2015 (4) TMI 557

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.... the previous year 2002-03, the assessee operated in India in terms of the following contracts:- * Contract No.2006/B/F/D/1004 with BG Exploration and Production India Limited The scope of work awarded to the assessee is provision of rig based surface well, testing equipment and along with operating personnel in respect of drilling of 5 wells in Mid Tapti. * Contract No.RV7CA000015A with Cairn Energy India Pty Limited The scope of work awarded to the assessee is provision of equipment and personnel for surface well testing in respect of development drilling campaign in Ravva field of the East Coast of India. * Contract No.10025 with Jubilant Oil and Gas Private Limited The scope of work awarded to the assessee is provision of well testing equipment and operating personnel in respect of exploratory drilling campaign in block CB-ONN-2002/2 located in Mehsana, Gujarat. 3. The assessee filed a return of income on 04.02.2010 declaring total income of Rs. 2,58,05,345/- u/s 44BB of the Income Tax Act (hereinafter referred to as "Act"). The AO passed a draft assessment order u/s 144C proposing to reject the assessee's claim u/s 44BB and assess the total income as fee for techni....

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....n the ground that the Revenue has not accepted the same. 5. Aggrieved the assessee filed this appeal on the following grounds:- "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 services in connection with exploration/prospecting/extraction of mineral oil 1. That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Incometax Act, 1961 ('the Act') at an income of Rs. 64,513,361/- as against the income of Rs. 25,805,350/- returned by the appellant. 2. That the assessing officer erred on facts and in law in assessing income of Rs. 258,053,446/- arising from services rendered by the appellant in connection with exploration/prospecting/extraction of mineral oil under section 9(1 )(vii) of the Act as opposed to section 44BB of the Act. Levy of interest 1. That the assessing officer has erred on facts and in law in levying interest under section 234B especially when there was no liability on the assessee to pay advance tax under section 209(1)( d) of the Income-tax Act, 1961. The appellant craves ....

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....ation of FTS/royalty and disregarding the insertion of provisos in section 44BB/44DA/115A and the rationale behind the introduction of said clarificatory provisos in the Finance Bill 2010 when relying on the case of M/s CGG Veritas to hold that the income of the assessee company was covered under the provisions of section 44BB. 6. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in relying on the case of M/s BJ Services Co (ME) Ltd ignoring the fact that the decision of the Hon'ble High Court in the said case has not been accepted by the Department and a Special Leave Petition is being filed against the judgment. 7. Whether on the facts and circumstances of the case the CIT(A) has erred in appreciating the finding given by the AO who had held that the Fee for Technical Services/Royalty received by the assessee which is a non-resident company was correctly estimated @ 25% of gross receipts as per the requirements of Rule 10 of the Income Tax Rules, 1962, in the absence of books of accounts and taxed accordingly. 8. Whether the CIT (A) has erred in not appreciating that proviso to section 4488 is not inserted 'per majorem cautelam' but ....

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....of the receipts. For AY 2008-09, the assessee is in appeal and for other two years (AY 2009-10 and AY 2010-10). 3. The nature of services rendered by the assessee is of technical in nature and taxability of similar issue is decided the Delhi Bench of Hon'ble Tribunal in the case of CGG Veritas SA (2012) (50S0T 3335) in its order dated 25 January 2012. This order is relied on by the CIT(A) while allowing the appeal of the assessee. In paragraph 40 of the Order, the Hon'ble Tribunal after considering the decision of the Hon'ble Delhi High Court in the case of Rio Tinto Technical Services (2012-TII-01-HC-DEL-INTL) and other decisions of the ITAT on the issue has held that receipts for services provided by the assessee is of the nature of fee for technical services. The Hon'ble Tribunal in paragraph 41 held that the CBDT Instruction No.1862 dated 22.10.1990 is of no help to the assessee. 4. In paragraph 43 of the Order the Hon'ble Tribunal has noted that the word 'services' in section 44BB include both technical and non-technical services. It was held that the proviso to section 44BB (1) will be pressed into service in case of the assessee whose receip....

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....GS Geophysical) the AO would specifically have to determine (a) whether the assessee had a PE in India during the relevant period; and (b) if so, whether the contracts entered into by the appellant with RIL were effectively connected with the appellant's PE in India. Only on the satisfaction of the said two conditions the income would be computed under section 44BB (1) of the Act. However, if such conditions are not satisfied then the income tax payable by the appellant would be computed in accordance with Section 115A (1) (b) of the Act. 11. The AO on page 4 of the order has noted that, 11 Since the payment under this contract are in respect of FTS as held above they are covered by the provisions of Section 44D/44DA of I.T.Act, such receipts would be taxable as business profits. In absence of the audited accounts for its permanent establishment in India, the profit earned on such fee for technical receipts have to be estimated". 12. To summarize, the consideration received by the assessee is of the nature of fee for technical services and this is taxable under section 115A or section 44DA depending on the fact of no PE or existence of PE and fee being effectively connect....