TaxTMI 
TaxTMI 
2018 (12) TMI 1069
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....s Reliance Industries Ltd ('RIL'). 3 2. Whether on the facts and in the circumstances of the case, the Hon'ble DRP has erred in holding that the amount received by the assessee from M/s Aker Installation FP AS ('Aker') on account of the services rendered was not in the nature of Fee for Technical Services ( 'FTS') as defined u/s 9(l)(vii) of the Act and was not taxable under the provisions of sec 44DA r.w.s. 115A of the Act. 3. 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 services to a nonresident company 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 DIT V Rio Tinto Technical Services [2012-TII-01-HC- DEL-INTL]. 4. Whether on the facts and circumstances of the case, the Hon&#....
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.... since sections 44DA/115A are special provisions for taxation of income in the nature of royalties and FTS and if a special provision is made respecting a certain matter that matter is excluded from the general provision under the rule of "Generallia specialibus non derogant". 10. 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 44DA and 115A 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 FTS as defined in section 9(1(vii), it cannot be considered for treatment u/s 44BB of the Act. 11. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in holding that sections 44DA and section 115A 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 entity and where an income is received by a non-re....
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....ted by Aker a portion of the contract for installation of Subsea facilities necessary for the first phase of MA D6 block development. The sub contracted scope comprises of in-country and out-country services. A copy of the contract entered into between Aker and the assessee is enclosed at pages 1 to 373 of the PB. 6. In the return of income filed for the relevant assessment year, the assessee offered to tax, income of Rs. 21,68,74,624/- earned under the said contract (consisting of in-country receipts of Rs. 15,88.61,653/- and out-country receipts of Rs. 5,80,12,971/-) under the provisions of section 44BB of the Act viz. presumptive basis, since the activities performed were 'in connection with prospecting for, extraction and production of mineral oil'. The assessee has, accordingly, computed its income tax liability under the Act and filed its return of income on presumptive basis determining its taxable income at 10 percent of in-country and out-country receipts under section 44BB of the Act. 7. During the course of assessment proceedings under section 143(3) of the Act, the AO while disregarding the applicability of section 44BB of the Act proposed to tax the entire receip....
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....ho is engaged in prospecting etc. of mineral oil or is directly a member of the Production Sharing Contract. Hon'ble Jurisdictional High Court in D1T vs. OHM Ltd. (2012) 212 Taxman 440 (Delhi) has held that section 44BB of the Act being a more specific provision shall prevail over the general provisions of the Act and that the services rendered by the sub-contractor of the ofl-shore rigs of a contractor is part and parcel of activities for extraction etc of mineral oils and would be covered u/s 44BB of the Act. Assessee's claim for applicability of Section 44BB was accepted by the AO for A.Y. 2009- 10. Consequently, the AO passed final assessment order dated 02.01.2014, under section 143(3) r.w.s. 144C( 1) of the Act and accepted the returned income filed by the assessee." 9. The bone of contention is taxability of the contract receipts u/s 44BB of the Act which reads as under: "Section 44BB (I) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying....
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....uch data. The AAR held that that the expression 'in connection with' used in section 44BB, has to be provided an expansive meaning to include a variety of services relating to exploration, extraction and production of mineral oil. * In the case of ACIT vs Paradigm Geophysical Private limited [2008] 117 TTJ 812 (Delhi) the assessee had entered into a contract with Reliance Industries Limited for undertaking seismic data processing activities. On the issue of determining whether the activities would be covered by the provisions of section 44BB of the Act, the ITAT held that any consideration of whatever nature received in connection with prospecting for, or extraction or production of mineral oil would be taxed on presumptive basis as per section 44BB of the Act, considering that the scope of the said section is very wide and would cover all kinds of services including services in the nature-of managerial, technical or consultancy. * The AAR in the case of Lloyd Helicopters International Pty Ltd [2001] 249 ITR 162 has held that provision of helicopter services for transporting men to the area where exploration activities are undertaken would be categorized under sec....
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.... of the Act. * Section 44D of the Act is not applicable since the assessee has entered into the contract on 13.11.2007. i.e. after 31.03.2003 The assessee's scope of work in relation to the activities under the Contract involves rendition of services in relation to installation of manifolds, umbilicals, flexible risers and flowlines and control systems in the D6 block and the associated engineering necessary for the installation of facilities in the In the first oil phase of the MA D6 oil field development. Accordingly, the services rendered by connection with exploration, extraction and production of mineral oil are taxable 1 44BB of the Act. 13. The Revenue insists that the provisions of section 44DA r.w.s. 9(1)(vii) of the Act squarely apply on the facts of the case in hand. Section 44DA of the Act as introduced by the Finance Act, 2003, w.e.f. 1.04.2004 reads as under: "44 DA. (I) 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 31 si day of March, 200....
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....perations and the expressions 'mining project' or 'like project', occurring in Explanation 2 section 9(l)(vii) of the Income-tax Act would cover rendering of services tike imparting of training and carrying drilling operations for exploration or exploitation of natural gas. In view of the above opinion, the consideration for services will not be treated as fees for technical services for purposes of Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961. The payments for such services to a foreign company will, therefore, be income chargeable to tax under the provisions of Section 44 BB of the Income-tax Act, 1961 and not under the special provisions for the taxation of fees for technical services contained in Section 115A read with Section 44D Income-tax Act, 1961. "(emphasis supplied)." Accordingly, such services would be outside the purview of "fees for technical services" under section 9(I)(vii) of the Act." 14. The Supreme Court in the case of Oil and Natural Gas Corporation Limited vs. CIT 376 ITR 306 held as under: "13. The Income Tax Act does not define the expressions "mines" or "minerals". The said expressions are found de....
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....orks or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. " 15. It is worth mentioning here that by Finance Act, 2010, amendment was brought in the proviso to section 44BB of the Act w.e.f 1.04.2011 whereby Section 44DA of the Act was inserted therein indicating that the provisions of Section 44BB shall not apply in respect of income referred to in that section. Finance Act 2010 itself specifically mentions that the above amendment shall take effect from 1st April 2011 and will, accordingly, apply to the assessment year 2011-12 and subsequent years. Memorandum explaining the provisions of Finance Bill, 2010 also makes it clear that these amendments assessment order proposed to take effect from 01.04.2011 and will, accordingly, apply to the assessment year 2011-12 and subsequent years. 16. The Hon'ble Delhi High Court in the case of DIT vs. OHM Ltd. 352 ITR 406 held that income received from services rendered in connection with providing services in relation to extraction and production of mineral oil should be taxable under section 44BB as opposed to section 44DA of t....
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....rvices are covered by Section 44BB It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim "Generallia specialibus non derogant". It is again a well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This was stated to be the "rule of harmonious construction" by the Supreme Court in Venkataramana Devaru v. Stale of Mysore AIR 1958 SC 255. If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction In South India Corporation (P.) Ltd v. Secretary. Board of Revenue Trivandrum, AIR 1964 SC 207 it 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 ....
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.... Section 44DA. Similarly, the second proviso to sub-section (1) of Section 44 DA can only be interpreted to mean that where the services are general in nature and fall under the subsection read with Explanation 2 to Section 9(1)(vii) of the Act, then an assessee rendering such services as provided in Section 44BB cannot claim the benefit of being assessed on the basis that 10% of the revenues will be deemed to be the profits as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w.e.f 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, mil forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. " (emphasis supplied). 17. The second contention of the Revenue is that section 44BB of the Act is not applicable to se....
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....d as under: "60. A reading of the aforesaid judicial precedence clarify that sec. 44BB does not distinguish between the main contractor or a sub-contractor as has been interpreted by the AO and the DRP. The conclusions of the A.0 and the DRP are erroneous on account of the reason that the provision clearly envisages the non-resident assessee to be engaged in the business of supplying plant and machinery on hire. The only condition imposed, to say. is that such plant and machinery has to be used or should be used for the purposes of prospecting or extraction or production of mineral oils. The language in section 44BB in our view is clear so also the Legislative intention. It is a trite law that has already held by the Hon'ble Supreme Court in B. Parmannand v.Mohan Koikal [2011] 4 SCC 266 that "the language employed in a statute is the determinative factor of the Legislative intend. It is well settled principle of law that the Court cannot read anything into a statutory vision which is plan and unambiguous". If the legislatures intention as contended by the Revenue was to restrict the benefit of sec. 44BB only to the main contractor or ONGC, then the words after 'the....
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....ssion of the ld. counsel for the assessee that assessee's income taxable in India shall only be so much of profits under contract as is attributable to the PE in India. The Hon'ble Supreme Court in the case of Carborandum Co vs CIT [supra] has held that if, however, all the operations are not carried out in India, the profits and gains of the business deemed to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in India. 60. Similar view has been taken by the Hon'ble Supreme Court in the case of CIT Vs. Hyundai Heavy Industries Co. Ltd reported in 291 ITR 482 [SC]. So far as the allegation of the ld. DIT that the A.O has not gone through the contract is concerned, we find the assessee has filed details including the copy of the contract before the A.O who, after analyzing the same has accepted the returned income. 61. We find the A.O in the instant case, after going through the various details filed by the assessee has taken a possible view. It has been held in various decisions that where the A.O has taken a possible view, the assessment order cannot be ....
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.... on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The CIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induces repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [see Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) at p. 10]. ............... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the CIT simply because, according to him, the or....
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....he order in the following manner: " The tools and dyes have a very short life and can produce upto maximum 1 lakh permissible shorts and have to be replaced thereafter to retain the accuracy. Most of the parts manufactured are for the automobile industries which have to work on complete accuracy at high speed for a longer period. Since it is an ongoing procedure, a company had produced 10,75,000 sets whose selling rates is inclusive of the reimbursement of the dyes cost. The purchase orders indicating the costing include the reimbursement of dyes cost are being produced before your Honour. Since the sale rate includes the reimbursement of dye cost and to have the matching effect, the cost of the dyes has been claimed as a revenue expenditure." 14. This clearly shows that the AO had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools is to be treated as revenue expenditure or not. It appears that since the AO was satisfied with the aforesaid explanation, he accepted the same. The CIT in his impugned order even accepts this in the following words : "AO accepted the explanation without raisi....
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....isional powers to : (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pas....
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....on, the assessee has objected to the levy of interest u/s 234B of the Act. 23. Before us, the ld. AR vehemently stated that the Revenue's receivables by an assessee are subject to deduction of tax at source. Thereafter, the question of payment of advance tax and subsequent levy of interest u/s 234B of the Act does not arise at all. 24. Per contra, the ld. DR strongly supported the orders of the authorities below. 25. In our understanding of the law, as per the provisions of section 234B of the Act, the assessee who is liable to pay advance tax u/s 208 of the Act will be liable to interest u/s 234B of the Act if he fails to pay such tax or advance tax paid by him falls short of 90% of the assessed tax. As per provisions of section 208 r.w.s 209(1) of the Act, advance tax payable has to be computed after reducing from the estimated tax liability the amount of tax deductible/ collectible at source on income which is included in computing the estimated tax liability. Such balance tax liability is the advance tax payable under section 208 of the Act. 26. The Hon'ble Delhi High Court in the case of DIT v. GE Packaged Power Inc.: 373 1TR 65, held that no interest under sec....