TaxTMI 
TaxTMI 
2018 (2) TMI 1343
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proposed action of the AO to bring the revenue to tax u/s 44DA/115A read with section 9(1)(vii) of the Act. 1.1 Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in not appreciating that the terms 'services' or 'facilities' used u/s 44BB are not defined and the two terms used are general in nature and therefore, once the payments take the character of FTS as defined u/s 9(1)(vii), they go outside the purview of section 44BB and have to be taxed at rates applicable to FTS u/s 115A/44DA of the Act. 1.2 Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in holding that the revenues earned by the assessee on account of provision of services were in connection with prospecting etc of mineral oil and hence eligible for treatment u/s 44BB of the Act, without adjudicating the aspect of eligibility in terms of second limb of the exclusionary proviso (Explanation to section 9(l)(vii) of the I T Act, 1961) i.e. "for a project undertaken by the recipient" in terms of the proposition confirmed by Hon'ble Delhi High Court in CIT V Rio Tinto Technical Services [2012-TII-01-HC- DELINTL] 1.3 Whether on the fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decision in the case of M/s OHM Ltd without first adjudicating upon the issue as to whether and how the scope of the services/facilities rendered under the contracts is not general in nature and therefore, does not qualify as FTS u/s 9(1 )(vii) of the Act taxable under section 115 A. 2.4 Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that the provisions of section 44BB of the Act are more special provisions which shall prevail over the provisions of section 9(l)(vii) read with sections 115 A/44DA of the Act, not appreciating the fact that both set of provisions are special in nature which operate in their own clearly defined spheres and therefore, once a particular receipt or income takes on the character of Royalty/FTS as defined in section 9(l)(vi)/9(l)(vii), it cannot be considered for treatment u/s 44BB and has to be taxed u/s 115A/44DA of the Act. 3 Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in holding that sections 115A and 44DA apply only to cases where the income by way of Royalty or FTS is earned by a non-resident by way of royalty or FTS from Government or an Indian ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Delhi passed the detail orders as per his order para no. 3 and 4 which is read as under :- "4.3 On careful examination of the matter, we find that identical issue of the assessee for the last year, i.e. A.Y. 2009-10, was adjudicated upon by the DRP-II, New Delhi vide direction u/s 144C(5) of the Act dated 18.12.2013. In the said direction, the DRP, after detailed discussion of the matter, had held that the amount received by the assessee on account of services rendered as per contract with Pride Foramer should be brought to tax by applying the deemed profit rate of 10% u/s 44BB of the Act. The relevant portion of the above direction is reproduced below:- "4. 1 As per the facts of this case, the assessee is a company incorporated under the laws of USA. During the year under consideration, the assessee has earned income from providing manpower services to Pride Foramer, a company incorporated in France which had executed contracts with ONGC for off-shore drilling operations relating to mineral oil in India through the rigs-Pride Pennsylvania and Pride Hawaii. The assessee company had entered into contract with Pride Foramer for provision of drilling related service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the above, the activities are an integral part of the drilling operation in connection with prospecting etc of mineral oil. This view has also been confirmed by the Hon'ble AAR in the case of Bourbon Offshore Asia Pte Ltd. (2011) 200 Taxman 408. 4.3.1 The provisions of section 44BB also do not contain any thing to support the AO's contention regarding the so-called 'second leg contract' so as to deny the applicability of the section to the assessee. What is required under the section is that the services/ facilities provided by the assessee should be "in connection with" prospecting etc of mineral oil. No where it is mandated that the services should be provided directly by the party who is engaged in prospecting etc. of mineral oil or is directly a member of the Production Sharing Contract as is sought to be made out by the AO. The above view has been confirmed by the Hon'ble /TAT Mumbai in Micoperi S.P.A. Milano vs. Dy. CIT (2002) 82 ITD 369. The legislature u/s 44BB inserted w.e.f. 01.04.1983 has provided a special provision of deemed profit in connection with the business of exploration of mineral oils considering the special nature of the business, which should no....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "12. The inquiry now is whether the income derived by the applicant from performing its contract with the UAE Company would be assemble to tax as, fees for technical services under section 44D, 44DA, or 115A of the Act. Admittedly, the income derived by the applicant is from a UAE company and not from the Government or an India concern. In other words, income derived by the applicant is from a nonresident company of foreign company. On the wording of these sections, the income cannot be brought within their purview, because they only speak of income by way of fees for technical services received from Government or an Indian concern. On this short ground, the contention of the Revenue that the income derived by the applicant is independently assessable under section 115A or 44DA of the Act, has to be rejected. Since, income derived by the applicant, is from an activity in connection with the prospecting for mineral oils and from a foreign company, the applicant would be entitled to claim to be assessed under section 44BB(1) of the Act. The ruling, therefore, on question no 3 is that the income derived by the applicant are to be computed in accordance with the provisions of se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....India should be brought to tax which is 7.5%. i.e. lower than the deemed profit of 10% offered by the assessee u/s 44BB. It is submitted that the above mark-up of 7.5% has been accepted as arm's length price by the TPO. However, we find that in view of the direction given against ground nos. 1.1 and 1.2 above accepting the assessee's claim u/s 44BB, the above alternative grounds are rendered infructuous and hence are rejected." Aggrieved by the above order the revenue appeal before the Income Tax Appellate Tribunal. No. 795/Del./2015 11 4. During the course of hearing the ld. AR submitted that the case is covered by the earlier order of the Tribunal in ITA no. 1156/Del/2014 for the assessment year 2009-10 and he also submitted that the facts were remained un-changed and he also relied on the decision of Supreme Court order ONGC vs. CIT order dated July 1, 2015 recorded in ITR 376 ITR 306 (SC). After hearing appeal of the revenue, we observed that the facts of the case from the assessment year 2009-10. No any changes found and respectfully following the judgment of the co-ordinate bench in ITA no. 1156/Del/2014 for assessment year 2009-10. The finding is as under :- "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the amounts paid or payable to such non-resident assessee as mentioned in sub-section (2). On the other hand, section 44D contemplates that if the income of a foreign company with which the government or an Indian concern had an agreement executed before 1-4-1976 or on any date thereafter the computation of income would be made as contemplated under the aforesaid section 44D. Explanation (a) to section 44D, however, specifies that 'fees for technical services' as mentioned in section 44D would have the same meaning as in Explanation 2 to clause (v/j) of section 9(1). The said explanation as quoted above defines 'fees for technical services' to mean consideration for rendering of any managerial, technical or consultancy services. However, the later part of the Explanation excludes from consideration for the purposes of the expression, i. e., 'fees for technical services' any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration which would be chargeable under the head 'salaries'. Fees for technical services, therefore, by virtue of the aforesaid Explanation will not include payments made in co....