TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 317
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....ervices rendered by the Assessee to entities resident in India is "fees for technical services" within the meaning of Explanation 2 to Section 9(1)(vii) of the Act; and, whether the same is taxable under section 115A or Section 44BB of the Act. 3. The present appeal was admitted on 08.01.2013 and the following questions of law were framed: 1. Whether on the facts and circumstances of the case, the Tribunal erred in law in holding that the activity of 2D/3D seismic survey carried on by the appellant in connection with exploration of oil, was in the nature of "fees for technical services" in terms of Explanation 2 to section 9(1)(vii) of the Act? 2. Whether on the facts and circumstances of the case, the Tribunal erred in law in holding that income of the appellant, in the nature of "fees for technical service" was liable to tax in India under section 44BB of the Act only if the appellant had permanent establishment ("PE") in India in the relevant assessment year? 4. Briefly stated, the relevant facts necessary to consider the disputes involved are as under:- 4.1 The Assessee is a company incorporated under the laws of Norway and is principally engaged in the business of provi....
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....ent order before the DRP, which were rejected by an order dated 18.07.2011; the DRP directed the AO to complete the assessment as per the draft assessment order. Thereafter, on 29.07.2011, the AO passed the final assessment order computing the Assessee's taxable income at Rs. 2,68,74,62,560/-. 7. Aggrieved by the assessment order dated 29.07.2011, the Assessee preferred an appeal before the Tribunal, inter alia, on the ground that the nature of its income did not fall within the definition of 'fees for technical services' under Explanation 2 to Section 9(1)(vii) of the Act and that tax on its income was liable to be computed under Section 44BB(1) of the Act. The Tribunal disposed of the aforesaid appeal by an order dated 20.04.2012, which is impugned herein ('the impugned order'). 8. By the impugned order, the Tribunal concurred with the AO/DRP that the consideration received by the Assessee was 'fees for technical services' falling within the scope of Explanation 2 to Section (9)(1)(vii) of the Act. The Assessee's contention that services in question fell within the scope of "construction, assembly, mining or like project" and, therefore, the consideration received for the s....
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....services' as such services were inextricably linked with prospecting and extraction of mineral oil and thus, would fall within the exclusion as provided under Explanation 2 to Section 9(1)(vii) of the Act. He further submitted that the said issue was squarely covered in favour of the Assessee by a recent decision of the Supreme Court in Oil and Natural Gas Corporation Limited v. Commissioner of Income Tax & Anr. Civil Appeal 731/2007, decided on 01.07.2008. 12. Mr Raghvendra Singh, the learned counsel appearing for the Revenue, contested the submissions made on behalf of the assessee and submitted that "fees for technical services" received by a non-resident from an Indian concern would be taxable under Section 44DA(1) of the Act, if the assessee carried on the business through a PE in India. He submitted that the amendment introduced in the proviso to Section 44BB(1) of the Act by the Finance Act, 2010 with effect from 01.04.2011, specifically excluded the incomes falling within the scope of Section 44DA of the Act from its scope. He submitted that even though the period in question was prior to the said amendment, nonetheless, the amendment would be applicable as it was only cla....
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....be the following, namely :- (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of secti....
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....ent 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 pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such fees for technical services are received in pursuance of an agreement made after the 31st day of May, 1997 but before the 1st day of June, 2005; and (BB) 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 ten per cent if such fees for technical services are received in pursuance of an agreement made on or after the 1st day of June, 2005; and (C) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income by way of royalty and fees for technical services. Explanation.-For the purposes of this section,- (a) "fees for technical services" shall hav....
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....of an assessee would be taxable under Section 115A(1)(b) of the Act unless (a) it fell within the exclusionary clause of Explanation 2 to Section 9(1)(vii) of the Act, that is, where the consideration received by the assessee is for "construction, assembly, mining or like project" undertaken by it; or (b) it fell within the scope of Section 44DA (1) of the Act. At this stage it is necessary to refer to Section 44DA(1) of the Act, which reads as under:- "Special provision for computing income by way of royalties, etc., in case of non-residents. 44DA. (1) The income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after the 31st day of March, 2003, where such non-resident (not being a company) or a foreign company carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively conne....
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.... tax payable on such income. 21. In this view, the primary issue to be addressed is whether the consideration received by the Assessee for providing Geophysical services would fall within the exclusion provided in Explanation 2 to Section 9(1)(vii) of the Act. In our view, the aforesaid question is no longer res integra and is squarely covered by the decision of the Supreme Court in Oil and Natural Gas Corporation Limited (supra). The said decision was rendered in a batch of matters concerning several non-resident assessees who claimed that their service fell within the expression "mining or like projects" and thus, the consideration received by them for such services stood excluded from the scope of 'fees for technical services'. The said assessees classified the contracts entered into by them under eight heads which are reproduced below:- "1. Carrying out seismic surveys and drilling for oil and gas. 2. Services starting/re-starting/enhancing production of oil and gas from wells 3. Services for prospecting for exploration of oil and or gas. 4. Planning and supervision of repaid of wells. 5. Repair, Inspection or Equipment used in the exploration, extraction or p....
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....DA(1) and 44BB(1) of the Act and affirmed the view expressed by the AAR in Geofizyka (supra) and held that Section 44BB of the Act, being industry specific was a special provision and would, thus, override the provisions of Section 44DA(1) of the Act in respect of any income that had arisen in respect of business carried on in connection with prospecting for, or extraction or production of mineral oils and which also fell within the ambit of Section 44DA(1) of the Act. The relevant extract of the said judgment reads as under:- "11. We do not think that there is any error in the view taken by AAR. Basically the rule that the specific provision excludes the general provision has been applied. Section 44BB is a special provision for computing the profits and gains of a nonresident in connection with 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 including petroleum and natural gas. Section 44DA is also a provision which applies to non-residents only. It is, however, broader and more general in nature and provides for assessment of the....
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....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." 26. Following the aforementioned decision, we accept the contention advanced on behalf of the Assessee that since it is clearly engaged in business of providing services in connection with prospecting for mineral oils, its income - if it falls within the ambit of Section 44DA(1) of the Act - would be taxable under Section 44BB(1). 27. The contention advanced on behalf of the Revenue that "fees for technical services" earned by a foreign company in respect of a contract which is connected with the PE of such foreign company in India would be taxable under Section 44DA(1) of the Act, irrespective of whether the same is connected with extraction/production of mineral oils, cannot be accepted. By virtue of Finance Act, 2003, such income was excluded from the ambit of Section 115A(1)(b) of the Act w.e.f. 01.04.2004. Although, with effect from said date such income was taxable under Section 44DA(1) of the Act but in certain cases where such income was earned by....