TaxTMI 
TaxTMI 
2016 (5) TMI 1250
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....AO u/s 143(3) r.w.s 263 pursuant to the directions dated 16.7.2012 of ld. DRP u/s 144C(5) of the I.T. Act, 1961. 3. Brief facts of the case are that the assessee company, incorporated under the laws of USA, is a tax resident of USA. It renders services in geophysical exploration and interpretation and its complete scope of work was entailing acquisition of 2D/3D seismic data and basic seismic data processing onboard by employing seismic vessel and qualified and experienced personnel. The onboard data processing involved processing the data acquired to remove distortions arising during the acquisition stage and convert the data into usable form. It was further explained that the seismic activities constituted an integral part of oil and gas exploration activities and the acquisition of seismic data was a crucial and an initial step in the prospecting for mineral oil which aids in identifying hydrocarbon bearing structures for development and production of mineral oil. 4. During the year under consideration the assessee had received gross receipts of Rs. 44,80,75,712/- from the following two contracts entered into with M/s Reliance Industries Ltd. i) Contract for 2D seismic ....
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....nt u/s 44BB of the Income-tax Act, 1961 ("the Act") for the assessment year 2009-10. 4. That the learned DDIT has erred in holding that provisions of section 44BB of the Act are not applicable to the services rendered by the Appellant to the Indian customer and in taxing the income u/s 44DA of the Act. 5. That the learned DDIT has erred in not appreciating that seismic data acquisition and onboard processing activities as carried out by the Appellant are in connection with exploration, extraction and production of mineral oil, as contemplated in section 44BB of the Act. 6. That the learned DDIT has erred in placing reliance on the decisions distinguishable on facts. For Viking Meritirne Inc. 7. That the learned DDIT/DRP has erred in not following the decisions (including Advance Rulings), on same facts, as relied upon by the Appellant, even having accepted that some decisions of higher authorities took a view contrary to his perception of law. 8. Without prejudice to the above grounds, the learned DDIT has erred in holding that the amendment as made by Finance Act, 2010 in proviso to section 44BB(1) for excluding the income covered by the provisions of section 44DA f....
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....4 substituted words "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" for words "a foreign company, includes any income by way of royalty or fees for technical services". Therefore, w.e.f. 1.4.2004 fee for technical services which. is not connected with permanent establishment of business or fixed place of profession in India, will be taxable u/s l15A(l)(b) of the Act. As observed earlier section 44DA was inserted in proviso to section 44BB (1) by the Finance Act, 2010 with effect from 1.4.2011 and simultaneously inserted second proviso to section 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 as....
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....ture and provides for assessment of the income of the nonresident by way of royalty or fees for technical services, where such non-resident carries on business in India through a permanent establishment situated therein or performs services from a fixed place of profession situated in India and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with the permanent establishment or fixed place of profession. Such income would be computed and assessed under the head "business" in accordance with the provisions of the Act, subject to the condition that no deduction would be allowed in respect of any expenditure or allowance which is not wholly or exclusively incurred for the business of such permanent establishment or fixed place of profession or in respect of amounts, if any, paid by the permanent establishment to its head office or to any of its other offices. Under section 44BB one does not find any reference to a permanent 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....
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....llowance wholly and exclusively incurred by the non-resident for the business of the permanent establishment in India and for expenditure towards reimbursement of actual expense by the permanent establishment to its head office or to any of its other offices is allowed from the revenues received by the non-resident. Because of the different modes or methods prescribed in the two sections for computing the profits, it apparently became necessary to clarify the position by making necessary amendments. That perhaps is the reason for inserting the second proviso to sub-section (1) of Section 44DA and a reference to section 44DA in the proviso below sub-section (1) of Section 44BB. A careful perusal of both the provisos shows that they refer only to computation of the profits under the sections. If both the sections have to be read harmoniously and in such a manner that neither of them becomes a useless lumber then the only way in which the provisos can be given effect to is to understand them as referring only to the computation of profits, and to understand the amendments as having been inserted only to clarify the position. So understood, the proviso to sub-section (1) of Section 44B....
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....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). 12. With reference to the aforementioned decisions, ld. counsel submitted that the issue of taxability of gross receipts by assessee u/s 44BB is no more res integra. 13. Ld. CIT(DR), however, submitted that the Hon'ble Supreme Court in the case of ONG (supra), has not examined the interplay between section 44BB and 44D and has also not considered the effect of amendment in the proviso to section 44BB. 14. Ld. CIT(DR) relied on the decision of Hon'ble Uttrakhand High Court at Nainital in the case of CIT Vs. ONGC as representative assessee of M/s Rolls Royce Pvt. Ltd. in ITA no. 86 of 2007 dated 20.09.2007. He pointed out that in this case the Tribunal's order, holding that the receipts were taxable u/s 44BB have been set aside and it has been held that the technical services rendered by assessee were squarely covered under Explanation 2 appended to clause (vii) to sub-section (1) of section 9, which has been adopted by reference u/s 44D....
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....able on presumptive basis u/s 44BB of the Act. The services carried on by assessee are in connection with the prospecting for mineral oils and, therefore, following the decision of Hon'ble Supreme Court, the assessee's appeal deserves to be allowed. In view of above discussion, the assessee's appeal is allowed. ITA no. 1247/Del/2015 (AY 2006-07): 18. This appeal arises out of assessment order dated 22.12.2014 passed by the AO u/s 148/143(3), pursuant to DRP's directions dated 14.11.2014 u/s 144C(5) of the I.T. Act. The issues involved are identical to the issues involved in ITA 5363/Del/2012 for AY 2006-07 above. In ITA 5363/Del/2012 we have held that the gross receipts received by the assessee are taxable u/s 44BB and not u/s 44DA of the Act. Since on merits the issue involved stands decided in favour of assessee, therefore, the ground relating to reopening of assessment has become academic. Accordingly, the impugned order passed by the AO is set aside and the assessee's appeal is allowed. ITA no. 2652/Del/2011 ( AY 2006-07): 19. This appeal has been filed by assessee against the order dated 31.3.2011 passed by the Director of Income-tax u/s 263(1) of the Income-tax Ac....