TaxTMI 
TaxTMI 
2014 (7) TMI 723
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and Reliance Industries Limited (in short RIL), who had been granted exploration licenses, engaged the services of the assessee for acquiring and processing three dimensional marine seismic data with respect to offshore block awarded to the said companies. 2.2 The appellant (assessee) opted to be taxed on presumptive basis under Section 44BB(1) of the Act at the rate of 10% of the gross revenue. The assessee, accordingly, also applied to the Income Tax Authorities for authorizing withholding tax at lower rates and was granted orders under Section 197 of the Act, authorizing deduction of income tax at source at the rate of 4.223% of the gross amounts payable by the contracting oil companies (BG & RIL) to the assessee for the financial year 2007-2008. The assessee also filed its return of income for the previous year 2007-2008 (AY 2008-09) on 30.09.2008 declaring a total income of Rs. 26,87,46,256/-. The return filed by the assessee was picked up for scrutiny. 2.3 The Assessing Officer (in short AO) rejected the contention of the assessee that its income was liable to be taxed on a presumptive basis under Section 44BB(1) of the Act. The Assessing Officer held that the services pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if the appellant had permanent establishment ("PE") in India in the relevant assessment year? c) Whether on the facts and circumstances of the case, the Tribunal erred in law in following the decision of the co-ordinate Bench in the case of CGG Veritas Services SA, ignoring other decided judicial precedents? d) Whether on the facts and circumstances of the case, the findings arrived at by the Tribunal are perverse, in as much as no reasonable person correctly informed of the position in law would come to such a conclusion?" 3. Although, the assessee had articulated the questions of law as quoted above, the learned counsel for the assessee did not advance any contention relevant to those questions and made submissions limited to the questionwhether the income from business of providing services in connection with prospecting for, or extraction or production of mineral oils would be liable to be taxed under Section 44BB(1) of the Act as opposed to Section 44DA(1) of the Act. And, whether an existence of a PE in India is a necessary condition for applicability of Section 44BB(1) of the Act. 4. It was contended by the learned counsel for the assessee that income falling within the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....B(1) of the Act applied specifically to the mineral oil exploration/production industry, while section 44DA(1) of the Act applied, inter alia, to all cases of royalty and fees for technical services which were connected with a PE of a foreign company in India. It was further contended that existence of a PE is India was not a necessary condition for applicability of section 44BB(1) of the Act. 8. Therefore, only the following question of law needs to be addressed in this appeal: "whether the income tax chargeable on the income of the assessee for the Assessment Year 2008-2009, which falls within the scope of section 44DA(1) of the Act is liable to be computed in accordance with section 44BB of the Act" 9. Before proceeding further, it would be necessary to refer to Section 44BB of the Act. The said section as existing on the statute book during the assessment year 2008-09 is reproduced below:- "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 assessee, being a non-resident, engaged i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act are applicable for computing profits and gains or other income referred to in that Section. It is, thus, necessary to refer to Section 115A of the Act for ascertaining the nature of income that is taxable therein and consequently, expressly excluded from the ambit of Section 44BB(1) of the Act by virtue of the proviso thereto. The relevant extract of Section 115A of the Act is quoted below:- "Tax on dividends, royalty and technical service fees in the case of foreign companies. 115A. (1) Where the total income of - xxxx xxxx xxxx xxxx xxxx (b) a non-resident (not being a company) or a foreign company, includes any income by way of royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976, and where such agreement is with an Indian concern, the agreement is 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....44DA(1) of the Act would be computed in the manner as specified therein. Explanation (a) to Section 115A(1) of the Act expressly provides that the expression "fees for technical services" would have the same meaning as in Explanation 2 to Section 9(1)(vii) of the Act which reads as under:- "Explanation 2 - For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum 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 under the head "Salaries"." 12. The assessee had urged, before the AO, DRP and the Tribunal, that the income received by it in pursuance of the contracts entered into with BG and RIL would not fall within the definition of "fees for technical services" by virtue of Explanation 2 to Section 9(1)(vii) of the Act. However, the finding of the AO and the Tribunal that the income of the assessee was "fees for technical services" was not contested befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd (c) The contract in respect of which income by way of fees for technical services is received is effectively connected with the PE in India. 14. If the aforesaid conditions are met, the income of the appellant would fall within the scope of Section 44DA(1) of the Act and, consequently, would be excluded from the scope of Section 115A(1)(b) of the Act. Thus, whilst the existence of PE is not a condition specified in section 44BB(1) of the Act, it is a necessary condition for applying section 44DA(1) of the Act and, consequently a necessary condition to exclude the application of section 115A(1)(b) of the Act. Thus, as stated earlier, section 44BB(1) of the Act would not be applicable with respect to incomes which are included under section 115A of the Act. It necessarily follows that in respect of income from technical services, section 44BB(1) of the Act would not be applicable unless the income falls within the scope of 44DA(1) of the Act, which could only be applied if an assessee being a foreign company, had a PE in India. 15. In the event the conditions of section 44DA(1) of the Act were satisfied, the tax on income of the appellant for the relevant year would be liable t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....establishment in India. The type of services contemplated by the provision is more specific than what is contemplated by Section 44DA. Section 44BB refers specifically to "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". Revenues earned by the nonresident from rendering such specific services are covered by Section 44BB. It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim "Generallia specialibus non derogant". It is again a well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they 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 nonresident, that would reduce section 44BB to a use....