TaxTMI 
TaxTMI 
2014 (7) TMI 601
X X X X Extracts X X X X
X X X X Extracts X X X X
....eing same, the result of the issues adjudicated in this appeal would follow on similar issues in other appeals. 2. The assessee has filed return of income declaring total income of Rs. 3,31,25,447/-. Assessing officer noticed that assessee had filed its return of income u/s 44BB(1) on the ground that it was engaged in the providing of services and facilities in connection with, or supply plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils. Assessing officer observed that the address of the company, as given in the return of income, was "852, 5th Floor, Chakala, Andheri-Ghatkopar Link Road, Andheri (East), Mumbai". He further observed that assessee had, in its return, admitted that there was a permanent establishment ("PE" in short) in India. Assessing officer in para 4 has given details of various contracts undertaken by the assessee to be divided into three parts i.e. supply, rental and services. The assessing officer required the assessee to file reply to the following queries: (i) What is the basis of claim the benefits of Sec. 44BB. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation and production of mineral oil, The proviso to Sec. 44BB excludes technical service from the purview of Sec. 44BB. It is evident that for services the legislature has used the work 'in connection with', which is of wider connotation. Whereas for equ9ipment rental the equipment either be used for prospecting or exploration or production of mineral oil. If equipment is used for any other service which is in connection with the above the benefit of Sec. 44BB will not be applicable in those cases. In view of this the payment received by the assessee on rental of tools is not covered u/s 44BB as the same are either fishing tools or linear hanger tools etc., which are used not for prospecting, exploration and production of mineral oil but for the other services." 6. The assessing officer examined the provisions of sec. 9(1)(vi) and pointed out that the payments received by the assessee were covered under the exclusion clause of Explanation (iv-a) of sec. 9(1)(vi). He pointed out that the assessee's receipts were taxable u/s 44DA as the assessee was rendering services through its PE. Since the assessee had not given any details of expenses, the revenue received by it f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ued in India as the sale was getting concluded in India and, therefore, taxable in India. As the assessee had not furnished any details about the cost of material purchased, the profit of the assessee was estimated at 25% of the gross receipts which amounted to Rs. 2,72,04,168/-. 11. Being aggrieved with the draft assessment order, the assessee filed objections before the ld. DRP, which was disposed of vide order dated 28-9-2010, upholding the AO's action. 12. The assessing officer passed the assessment order consequent to the directions of DRP on 22-10-2010 against which assessee is in appeal before us and has taken following grounds of appeal: "Based upon the facts of the case, the assessee respectfully submits the following grounds which are without prejudice to and independent of each other: Addition qua breakup of revenue against consolidated contract into equipment rental and services 1. That the assessing officer erred on facts and in law in holding that the provision of equipment, personnel, and supply of consumables under consolidated contracts were independent of each other; 2. That the assessing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 1,302,951/- arising from supply of consumables (on consolidated contracts of provision of equipment, services and consumables) was to be assessed to tax by applying a presumptive profit rate of 25 per cent on gross revenues in this regard, as opposed to section 44BB of the Act. Addition qua income from offshore sales 10. That the assessing officer erred on facts and in law holding that the revenue on account of offshore sales was Rs. 107,513,715 as against Rs. 1,92,11,715 as reported by the assessee in its return of income. 11. That the assessing officer erred on facts and in law holding that income arising from offshore sales concluded entirely outside India was to be assessed to tax at a slim of Rs. 26,878,428/- applying a presumptive profit rate of 25 per cent on gross revenues of Rs. 107,513,715 in this regard, as opposed to the revenues being exempt from taxation in India. Levy of interest 12. That the assessing officer erred on facts and in law in levying interest under section 234B of the Act when no such levy of interest had been mentioned in the assessment order. 13. That the assessing officer has erred on facts and in law in levying interest under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 44DA the same being retrospective in nature as it is clarificatory. 20. Ld. CIT(DR) pointed out that the decision in the case of B.J. Services was rendered in the context to sec. 148 and not for deciding whether sec. 44DA is prospective or retrospective in nature. He submitted that one should not go merely by date of insertion of section but the object with which the section has been incorporated. 21. Ld. DR has filed detailed written submissions which are placed on record. The same are reproduced hereunder: Subject: Written submissions on the issue regarding applicability of sec 44DA in the case of ( ITA No 5283/10/0el) AY 2007-08 and other cases The important issue involved in the appeal is whether amendments made in section 440A and in proviso to section 44BB(1) by the Finance Act, 2010 are retrospective or not. The department's view is that these are retrospective. In this connection it will be useful to see the background of the relevant provisions. 2. Section 44D and 115A were inserted wef 1-6-1976 by the Financ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is also evident from the headings of both the sections viz. 44D and 44DA, which is practically the same. 7. The above intention of the legislature is also clear from the proviso to section 44BB(1) which excludes the cases falling u/s. 44D, 115A, etc. The exceptions provided in the aforesaid proviso clearly shows that the legislature never intended to tax FTS u/s 44BB(1) but u/s. 44D or 115A or 44DA as the case may be. It is important to note that when section 44D was inserted there was no section 44BB which is a later insertion. This further shows that FTS was always taxable under the special provisions viz. u/s. 44D etc. 8. In some of the decisions [e.g. Geofizyka 320 ITR 268(AAR)] distinction has been drawn between section 44D and 44DA on the ground that while section 44D contains non obstante clause that provisions of section 28 to 44C would not apply, section 44DA does not contain such non obstante clause. On this basis it has been held that while section 44D will have overriding effect over section 44BB, section 44DA shall not have such overriding effect. In my ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t taxpayer who is 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 o], mineral oils is computed at ten per cent. of the aggregate of the amounts paid. Section 44DA provides the procedure for computing income of a non-resident/ including a foreign company/ by way of royalty or fee for technical services/ in case the right/ property or contract giving rise to such income are effectively connected with the permanent establishment of the said non-resident. This income is computed as per the books of account maintained by the assessee. Section 115A provides the rate of taxation in respect of income of a non- resident/ including a foreign company/ in the nature of royalty or fee for technical services/ other than the income referred to in section 44DA i.e., income in the nature of royalty and fee for technical services which is not connected with the permanent establishment of the non-resident. 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 ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned in the Finance Act the amendment may have retrospective operation. While holding so the Courts have held that sometimes the legislature specifically mentions about the retrospective operation of an amendment while in some situations such retrospective operations has to be inferred by way of implication. (a) CIT v. Gold Coin Health Foods [304 ITR 308 (SC} (Larger Bench)]: In this case the issue involved was whether amendment made in Explanation 4 to section 271(1)(c) by the Finance Act, 2002 was retrospective or not. In this amendment the effective date mentioned in the Finance Act was 1-4-2003. Reversing the decision of the two judges bench, the Supreme Court held that even if the effective date was 1-4-2003, the amendment shall have retrospective operation as the same was clarificatory in nature and had made the implicit provisions explicit. The Hon'ble Supreme Court observed "As noted by this court in CIT v. Podar Cement P. Ltd. [1997] 5 SCC 482 the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icationfrom the language employed that the Legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the Legislature contemplated. The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. " The above being the position, the inevitable conclusion is that Explanation 4 to section 271(l)(c) is clarificatory and not substantive. The view expressed to the contrary in Virtual's case [2007] 9 SCC 665 is not correct. 1/ (b) K.Govindan & Sons v. CIT 247 ITR 192 (SC): In this case the issue was whether amendment made in section 139(8) by the Taxation Laws (Amendment) Act, 1984 was retrospective as the effective ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision the court observed as follows: "A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. " (e) Sedco Forex v. CIT 279 ITR 310 (SC): In this case the issue involved was whether the amendment made in Explanation to section 9(1)(ii) by the Finance Act, 1999 wef 1-4-2000, had retrospective operation or not. The Court did not accept the department's plea that it had retrospective operation. However, while deciding the issue the Court referred to Reliance Jute and Industries Ltd. v. CIT [1979] 120 ITR 921 (SC) wherein the following observations were made: "An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....prospecting/ extraction of mineral oil. He submitted that clause (iv-a) to Explanation 2 to sec. 9(1)(vi) is not applicable in this case. 23. In reply to ld. CIT(DR)'s submissions that since the decision in the case of B.J. Services (supra) was rendered in the context of Sec. 148 and, therefore, the said decision is not applicable, ld. Counsel submitted that Hon'ble Uttarakhand High Court considered the merits also in the case of B.J. services (supra) and held that the amendment to the proviso to section 44BB was prospective in nature. In this regard ld. Counsel referred to reasons recorded for reopening of assessment in the case of B.J. Services (supra) and pointed out that one of the reasons recorded for reopening was as under: "That in view of the Explanatory Note to the Finance Bill, 2010, indicating that the combined effect of the provisions of sections 44BB, 44DA and 115A of the Act is that if the income of a non-resident is in the nature of a fee for technical services, in that event, it would be taxable under the provisions of section 44DA or under section 115A and that section 44BB would....
X X X X Extracts X X X X
X X X X Extracts X X X X
....royalty or fees for technical services received. The Explanation to s. 44D provides that "fees for technical services" shall have the same meaning as in Expln. 2 to cl. (vii) of sub-s. (1) of s. 9. 42. Sec. 9(1)(vii) of the Act provides that income by way of fees for technical services payable by a Government or a person shall be deemed to accrue or arise in India. Expln. 2 provides that "fees for technical services" means any consideration for the rendering of any managerial, technical or consultancy services, including the provision of services of technical or other personnel but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "salaries". 43. Sec. 115A(1)(b)(B) of the Act provides that where the total income of a foreign company includes any income by way of royalty or fees for technical services, the amount of income-tax calculated on the income by way of fees for technical services, would be at the rate of thirty percent if such f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f s. 44DA in the Act, the combined effect of the provisions of s. 44BB, 44DA, 115A and Expln. 2 of s. 9(1)(vii) of the Act as per the stand of the Revenue is that if the income of a non-resident is in the nature of a fee for technical services, it would be taxable under the provisions of either s. 44DA or s. 115A r/w Expln. 2 to s. 9(1)(vii) irrespective of the business to which it relates and that s. 44BB would apply only in a case where consideration was for services and other facilities relating to exploration activity which are not in the nature of technical services. 49. In spite of the insertion of s. 44DA in the Act, a grey area remained regarding the scope of s. 44BB and s. 44DA, namely, whether the fee for technical services relating to the exploration sector would be covered under s. 44BB of the Act. In order to remove the grey area, s. 44DA and 44BB was amended w.e.f. 1st April, 2011 so as to exclude the applicability of s. 44BB to the income which is covered under s. 44DA. The aforesaid was provided in the Explanatory Note to the Finance Bill, 2010, which was ultimately amended in the relevant ss. 44BB and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the department's contention and held that amendment in explanation 2 to section 192 made by the Finance Act 1999 would apply prospectively w.e.f. 1-4-2000 even though the explanation was inserted for the removal of doubts. He further submitted that sec. 44BB is a special provision which has over-riding effect, whereas section 44DA is residual section. 26. Ld. Counsel pointed out that no contrary intention has been given in the provisions of section 44BB as the specific date viz. 1-4-2011 has been mentioned. 27. Ld. Counsel also relied on following decisions: Schlumberger Asia Services Ltd. v. ADIT 6063/2010; Western Geo International Ltd. v. Addl. CIT 5977/Del/2010. PGS Exploration Norvey AS v. DIT 4056/Del/2011. 28. Ld. Counsel further submitted that now this issue has also been considered by Hon'ble Delhi High Court in the case of DIT v. OHM Ltd. as under: "11. We do not think that there is any error in the view taken by AAR. Basically the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... should be so interpreted that, if possible, effect should be given to both. This was stated to be the "rule of harmonious construction" by the Supreme Court in Venkataramana Devaru v. State of Mysore, AIR 1958 SC 255. If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue Trivandrum, AIR 1964 SC 207 it was held that a familiar approach in such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. 12. The second proviso to sub-section (1) of Section 44DA inserted by the Finance Act, 2010 w. e. f. 01.04.2011 makes the position clear. Simultaneously a reference to Section 44DA was inserted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resident or the foreign company should carry on business in India through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w. e. f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. 13. In the result the writ petition fails and is dismissed with no order as to costs. 29. Ld. Counsel further referred to the order of the ITAT Delhi Bench 'B' dated 25-1-2012 in the case of M/s CGG Veritas Services SA v. Addl. DIT rendered in ITA no. 4653/Del/2010 ( pages 127 to 202 of the PB ) and referred to page 185 of the PB wherein the ITAT has examined the scheme of the Act in this regard, as under: "43. Now next question arises as to whether the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C 1099), while interpreting the proviso to the Regulation 17(3) of the UP State Road Transport Corporation has held that sometimes a proviso in effect becomes a substantive provision. Regulation 17(3) reads as follows: "17(3) The service of a person who fails to pass the fitness test, referred to in sub-regulation (2), may be dispensed with; Provided that the persons, whose services are dispensed with may, in the discretion of the Corporation, be offered alternative jobs." Interpreting the above proviso attached to the Regulation 17(3), Hon'ble Supreme Court observed as under: "The proviso with which we are concerned in regulation 17(3) does not carve out an exception from the general rule contained in the first branch. It is an independent and substantial provision providing discretion to the Corporation to offer an alternative job to the retrenched driver. This offer is to be made after the exercise of power under the first branch of regulation 17(3). There is, therefore, no doubt that the second branch of regulation17(3) is a substant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 44DA applicable from assessment year 2011-12 according to which provisions of section 44BB (1) will not be applicable in respect of income referred to this section. On combined reading of proviso to section 44BB (1) and second proviso to section 44DA 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ineral oils, the computation provisions relating to fees for technical services in sec. 44DA had to yield to sec. 44BB. He pointed out that this decision was followed in the case of Ohm Ltd. 335 ITR 423 (AAR), which view has been upheld by Hon'ble Delhi High Court in the case of OHM Ltd. (supra), as noted earlier. 32. Ld. Counsel further pointed out that in the case of Schlumberger v. DIT 6063/Del/10 (supra) the ITAT relying on the decision of CGG Veritas has held that income in connection with the business of exploration of mineral oils in the assessment year prior to 1-4-2011 will be assessed u/s 44BB. In para 7.11 the ITAT has observed as under: "It has further been the contention of the revenue that the amendments vide Finance Act 2010 inserting mutually exclusionary clauses in s. 44BB and s. 44DA are clarificatory and hence are retrospective in operation w.e.f. AY 2004-05. We find that this contention is not at all correct as the said provision of the Act cannot be said to be clarificatory and hence retrospective in operation. In this regard in the case of CGG Veritas Services comes to the rescue of the assessee.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pment. The assessing officer was of the opinion that payment received qua services rendered was in the nature of fees for technical services in terms of sec. 9(1)(vii) and the payments received qua hire of equipment was in the nature of 'royalty' in terms of section 9(1)(vi) of the I.T. Act. It is not disputed that assessee had PE in India and, therefore, the aforesaid receipts were taxed u/s 44DA by the assessing officer. The assessing officer taxed the entire receipts of assessee @ 25%. The assessing officer held that the simultaneous amendment made by Finance Act 2010 w.e.f. 1-4-2011 in section 44DA and proviso to section 44BB of the Act, being clarificatory in nature, are retrospective in operation and was, thus, applicable to the year under consideration. The assessee's contention was that its receipts were taxable u/s 44BB because they were in connection with exploration of oils and minerals and the provisions of section 44DA were not applicable for the years under consideration. 38. Before interpreting these sections it is necessary to first refer to the scheme of the Act regarding taxability issue of 'royalty' and "fees for technical services". 39.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration which would be income of the recipient chargeable under the head "salaries". 44. As per CBDT Instruction no. 1862 dated 22-10-1990 [ 165 ITR 161 (St.)], consideration for mining includes rendering of services like imparting of training for carrying out drilling operations in connection with the extraction of mineral oils undertaken by recipient. Thus, the consideration, inter alia, for mining was excluded from section 9(1)(vii), provided the same was undertaken by assessee itself. 45. From the above exclusionary clause it is evident that the Royalty and FTS in respect of incomes contemplated u/s 44BB were taxable u/s 9(1)(vi) and 9(1)(vii) till the date of insertion of exclusionary clauses. Thus, the royalty and FTS which was for the nature of services contemplated u/s 44BB were excluded from sections 9(1)(vi) and 9(1)(vii) and brought under section 44BB which is a special provision for computing profits and gains in connection with the business of exploration etc. of mineral oils. Section 44BB was inserted by the Finance Act 1987 with retrospective effect from 1-4-1983. 46. The legislative intent, as rightly pleaded by ld. CIT(DR), from the very beginning is not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b-section (1) of section 9; (d) royalty received 88[from Government or an Indian concern in pursuance of an agreement made by a foreign company with Government or with the Indian concern] after the 31st day of March, 1976, shall be deemed to have been received in pursuance of an agreement made before the 1st day of April, 1976, if such agreement is deemed, for the purposes of the proviso to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976.] 48. Noticeable features of this section are as under:- (a) It is special provision for computation of income by way of royalty or fees for technical services. Thus a computation provision. (b) Applicable to only that portion of royalty which consists of lump sum consideration for the transfer outside India, or for imparting of information outside India in respect of any data, documentation, drawing or specification relating to patent, invention, model, design, secret formula or process or trade mark or similar property. Thus, it primarily deals with considerations paid as royalty for transfer of IPR outside India even if IPR was with respect to oil exploration. (c) The opera....
X X X X Extracts X X X X
X X X X Extracts X X X X
....have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) "permanent establishment" shall have the same meaning as in clause (iiia) of section 92F.] 50. Noticeable features of section 44 DA are as under:- (a) covers the cases of royalty and FTS received from 1-4-2003 onwards by non-residents/ foreign co. (b) non-resident/ foreign co. carries on business in India through a PE situated in India. (c) Non-resident performs professional services from a fixed place of profession in India. (d) Right, property or contract in respect of which the royalty/ FTS are paid is effectively connected with such PE/ fixed place of profession. (e) Taxable under profits and gains of business or profession. (Note) [Therefore, if royalty/ FTS is received by a non-resident who is engaged in the business of providing services or facilities in connection with, or supplying P&M on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils then this will be taxed u/s 44BB but if it is received on account of having PE/ fixed place in India then it will be taxed u/s 44DA from 1-4-2011 onwards. It is noticeable that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; [(3) No deduction in respect of any expenditure or allowance shall be allowed to the assessee under sections 28 to 44C and section 57 in computing his or its income referred to in sub-section (1). 52. Noticeable features of section 115A are as under:- Section 115A(b) w.e.f. 1-4-04. (a) covers the cases of royalty/ FTS other than referred to in section 44DA(1). (b) Rate of tax is as under: (i) 30% if in pursuance to agreement made after 31/3/76 to 31/5/97; (ii) 20% if in pursuance to agreement made between 1-6-97 to 31/5/2005; (iii) 10% if in pursuance to agreement made on 1-6-2005 or thereafter. (c) No deduction is allowable in respect of any expenditure or allowance u/ss 28 to 44C and 57. 53. Section 44BB inserted by the Finance Act, 1987 with retrospective effect from 1-4-1983 reads as under: [Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils. 44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngaged in the business of providing services or facilities in connection with the prospecting or extraction or production of mineral oils. (ii) Non-resident assessee is engaged in the business of supply plant and machinery on hire used or to be used, in prospecting for or extraction or production of mineral oils. (iii) The amount being 10% of gross receipts would be assessable as "business income". However, a proviso was also inserted which, inter alia, excluded the royalty or FTS contemplated u/s 44D or section 115A. Section 44DA inserted in this proviso by Finance Act 2010 w.e.f. 1-4-2011. 55. From the combined reading of these sections it is evident that all the sections relating to royalty/FTS operate in different fields and that is the reason for insertion of proviso to sections 44BB/44DA/115A. Where the assessee was imparting services which entitled it to royalty or FTS simpliciter then the same continues to be assessed u/s 9(1)(vi)/(vii) read with section 115A but where the assessee is imparting services in relation to oil exploration the Royalty/ FTS would be taxable u/s 44BB. 56. Specific services are contemplated only under section 44BB and, therefore, that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; "The court ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to entire statute; it must compare the clause with other parts of the law and the setting in which the clause to be interpreted occurs. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head on clash between two sections of the same Act. Whenever it is possible to do so, it must be done to construe the provisions which appear to conflict so that they harmonise. It should not be lightly assumed that Parliament had given with one hand what it took away with the other. The statute must be read as a whole and one provision of the Act should be construed with reference to other provision in the same Act so as to make the consistent enactment of the whole statute." 61. A question arises as to why such an amendment was necessitated. 62. The international tax policy adopted by a country is always driven by economic and social objectives. If the country's economic objectiv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not retrospective. We find that this issue has been dealt elaborately by Hon'ble Jurisdictional High Court (Uttrakhand) in B.J. Services (supra). We are not inclined to accept the contentions advanced on behalf of the revenue, reproduced earlier, for the simple reason that the issue is squarely covered by the decision of Hon'ble Jurisdictional High Court, decision of Hon'ble Delhi High Court in the case of OHM (supra) and by the decision of the ITAT in CGG Veritas (supra) and Phonex (supra). 66. As far as ground no. 8 regarding income arising from letting out equipment, used in connection with the exploration/ prospecting/ extraction of mineral oil taxed u/s 9(1)(vi) by assessing officer is concerned, we are of the opinion that in view of explanation (iv-a), the income is to be assessed u/s 44BB. 67. Accordingly, ground nos. 1 to 8 are allowed. 68. Ground no. 9: Brief facts apropos ground no. 9 are that contract with Cairn Energy Pty Ltd. was entered into with assessee for providing various consumables by assessee like fishing tools and services etc. Assessing officer had taxed these revenue receipts by applying a presumptive profit rate of 25% in gross reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d had been put to use by the contractor's personnel. (c) In the scope of work, it was mentioned "the Contractor shall deliver the goods at NHAVA Supply Base for transportation to worksite". It further mentioned "the goods shall be delivered as per the delivery schedule hereunder" (d) The invoices submitted by the assessee mentioned consignee as Baker Hughes Asia Pacific Ltd., Mumbai also. 72. With reference to the contract with Hindustan Oil Exploration co. Ltd., the assessing officer pointed out that income arose or accrued to the assessee u/s 5(2) for the following reasons: (i) Mr. C.K. Pathak, the Country Manager, was negotiating and concluding the contract on behalf of Baker Hughes Asia Pacific Ltd., which was evident from the correspondence with the Hindustan Oil Exploration Co. Ltd. and the assessee. (ii) The purchase order was issued to Baker Hughes Asia Pacific Ltd., Mumbai; (iii) The place of delivery of goods was Chennai Sea Port in India ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to page 113 of the paper book and pointed out that CIF has been defined under the INCO terms as under: "The International Chamber of Commerce defines 'CIF' as under- "CIF (named port of destination); "Cost, Insurance & freight" means that a seller delivers when the goods pass the ship's rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time of delivery are transferred from the seller to the buyer." 81. He referred to the details contained in the invoice ( at page 558 of the PB) and pointed out that commercial invoice shall, inter alia, contain details of total price CIF from which-ever port the materials will be imported into India. Nevertheless the CIF rates shall include the transit insurance upto the company's warehouse in India. Transportation from the port to warehouse shall be company's responsibility. 82. Ld. counsel, accordingly submitted that in accordance with the I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... agreed to the proposal of the applicant that the work be under three distinct aspects: (a) off-shore supply contract in favour of the applicant for supply of equipment and materials on c.i.f. Indian port of disembarkation basis; (b) on-shore supply of equipment and material on ex-works basis, and (c) on shore service contract for port handling and clearance, inland transportation, insurance, delivery on f.o.r. destination basis, storage, erection including associated civil works, testing and commissioning of all equipment and materials including offshore equipment. Under the terms of the bid, the foreign bidder was authorized to assign the whole or part of the contract to an independent contractor, subject to approval of PGCL. In view of this provision the applicant requested PGCI to award the offshore contract to itself and the on-shore supply and service contract to be performed in India to L&T of India. PGCI awarded to the applicant the off-shore contract covering all works to be performed outside India including supply of all offshore equipment and material on c.i.f. Indian Port of embarkation basis. The Authority ruled: (i) That none of the stipulation in the contract g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....voidance of Double Taxation between India and Korea, in any event the office of he assessee in Bombay constituted the permanent establishment under article 5(2)(c) of the Convention and the profits of the assessee attributable to the permanent establishment were liable to be taxed in India in accordance with article 7 of the Convention. The Assessing Officer also rejected the accounts of the assessee and assessment were made on the basis of receipt for the two assessment years 1987-88 and 1988-89. He treated the fabrication as having a nexus with the installation and treated the income from the Korean operations as taxable in India; and estimated the profits of the assessee under the agreement at 20 percent of the gross receipts and taxed 2 per cent of the contract revenue in Korean operations. The Commissioner (Appeals) held that the contract was indivisible for the purposes of attributing the profits to the permanent establishment in India and held that though the actual receipt on fabrication operations in Korea was not taxable, the work of designing and engineering of platforms was taxable under the Convention read with section 9(1) of the Income-tax Act, 1961 and directed that....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... v. M/s Nokia Networks OY ( ITA no. 512 of 2007 dated 7-9-2012) (available at p. 537 vol. IV of PB) wherein it has, inter alia, been held that acceptance test does not determine passing of title. He referred to para 17 of the judgment, which reads as under: 17. We find that the terms of contract make it clear that acceptance test is not a material event for passing of the title and risk in the equipment supplied. It is because of the reason that even if such test found out that the system did not conform to the contractual parameters, as per article 21.1 of the Supply Contract, the only consequence would be that the Cellular Operator would be entitled to call upon the assessee to cure the defect by repairing or replacing the defective part. If there was delay caused due to the acceptance test not being complied with, Article 19 of the Supply Contract provided for damages. Thus, the taxable event took place outside India with the passing of the property from seller to buyer and acceptance test was not determinative of this factor. The position might have been different if the buyer had the right to reject th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been held that as per Explanation to Section 9(1)(i) in the case of a business of which some operations are carried out in India and some outside India, the income of the business deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. The explanation contemplates a business comprising several operations some of which are carried out, out of India in such a situation only the operation carried out in India shall be taken into account and a reasonable portion thereof shall be treated as income accruing or arising in India. He, therefore, submitted that no income can be attributed in respect of operations which were carried out outside India. 93. Ld. DR referred to the decision of Hon'ble Supreme Court in the case of Kanchanjunga Sea Foods Ltd. (Civil Appeal no. 3844-3847 of 2003 dated 7-7-2010). 94. Ld. DR referred to the agreement with HOEC vide agreement no. PY1L6A060, contained at pages 539 onwards of the paper book. He referred to page 540 and pointed out that the address of the assessee company was as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n India with the acceptance of which the title to property in goods passed to HOEC. He referred to the decision in the case of Phulchand Exports v. Patriot, wherein it was held as under: "If no place be named in the contract for the tender of the shipping documents, they must prima facie be tendered at the residence or place of business of the buyer. The buyer must be prepared to pay or accept the draft, as the case may be, according to the terms of the contract of sale, within a reasonable time after the shipping documents are tendered to him. What is a reasonable time is a question of fact depending on the circumstances of the case. In ordinary case obviously payment must be made promptly on the tender of the documents with the invoice. As the essential feature of a contract of sale CIF is that performance is satisfied by delivery of documents and not by the actual physical delivery of the goods, it follows that all that the buyer can call for is the delivery of the documents we have mentioned. This represents the measure of the buyer's right and the extent of the vendor's duty. The buyer cannot r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 104. Ld. DR further pointed out that CIF contracts are an exception to the general rule in section 20 of the Sale of Goods Act, which links the passing of risk to the passing of property. Whereas property passes under a CIF contract at the time the buyer pays and takes up the documents, the goods are deemed to be at the buyers risk from the time of shipment. 105. With regard to the reliance placed by assessee on the decision in the case of Mahabir Commercial Co. Ltd. v. CIT 86 ITR 417 (SC), ld. DR pointed out that in this case documents were delivered in Pakistan and this decision confirms that sale is complete with documents' delivery/ tendering and, therefore, this decision primarily supports the department's contention that in a CIF contract the sale is of documents and the title passes when the documents are delivered and the payment is made by buyer. He submitted that decisions relied on by the assessee, pertaining to sales, which took place on FOB basis, are not applicable to the facts of the case. 106. In regard to the contract with ONGC, contained at pages 656 onwards of the paper book, ld. DR referred to following clauses: &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tract as well as contractor's equipment, tools and any other belongings of the contractor or their personnel during the entire period of their engagement in connection with this contract. ONGC will have no liability on this account. 1.16 FOR/Ex-works/FOB/FAS/C&F/CIF Shall mean the terms as explained in INCO terms. 12.0 Rejection If ONGC finds that the goods supplied are not in accordance with the specification and other conditions stated in the order or its sample(s) are received in damaged condition (of which matters ONGC will be the sole judge), ONGC shall be entitled to reject the whole of the goods or the part, as the case may be, and intimate within 14 days from the date of receipt at site/ store house as per terms of Contract to the supplier the rejection without prejudice to ONGC other rights and remedies to recover from the supplier any loss which the ONGC may be put to, also reserving the right to forfeit the performance security/ performance Bond if any, made for the due fulfillment of the contract. The goods shall be removed by the supplier and if not removed within 14 days of the date of communication of the rejection ONGC will be entitled to dispose of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....#2: Within 8 weeks at ONGC Nhava Base from date of firm order. The contractor shall mobilize contractor's personnel within 5 working days from the date of mobilization notice. The date of mobilization of the contractor's personnel shall be reckoned as the date of their reporting to Well Services, Mumbai. Contractor shall deliver goods at Nhava Supply Base for transportation to worksite." 107. With reference to above terms of contract, ld. DR submitted that since the right to property in goods passes in India at Nhava supply Base because the intention was to complete the sale in India and, accordingly, the nonresident assessee was liable to tax as per the provisions of section 5. Ld. DR submitted that under section 19 of the Sale of Goods Act, property in goods passes when parties intend to pass the title. He submitted that in the present case the overall intention of the parties is to be seen and it is self evident from the terms of the contract that the parties' intention was to complete sale in India. He submitted that since title passed in India the tax is also payable in India. 108. Ld. DR submitted that in the case of contract with ONGC there is no ment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....presented to the assessee's banker for negotiation to certify that goods were shippped FOB and bill of lading was issued. 116. Ld. DR further referred to the decision in the case of LG Cables Ltd. (supra) and pointed out that at page 453 of the report it has been observed as under: 17. That the offshore supply of equipment related to the supply of specified goods discharged from Korea for which the PGCIL had opened an irrevocable letter of credit in the name of the respondent-assessee with a bank in South Korea. The consignor of the equipment supplied from Korea to Haldia Port was the respondent while the importer was the PGCIL. The equipment was delivered to the shipping company named in the bill of lading and the bill of lading and other documents were handed over to the nominated bank. Accordingly, with the delivery of the bill of lading to the bank, the property in the goods stood transferred to PGCIL. The cargo insurance policy was obtained by the respondent-assessee and it named the PGCIL as coinsurer. Clause 31.2 of the contract unequivocally clarified that the respondent-assessee and the PGCIL intended to transfer the title/property in the goods as soon as the goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Goods Act and observed that the property in goods passed when the party intends it to pass and the intention was manifested in Article 13 of the Supply contract and the provisions of article 15 in no manner militate against such intention. He submitted that in Nokia case, Ericsson agreement was considered and in Ericsson's case as per Article 13, the title passed outside India. He pointed out that in this context, court held that acceptance test was not material. 122. Ld. DR with reference to the decision in the case of Ishikawajimaharima Heavy Industries Ltd. v. DIT 288 ITR 408 (SC), relied upon by the learned counsel for the assessee, pointed out that the issue before the Hon'ble Supreme Court was with regard to composite contract viz a viz bifurcated supply and not whether sale took place out of India or not. In support of his contention ld. DR referred to page 419 of the decision wherein the contention of assessee's counsel was that authority misconstrued and mis-interpreted the contract in arriving at a conclusion that the amounts received from company for off shore services was liable to be taxed in India because a bare perusal of the contract shows that the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the case of Sepco III Electric Power Construction Corpn. (AAR 1008 of 2010 dated 31-1-2012), available at page 238 of PB, and pointed out that in this case the Authority observed as under: "On behalf of the applicant, the terms of the contract were elaborately referred to. It is pointed out that the Indian company was defined as the 'owner' in the contract and the applicant was defined as the 'contracting counter-party'. With reference to clause 27 of the contract, it was pointed out that the parties had stipulated for the passing of the title to the equipment outside the country. The title passed at the port of loading. Port of loading itself was defined to show that it was outside the country." 127. Thus, there was no issue regarding passing of title. 128. Ld. DR further referred to the decision in the case of LS cable Ltd., wherein it was, inter alia, observed as under: "The clauses in the offshore supply contract agreement regarding the transfer of ownership, the payment mechanism in the form of letter of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (appears that consumables are provided on sale basis and the equipments that can be reused on rental basis) and the services of its personnel so as to carry out fu1l range of activities for the client. The sale of goods (equipments/tools/material) is an essential and integral part of the whole contract of providing comprehensive supply and services. The sale is essential and linked to other parts of the contract. The installation of the equipment is undertaken by the assessee. The claim of the assessee that these are sold offshore is baseless (no where the contract uses the term offshore). The sale of goods is only a part of the whole and comprehensive contract. No doubt the sold goods are Manufactured outside lndia but the income accruing/arising due to sale of these goods in India is taxable in India (Section 5(2) (b) of the Act. If the goods are not sold these will remain as an inventory and no profits/income an be realized, The sale of goods is an essential part of the business of the assessee and no income can be realized till the same are sold. Operations in regard to sale of gold have taken place in India. In any event (not in present case), even if the risk of loss or dama....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a then no profit accruing to the non-resident assessee could be taxed in India. 136. Ld. Counsel has relied on various decisions which we have considered but it depends on facts of each case when the title passed to buyer. 137. Ld. Counsel for the assessee has submitted that as per the International Commercial Terms the CIF contract or FOB contract is not relevant. Further, merely because the contract is signed in India it does not follow that the title would also pass in India. His main plank of argument is that since risk was taken over by the company viz. HOEC and ONGC outside India, therefore, the sale concluded outside India. 138. We do not find much substance in this plea of assessee because if the terms of contract contemplate execution of contract on CIF basis then the principles governing the CIF contract would apply mutatis mutandis to international commercial terms also subject to any contract to the contrary. 139. INCO Terms define the responsibilities of the buyers and sellers but it does not define/ convey title of the goods. INCO Terms are not a law but a set of rules that are prevalent for the industry only. 140. Therefore, before examining the contra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cument of title of goods entitling the possession of the documents to transfer or receive goods thereby representative. 146. As regards the bill of lading, it must be in such form that the buyer may not only be able to obtain possession of the goods on arrival but also to recover according to its terms from the carrier for loss or damage occurring at any stage of the transit. It must therefore cover the whole transit of the goods from the port of shipment to the port of arrival. Further it must be procured on shipment, be correctly dated; and be for the contractual quantity of the goods. Apart from express agreement, a delivery order or ship's release will not suffice as a substitute for the bill of lading but a bill of lading in the form "received for shipment" instead of "shipped on board" is valid. Even if it is, and the contract provides for shipment by a certain date, this provision must be strictly complied with. 147. Therefore, it is an essential part of the contract that the seller should tender the document. If the seller tenders the documents, the buyer's obligation is to take them and on his taking them, he is bound to pay the price according to the terms o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re not in accordance with the contract, then, of course, the purchaser has a right to reject the goods and to pursue his remedies against the seller. It follows that the purchaser can pursue his remedies only when he has acquired the title in the goods. Thus, the unconditional appropriation of goods took place when the documents were delivered to the purchaser and were accepted by him. 150. In the present case we find that under both the contracts with HOEC and ONGC the documents are delivered in India and therefore the right to property in goods has passed in India as the sale got concluded in India. 151. First we will consider the contract between HOEC and the assessee, which is contained at pages 540 to 574 of the paper book. It is evident from the terms of the contract that the contract comprised of following documents: (i) The deed of agreement no. PY 1C6A060 dated 19-4-2006 along with general conditions of contract - section 1; compensation schedule section 2; and scope of supply section 3. According to terms and conditions clause (e), the delivery terms were as per terms and that was CIF (cost, insurance and freight Chennai Sea Port). However, the insurance from Che....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m contractor to company as stipulated in the deed. Therefore, the intention is to be gathered from the deed itself. In this regard we find that as per clause H.2 (p.b. page 542) payment is to be made within 30 days from the date of delivery/ supply at Chennai Port. The disputes were to be settled as per the laws of India and the jurisdiction was of the court of Mumbai. The arbitration was to be as per the Arbitration and Consolidation Act, 1996. The agreement was signed in India. 156. As per clause 7 of section 1, dealing with general conditions of contract, the delivery date for the supply is the essence of the contract. The delivery date as per clause e(2) was March, April 2006 on CIF Chennai base, which implies that the goods were to be delivered at Chennai base by April 2006. However, as per Price Table A, contained at page 564, the delivery date at CIF Chennai has been given for various items as 20th March 2006. Similarly, at pages 572 to 574 i.e. details of equipment for purchase, wherein also delivery at CIF Chennai base, March 2006 has been mentioned. 157. The notices to contractors were to be sent at Mumbai address. The dispatch instruction no. 4 clearly contemplates....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cumulative consideration of all the terms leads to inescapable conclusion that the only intention of the party was to appropriate the goods in India. 163. The contract of assessee with ONGC is contained from pages 656 onwards. On page 664 the scope of work has been given which was supply of equipments along with services, as mentioned at page 702 of the paper book. The contractor's local address was at Mumbai. The invoices with original supporting documents, duly counter signed by ONGC representative/ Engineer, wherever applicable, were to be submitted on completion of job by the contractor to corporation and payment was to be made within 15 working days from the date of receipt of invoice. The invoices were not in the name of ONGC but in the name of sister concern. The custom duty was paid by assessee as per para 8.3 and it was to be borne by contractor. Import clearance was to be done by the assessee. Insurance was to be paid by assessee and after due packing and marketing the consignment was to be comprehensively ensured against all risks by the supplier from contractor's warehouse to ultimate consignee's warehouse base. The additional conditions that were suppli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, in the case of the Anglo French Textile Co. Ltd. v. CST [1954] 25 ITR 27 the Hon'ble Supreme Court has held as under: " In regard to Question No. 2 however Shri Porus A. Mehta, learned counsel for the respondent contended before us that the matter was not concluded by the judgment of the majority in Commissioner of Income tax, Bombay v. Ahmedbhai Umarbhai & Co., Bombay, and that the High Court was wrong in the answer which it gave to this question. He contended that the decision in the case of Commissioner of Income tax, Bombay v. Ahmedbhai Umarbhai & Co., Bombay, turned on the statutory provisions of the Excess Profits Tax Act read with Section 42(3) of the Indian Income tax Act which was expressly incorporated therein by virtue of Section 21 of the Act and not on any general principles of apportionment of income, profits or gains enunciated therein. He took us in extenso over the portions of the majority judgments and tried to demonstrate that the decision there was based purely on the applicability of Section 42(3) of the Indian Income tax Act, but for the applicability of which, according to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to where the income, profits or gains could be said to arise or accrue. Section 42 of the Indian Income tax Act has no relevance to the determination of this question because it is mainly concerned with income which is deemed to have arisen or accrued and not with income which actually arises or accrues within the taxable territories. Section 42(3) also is a part of the scheme which is enacted in Section 42 and cannot help in the determination of the question before us. As a matter of fact the use of the words "under Section 42(3)" in Question No. 2 as reframed by us was not appropriate and the only question which should have been sent to the High Court was "If not, should only those profits determined as attributable to the operations carried out in India be taken into account for applying the test laid down in Section 4A(c)(b)?" 167. We, therefore, restore the matter to the file of AO for attributing the income out of these two contracts to the extent of operations relating to sales carried out in India. 168. In the result, ground nos. 11 & 12 are partly allowed for statistical purposes. 169. Now we come to ground no. 12 regarding levy of interest u/s 234B. The assessee&....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held that where the assessee who accepts the tax liability after initially denying it cannot shift the responsibility to the Indian buyer for not deducting the tax at source from the remittances after leading them to believe that no tax was deductible. Ld. DR submitted that in the present case also the tax had not been deducted by the HOEC and ONGC as the assessee claimed that the sale concluded outside India, therefore, interest u/s 234B is leviable. 173. Ld. Counsel for the assessee has relied on the decision in the case of Hon'ble Jurisdictional High court in the case of DIT v. Max India Ltd. 334 ITR 79 wherein it has been held that upon failure on the part of the employer to deduct tax at source from salary of the employee, the employee becomes liable to pay the tax directly u/s 191 of the Act and does not become liable to pay interest u/s 234B of the Act. Thus, that default should be attributable to the person liable to deduct tax but if the person liable to deduct tax has been made to believe that the income is not chargeable to tax and hence did not deduct the tax, then assessee cannot take plea of not paying interest u/s 234B on the assessed tax. The assessee was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2010, we direct the AO not to charge interest u/s 234B in respect of all contracts entered into by the assessee with various organization in India except with respect of contracts entered into with HOEC and ONGC. Accordingly, these grounds are partly allowed. 179. Ground no. 10 relating to levy of penalty u/s 271B is premature and requires no adjudication at this stage. 180. In the result, appeal is partly allowed. ITA no. 5631/Del/2010 (SIEM offshore AS A.Y. 2006-07): 181. Ground no. l is general in nature and requires no adjudication. 182. Ground no. 2 relates to proceedings u/s 148. At the hearing no arguments were advanced with regard to initiation of reassessment proceedings. Accordingly, ground no. 2 stands dismissed being not pressed. 183. Ground no. 3 relates to taxability of "fees for technical services". While deciding ITA no. 5283/Del/2010, after elaborate discussion therein we have held that where assessee was imparting services in relation to oil exploration, the income arising on account fee for technical services was to be taxed u/s 44BB. Adopting the same reasons, we allow ground no. 3 in favour of the assessee. 184. Ground no. 4 & 5 relates to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rossing up receipts. Having heard both the parties we hold that u/s 44BB gross receipts are to be considered, which will include reimbursement also. Therefore, these grounds are dismissed. 197. Ground no. 6 relates to charging of interest u/s 234B/D. For the reasons given in ITA no. 5283/Del/2010, we hold that the assessee was not liable to pay interest u/s 234B. Accordingly, ground is decided in favour of the assessee. 198. In the result, appeal is partly allowed. ITA nos. 5287/Del/2010 (Smith International Inc. A.Y. 2007-08): 199. Ground nos. l to 4 relate to taxability of royalty/fees for technical services. While deciding ITA no. 5283/Del/2010, after elaborate discussion therein we have held that where assessee was imparting services in relation to oil exploration, the income arising on account royalty/ FTS was to be taxed u/s 44BB. Adopting the same reasons, we allow ground nos. 1 to 4 in favour of the assessee. 200. Ground no. 5 relate to taxability of grossing up of receipts. Having heard both the parties we hold that u/s 44BB gross receipts are to be considered. Therefore, this grounds is dismissed. 201. Ground no. 6 is as under:  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of interest u/s 234B/D. For the reasons given in ITA no. 5283/Del/2010, we hold that the assessee was not liable to pay interest u/s 234B. Accordingly, ground is decided in favour of the assessee. 211. In the result, appeal is allowed. ITA no. 5288/Del/2010 (Subsea 7 Singapore Pte. A.Y. 2007-08) 212. Ground nos. 1 to 6 relate to addition qua equipment rental, service charges and sale of consumables and services rendered by assessee in connection with exploration/ prospecting/ extraction of mineral oil. For the detailed reasons given in ITA no. 5283/Del/2010, we hold that the income arising on account royalty/ FTS, letting out of equipment etc. was to be taxed u/s 44BB. Adopting the same reasons, we allow ground nos. 1 to 6 in favour of the assessee. 213. Ground no. 9 & 10 raised by the assessee relate to charging of interest u/s 234B/D. For the reasons given in ITA no. 5283/Del/2010, we hold that the assessee was not liable to pay interest u/s 234B. Accordingly, grounds are decided in favour of the assessee. 214. In the result, appeal is allowed. ITA no. 5282/Del/2010 (Baker Hughes Singapore Pte. A.Y. 2007-08): 215. Ground nos. 1 to 7 relate to addition qua ....