AI Drafter 
TaxTMI 
TaxTMI 
2016 (7) TMI 947
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....act with the upstream companies and tires it was submitted that the assessee has a permanent establishment (PE) in India. It was submitted that such data is widely used by oil exploration companies to help them ascertain existence of potential hydrocarbons and to determine the size and structure of known reservoirs in the area designated for s seismic survey. This seismic survey and processing of data acquired by in the Surrey is one of the most critical activities in the exploration of mineral oils. Since the services provided by the assessee are in connection with prospecting for, or extraction or production of mineral oil, the taxable income of the assessee has been computed as per the provisions of section 44 BB of the act at a deemed profit of 10% of gross revenues. 2.2. During the year under consideration the assessee has offered the revenues from the following contracts: Name of the company contract details Contract No. and date Scope of work Contract Revenue ONGC Contract No. MR/WOB/MM/ GP/QML/Hon'ble Supreme Court /OB/2006/EB-2132 Long term leasing of one Q-marine vessel for the field season 2007-08 two Q-marine vessels for the field season 2008....
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..../2009/CC00 2 dated 18.11.2009 Acquiring Marine 3D Seismic Data and processing for Block MB-OSN-2005/2 for Adani Welspun Exploration Ltd. 223,823,982 BG One time work Data Gathering & Seismic Deliverables 6,347,203 Stat Oil One time work purchase order date 02.09.2009 Seismic Interpretation course at UAN 1,155,250 Total Receipts 7,407,572,086 2.3. It has been submitted by the assessee that the above contracts have been continuing since previous year in respect of most of them and in respect of new contracts executed for which revenue have been offered during this year are also having similar nature of scope of work. The scope of work of the above contracts include processing of PD line data, survey long-term lease of Marine technology, hiring of Q-Marine Vessel with the help of its personnel and equipment, seismic data acquisition and processing, hiring of vessel and technology, in contracts with RIL and ONGC, and undertake seismic data processing services for Essar. 2.4. During the year under consideration the assessee had received gross receipts of Rs. 7,40,75,72,086/- from the above contracts. The assessee had offered ....
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....OT 335 (DEL). The ld.CIT(A), following the decision of assessee's own case for the previous assessment year allowed the ground released by the assessee. However on the issue relating to reimbursement of the mobilisation/demobilisation expenses the ld.CIT (A) confirmed the addition made by the Ld.AO. 4. Aggrieved by the order of the Ld.CIT (A) both the assessee as well as the revenue has preferred an appeal before us on the following grounds of appeal. Assessee's Appeal ITA No. 5602 "Based on the facts and circumstances of the case, Western Geco International limited (hereinafter referred to as 'WGIL' or the 'Appellant') respectfully craves leave to prefer an appeal against the order dated 30 July 2013 passed by the Commissioner of Income Tax (Appeals) - II [hereinafter referred to as the 'learned CIT(A)'] under section 250(6) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') (received by the Appellant on 19 August 2013) on the following grounds: Addition qua mobilization / demobilization receipts attributable to distance travelled outside India: 1. The learned CIT(A) has erred in taxing receipts amounting to Rs. ....
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....sion in the case of CIT vs M/s ONGC As Agent of M/s Foramer France [(2008) 299 ITR 438 Utarakhand] . 5. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the distinct scheme of taxation of FTS/Royalty and disregarding the insertion of provisos in section(s) 44BB/44DAIl15A and the rationale behind the introduction of said clarificatory proviso's in the Finance Bill 2010. 6. Whether on the facts and circumstances of the case, the CIT(A) has erred in relying on the decision of the IT A T in the case of M/s CGG Veritas Services, SA in ITA No.4653/Del/20l0 (on the issue that once a PE is established to be in place then the income has to be treated as business profits and assessable u/s 44BB). 7. Whether on the facts and circumstances of the case, the CIT(A) has erred in not appreciating the fact that proviso to section 44DA brought about by the Finance Act 2010 was only clarificatory in nature and its application has to be read into the main provision with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sed co Forex International Drilling vs CIT. 8. Whet....
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.... try to work out, based on some bases, the revenue is attributable to the activity of mobilisation carried out outside India, cannot be accepted, as such an exercise would amount to estimating income for activities outside India, when the scope of the contract is for execution of the contract in India. Mobilisation in our view is an incidental activity to the main activity of carrying out the contract in India. The judgement of Hon'ble Supreme Court in the case of Ishikawajima and Hundai Heavy Industries Ltd. VSD I T, reported in 288 ITR 408 has been discussed by the Hon'ble High Court in the case of Sedco Forex International Inc (supra). The ratio laid down by Hon'ble Supreme Court in that case is not applicable here as it is not a case where separate parts of a contract are executed at different places. The argument that the payment was in the nature of reimbursement of expenses incurred by the assessee company and hence not income was also rejected by the Hon'ble High Court. Thus we are unable to agree with the contentions of Ld. counsel for the assessee. Thus these grounds of the assessee are dismissed." 5.3. Respectfully following the decision of this tribunal in assessee's....
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....he appeal filed by the revenue relates to the taxability of fees for technical services under section 44 BB or under section 44DA or and under section 115A of the act. 7.1. Ld. AR submitted that to the facts of the present case for the year under consideration, the gross receipts of assessee are taxable u/s 44BB because, insertion of section 44DA in the proviso to sec. 44BB w.e.f. 1.4.2011, has been held to be prospective in nature. He submitted that ld.AO has given specific finding of permanent establishment of assessee being there in India. He referred to the decision of ITAT Delhi Bench in the case of CGG Veritas Services SA Vs. (supra), wherein in para 46 of the order the Tribunal has, inter alia, observed as under: "46. On combined reading of section 44DA(1) and 115A(1)(b) it is clear that the provisions of section 44DA(1) are applicable in the case of a non-resident assessee who carries on business in India through a permanent establishment, or performs professional services from a fixed place of profession, and fees for technical services paid under the contract is effectively connected with such permanent establishment or fixed place of profession in India. In section....
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....04-05 to 2010-11 the consideration received for 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 outside the scope of section 44DA and will be assessable under section 44BB (1) of the Act for the simple reason that proviso to section 44BB(1) does not contain section 44DA for these years." 7.2. The Ld. AR has placed as reliance on the decision of this Tribunal in assessee's own case for assessment year 2007-08 and 2009-10 in ITA No. 5977/Del/2010. 7.3. Ld.AR referred to the decision of Hon'ble Supreme Court in the case of ONGC Ltd. Vs. CIT (2015) 59 Taxmann.com 1, wherein it has been held that, where the dominant purpose of agreement is for prospecting, extraction or production of mineral oil, though there may be certain ancillary works contemplated thereunder, the payments received by the non-resident assessee or foreign companies under the said contracts are assessable under the provisions of section 44BB and not section 44D of the Act. The relevant extract of the decision by the Hon'ble Court is as under; "The above facts indicate t....
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....A over 44 DA was not accepted by the tribunal in view of the insertion of the proviso to subsection (1) of section 44 BB by the finance act, 2010 w.e.f. 1st April, 2011. Whereas, the section 44 BB deals with all kinds of services in connection with prospecting for, extraction or production of mineral oils; section 44DA deals with, amongst others, fees for technical services from a nonresident, not being a company, or a foreign company, after 31st of March, 2003 at the same time, section 115A deals with technical service fees in case of a foreign company. Therefore we are of the view that the tribunal was right in concluding that in respect of fees received by a non-resident assessee for providing services in connection with prospecting for, extraction or production of mineral oils, such assessee would be covered by section 44 BB until proved before proviso to subsection (1) of section 44 BB was inserted." 8.3. The ld.AR submitted that the assessment year before the Hon'ble Uttarakhand High Court was 2007-08 does he submitted that the amendment being prospective in nature would not be applicable to the year prior to 2012-13. 9. We have considered the rival submissions and have....
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....come 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 facilities in connection with, or supplyi....
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....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 44BB can only mean that the flat rate of 10 ....