II provides definition of 'prospecting'. Page 80 of the same provides definition of 'exploration operations', which specifically contains seismic surveys. Page 79 of the same talks about 'exploring licence', 'prospecting licence' and 'minin....
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.... for exception from being FTS, then the words 'undertaken by the recipient' should not be there in the language of statute. Let's imagine a situation where language of the section does not contain the words 'undertaken by the recipient'. In such a situation, receipts from mining or like project whether owned or not by the recipient will be out of definition of FTS. Now, in actual situation, where these words are there in the language of statute, the ld. Counsel for assessee contends that it means the same thing as in earlier situation. This means that these words are irrelevant without any meaning which cannot be regarded as correct interpretation of statute. Since legislature has consciously used this phrase, these words cannot be just ignored and their natural meaning has to be assigned. The assessee has no stakes in the project of prospecting for or exploration of mineral oil. It has no takeaway rights and no other vested interest in the said project. The assessee suffers no risks even if project of prospecting for or exploration for mineral oil does not succeed. The assessee could not demonstrate that the project is owned by it. The job of the assessee is w....
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....IT (supra) relied by the assessee, ld. CIT (DR) submits that in paragraph 43 and 44 of the said order the ITAT had not considered Uttarakhand High Court decision in case of CIT v. Rolls Royce (supra) while holding that the services provided by the assessee were in connection with extraction of mineral oil and hence, section 44BB was applicable. The ITAT has not considered the import of proviso to section 44BB(l). He, therefore, submitted that since the Tribunal has not just applied the ratio of decision of Hon'ble Uttarakhand High Court that if services are in nature of FTS, then provisions of section 44BB will not be applicable because of operation of its proviso. Hence this case law also does not help the assessee. Ld. Counsel for assessee has also argued that section 44BB is available to contractors like the assessee and section 42 is available to persons like ONGC. Here, it is relevant to note that section 44BB(1) is subject to its proviso and both have to be read together. 25. In rejoinder, at the outset ld. AR of the assessee has agreed with the ld. CIT (DR) that sub-sec. (3) of sec. 115A provides for computation of income by way of FTS etc. He, therefore, has withdrawn ....
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.... assumes importance. On the basis of such an interpretation, the CIT DR has concluded that since ONGC owned the mining project and the assessee provided services for that project, ONGC would be covered by the exclusionary limb of the Explanation 2 to 9 (l)(vii) and not the assessee who in fact only provided services in connection with the said project as envisaged under the said provision. Indeed, the CIT (DR) has merely rephrased the contention of the AO. This has also been the stand of the Revenue in several cases. 28. Ld AR of the assessee has submitted that the scope of operations under the impugned contracts is such that they constitute self contained independent 'project'. He placed reliance on the dictionary meaning of the word 'project' - a planned undertaking (The Law Lexicon); an enterprise carefully planned to achieve a particular aim; a proposed or planned undertaking (Concise Oxford dictionary). He also relies on the decision of Apex court in the case of Union of India v. Indian Charge Chrome and Anr. (supra) for the definition of word 'project'. The question as to whether the work undertaken by the contractor constitutes a 'project' mu....
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....xford Dictionary). Hence, it is clear that the contention of the ld. CIT( DR) that the word 'undertaken' should be construed to mean that the project should be owned by the assessee is totally misconceived. Further, sec. 9(1)(vii) deals with the 'recipient of fee' from such operations as enumerated there-under and not the recipient of services (which in this case would be the ONGC or ENI).The constriction placed by the Ld.CIT(DR) would make the provisions of section 44BB absolutely infructuous because the so called 'owner' of the project (namely, ONGC, ENI etc.) are covered by S. 42 read with notifications issued u/s 293A of the Act and not by section 44BB of the Act. For instance, the entire payment to the assessee for carrying out stipulated 3D seismic survey would constitute capital expenditure in the hands of ONGC, which will be allowed while computing its income in accordance with the provisions of Section 42 of the Act. This proposition of law is in accordance with the judgment of Hon'ble Uttaranchal High Court in CIT v. Enron Expat Services Inc. 327 ITR 626. 31. Assessee has placed reliance on Instruction No. 1862 issued by CBDT on 22.1 0.1990 wh....
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....5 relating to the project undertaken by the assessee for Eni, the scope of services is the same as under the contracts with ONGC. Only difference being that Eni is a non-resident company. Ld AO contends that assessee is excluded by the expression 'mining or like project' as it has rendered technical services. Therefore, it is a business receipt taxable u/s 28 of the Act. The assessee has no objection to treatment of income from these contracts as business income. However, the contention of the assessee is that since the income is from business, it should be assessed u/s 44BB, which overrides the provisions of section 28 to 43C of the Act. He placed reliance on the decision of Hon'ble Supreme Court in the case of Hyundai Heavy Industries Ltd reported as 291 ITR 482. 34. We have heard both the parties and gone through the material available on records. The assessee during the year under consideration has carried out seismic surveys and has submitted its reports to ONGC and ENI. The amounts received have been offered to tax under section 44BB (1) of the Act. However, the assessing officer has invoked the provisions of section 115A read with section 9(1)(vii) of the Act an....
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....es like digging or drilling will fall under 'like project'. Therefore, in order to fall under exclusionary limb of the definition, the activities of 'mining or like project' should be undertaken by the assessee himself. Our view is supported by the following decisions: 36.1 In Income-tax Officer v. SMS Schloemann Siemag Aktiengesellschaft Dusseldorf 57 I.T.D. 254 (Hyd.) the assessee entered into two separate agreements with an Indian concern [VSP], one in respect of wire rod mill in which it was the prime contractor and the other in respect of light and medium merchant mill in which it was the confirming party, another party being the main contractor. In the first contract the assessee was given the over-all responsibility with regard to the entire work referred to in the scope whereas in the second contract, the over-all responsibility was to be jointly shared by the assessee and the main contractor. The assessee received various amounts under the contracts for (1) equipment and commissioning spares; (2) design and engineering fees including reimbursement of expenditure and fees for training services; & (3) for supply of spares for two years of operation and maint....
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....d machinery. Under the agreement the assessee was liable to pay consideration for re-installation and re-commissioning of the machinery in India. The assessee applied to the assessing officer for a 'No-objection Certificate' for remitting money to GTA without deduction of tax at source. The assessing officer rejected the plea of the assessee holding that services provided by GTA were of technical nature and it was not construction, assembly, mining or like project undertaken by recipient. The assessing officer held that payment in question was taxable in India in the hands of GTA under article 13(2) of DTAA. On appeal, the ld. CIT (Appeals) confirmed the order of the assessing officer. It was noted by him that technicians came to India to supervise and give advice on re-assembly, erection and commissioning of machineries and they rendered services by their technical skill for which payment was to be made by the assessee. It was thus apparent that payment in question was in consideration of supervisory services rendered. On further appeal, the Tribunal held that the technical fee was for the technical advice in connection with erection and the actual erection was done by oth....
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....O)(Ahd), the assessee entered into an agreement with KPTL. After that GAIL awarded a contract (PDPL project) to consortium of assessee and KPTL. Subsequently, both parties of consortium entered into a co-operation agreement in respect of PDPL project of GAIL. As per co-operation agreement, assessee provided its technical guidance and consultancy for project management whereas entire work to be executed on contract was undertaken by KPTL by deploying all required input resources. As per scope of activities, assessee was required to provide design and engineering of various aspects and was also required for preparing welding procedure and was also required to review work procedure for pipeline laying and in addition to that, assessee was required to depute experts for site review and implementation by KPTL. Manner of sharing consideration had been prescribed in ratio of 3 per cent for assessee, 96 per cent of KPTL and balance 1 per cent was reserved for common expenses of consortium. Regarding 1 per cent, it was also agreed that if there was any deficit, it would be made good by KPTL. Assessee had shown income from PDPL project as technical fee (FTS) and offered same for tax at rate ....
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....simplicitor and assembly, erection, testing and commissioning and hence such activities of the assessee did not fall within the meaning of term "construction and assembly" as provided in the exclusion provided in Explanation 2 to section 9(1)( vii ) of the Income-tax Act, 1961. 36.6 Hon'ble Delhi High Court in recent decision dated 4.1.2012 in ITA No. 486/2011, 491/2011 & 492/2011 in the case of Rio Tinto Technical Services has held that the use of the word 'project' in the expression is relevant and significant and therefore, the word 'project' in the said expression requires and mandates that there should be construction project, assembly project or a mining project or a like project undertaken by the recipient and the consideration paid should be on the said account. 37. From the above judicial pronouncements it is clear that in order to fall under the exclusionary clause of Explanation (2) to section 9(1)(vii) the assessee should have either undertaken the business of construction, assembly, mining or like project or the income received should be chargeable to tax under the head 'salaries'. According to assessee the mining process means winning of ....
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....ix-A :Specification of 3-D Seismic Data Acquisition (b) Appendix-AI :Technical specification of 3-D Seismic Data Processing (c) Appendix-B : Technical details of equipment (d) Appendix-C :General Information of Vessels (e) Appendix-D-1 :Price schedule for Data Acquisition & Processing (f) Appendix-E :Location Maps of survey blocks (g) Appendix-F-1 :Proforma for Daily Progress Report (Data Acquisition) (h) Appendix-F-2 :Proforma for processing DPR (i) Appendix-G :Proforma for acceptance of Production LKM (j) Appendix-H :Format for Bathymetry data (k) Appendix-J :Format for Meteorological data (l) Appendix-K :Format for Deliverables (m) Appendix-L :Format for vessel acceptance (n) Appendix-M :Format for completion certificate (o) Appendix-N :Format for Demobilization Certificate (o) Appendix-O :Format for data load sheet (5) Annexure-V :Cost of Vessel(s) & Equipments (6) Annexure-VI :Copy of Performance bank Guarantee 39.1 The scope of work as per Annexure-II (General Contract Conditions) of contract is reproduced....
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....P seismic reflection data. 2. Navigation & positioning data unambiguously tied with seismic and bathymetric data. 3. Bathymetric data along with navigation data. 4. Onboard processing of seismic trace data for QC." 40. From the perusal of above mentioned annexures, terms and conditions of contract, scope of work, work area and work specifications it may be seen that the assessee has collected 3D seismic data, analyzed it, and submitted the report in the diskette to ONGC. The assessee had also provided services of its personnel. Since the assessee is engaged in collection of 3D seismic data and processing thereof, the activities of the assessee cannot be treated at par with that of mining or like project operations even on the surface of the earth. Therefore, in our considered opinion, the assessee cannot be said to have been engaged in the mining or like project. The assessee had not itself undertaken any activity of 'mining or like project' for extraction or production of mineral oil. The clauses of the agreements with ONGC do not disclose that the assessee had undertaken any mining project or a like project. No such case based on....
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....eport in desired media as also providing services of personnel will clearly fall under the definition of 'fee for technical services' covered in first limb of Explanation 2 to section 9(1)(vii) of the Act. 42. Now question arises as to whether the technical services provided by the assessee can be said to be rendered in connection with the prospecting for, or extraction or production of, mineral oils covered by provisions of section 44BB(1) of the Act. Section 44BB (1) as relevant to assessment year under consideration is reproduced as under: "44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a nonresident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in subsection (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not ....
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....yed word 'services' in section 44BB (1) of the Act. The word 'services' will include both technical and non-technical services. Proviso to section 44BB(1) carves out an exception according to which the provisions of this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 115A or section 293A are applicable for the purposes of computing profits or gains or any other income referred to in those sections. We also find that in proviso to section 44BB(1) for the relevant assessment year each of the sections 42, 44D, 115A and 293A are separated by word "or". The word "or" is normally used as disjunctive and has to be read in the alternative. It cannot be read as conjunctive or in other meaning because the result produced will be unintelligible and absurd and against the clear intention of the legislature. It is also a settled law that the legislature does enact a word in the statute which can be said to be redundant. Therefore, literal interpretation has to be followed for existence of word "or" between different sections appearing in proviso to section 44BB (1) of the Act. In proviso to section 44BB(1) section 44DA has been....
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....f it is ignored, the consideration in respect of services both technical as well as non-technical will be covered by section 44BB (1) making provisions of sections 42/115A/293A redundant for the year under consideration and also section 44DA w. e. f. assessment year 2011-12. The proviso cannot also stand on its own as it convey no meaning independent of section 44BB(1) and hence it cannot be construed as an independent provision. In view of above legal position we reject the contention of the ld AR of the assessee that the moment the case falls u/s 44BB (1), its proviso should be ignored. The contention of the assessee is also rejected that when there is no ambiguity in section 44BB(1), there is no need of proviso to it. 45. Provisions of section 42 are applicable in the case of an assessee for the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation to which the Central Government has entered into an agreement with any person for the association or participation of the Central Government or any person authorized by it in such business. The provisions of section 44D were in operation dur....
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....s approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy, then, subject to the provisions of sub-sections (1A) and (2), the income-tax payable shall be the aggregate of- (A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent if such royalty is received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such royalty is received in pursuance of an agreement made after the 31st day of May, 1997 but before the 1st day of June, 2005; (AA) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of ten per cent if such royalty is received in pursuance of an agreement made on or after the 1st day of June, 2005; (B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent if such fees for technical services are received in purs....
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....it is clear that the fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall not under section 44BB(1) and will be assessable under section 44DA of the Act. To make it more clear the fee for technical services can be divided in following categories: (i) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil having business PE or fixed place of profession - (section 44DA); (ii) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil without having business PE or fixed place of profession - (section 115A); (iii) Other fee for technical services having business PE or fixed place of profession - (section 44DA); (iv) Other fee for technical services without business PE or fixed place of profession - (section 115A); Thus it is abundantly clear that with effect from assessment year 2011-12 fee for technical services whether rendered in connection with prospecting for or extraction or production of mineral oil or o....
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....r technical services' for detailed reasons discussed in the order separately. Once it is certain that the payment received by the assessee was 'fees for technical services', the only situation in which such receipts can be taxed on net basis is where the assessee has a permanent establishment in India and such receipts are effectively connected with such permanent establishment. It is not the case of the assessee that during the period under consideration it had a permanent establishment in India. Accordingly, the provisions of section 44DA of the Act do not apply in the assessee's case. Thus, the only way in which the assessee could be taxed is section 115A of the Act. It is clearly stated in law that the provisions of section 44BB of the Act do not apply where the provisions of section 115A are applicable. The principle of taxing fees for technical services irrespective of the business to which it relates is also clarified in the memorandum to Finance Bill 2010 as below. "Combined effect of the provisions of sections 44BB, 44DA and 115A is that if the income of a non-resident is in the nature of fee for technical services, it shall be taxable under the provisions....
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....o to section 44BB(1) the reliance placed by the assessee on this decision is of no help. Similar is the case with reference to the other decisions for Authority for Advance Ruling as they have not considered the proviso to section 44BB (1). We, therefore, are in agreement with the arguments advanced by the ld. CIT(DR) that decision of Geofizyca Torun (supra) is not applicable to the facts of the assessee's case. Decision of ITAT in the case of Alberta Research Council (supra) is also inapplicable in view of decision of Hon'ble Delhi High Court in the case of Rio Tinto Technical Services (supra) wherein it has been held that in order to fall in second limb of Explanation 2 to section 9(1)(vii) there should be construction project, assembly project or a mining project or a like project undertaken by the recipient and the consideration paid should be on the said account. The unreported decision of Hon'ble Uttarakhand High Court in the case of ONGC as agent of Scan Drilling Company (Income tax reference no 2 of 2001) is also not applicable to the facts of assessee's case as in that case the assessee was not carrying out 3D seismic surveys to find out the availability of....
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....efore, after insertion of sub- section (3) in section 44BB (1) the presumptive taxation provision, in our considered opinion, cannot be treated as special provision. Even prior to insertion of sub section (3) in the presence of proviso section 44BB cannot also be said to be a special provision having overriding effect on section 115A of the Act. The presumptive taxation provisions will be applicable subject to the sections covered under proviso and sub section (3) of section 44BB (1). The provisions of section 115A are also special provisions. Therefore, the consideration for fee for technical services other than those covered u/s 44DA will be assessable u/s 115A (1)(b) of the Act. 51. As regards the issue relating consideration received from Eni, It is seen from the assessment order that the assessing officer in the absence of copy of account in respect of revenues earned from Eni Ltd, has assessed as business income u/s 28 of the Act @ 25% of the receipts on estimate basis. The contention of assessee is that all the terms of contract are similar to that of ONGC with only difference that Eni is a non-resident company. Ld. CIT(DR) before us could not rebut the contention of the as....