TaxTMI 
TaxTMI 
2017 (7) TMI 1269
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....ls. Keeping in view the CBDT Circular dated 10/12/2015 & also the provisions of Section 268A of Income-tax Act 1961, and considering the submissions of the Ld. AR, the Revenue is also in agreement with the same subject to file M.A if in case Tax Effect is more than Rs. 10 lacs. The appeals for A.Y. 2004-05 and 2008-09 being ITA No. 2952/DEL/2007 and 1179/DEL/2012 are dismissed. 3. However, dismissal of these two appeals will not hold as precedent in earlier or subsequent proceedings as the issues involved and agitated by the Revenue in these appeals are common to the appeals filed for preceding and subsequent Assessment Years. 4. The assessee company is incorporated in the United States of America and for the purpose of the DTAA between India & USA, it is a tax resident of the USA. The assessee is in the business of providing software solutions to the oil and gas industry throughout the world and had sold certain software to purchasers in India. It is engaged in the business of supply, installation and commissioning, maintenance, consultancy and training of softwares which are used in connection with the prospecting for production exploration and extraction of mineral oils. ....
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....oftware supplied by it. The Assessing Officer held that the entire income from training employees of the Indian company was in the nature of 'fee from included services' and the same was brought to tax at the rate of 15% as provided in Article 12 of India-US DTAA. The Assessee had also received a sum of Rs. 30,86,293/- from Halliburton Offshore Services Inc. As the Assessee could not produce the contract or invoice in relation to this receipt, the Assessing Officer held the entire receipt from Halliburton Offshore Services Inc. was in the nature of 'fee from included services' as provided in Article 12 of India-US DTAA and taxed such receipt at the rate of 15%. Accordingly, the assessment for the Assessment Year 2002-03 was completed with following additions: Taxable income as per Return of Income NIL Add: Income from sale of software (2% of contract value) (taxed at corporate tax rate applicable to a foreign company) Rs. 24,08,514/- Income from fee from included services -Installation and commissioning as a part of sale of software (5% of contract value) -Training as part of sale of software (10% of contract value) ....
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....,24,616/- was taxable in India. However, the CIT (A) relied on the Instruction No. 1862 issued by CBDT and held that the income from training provided without supplying software ought to be taxed under section 44BB of the Income-tax Act, 1961 and not at the rate of 15% as taxed by the AO. Thus, the addition of Rs. 17,24,616/- in respect of standalone training contracts was confirmed by the CIT (A). However, it was held that income from such services ought to be taxed under section 44BB of the Act and not at the rate of 15% as levied by the AO. Income earned by the Assessee from contract with Halliburton Offshore Services Inc. was not pressed by the Assessee before the CIT (A) and addition to the tune of Rs. 30,86,293/- was accordingly, confirmed by the CIT (A). 5.3 The Ld. DR relied upon the Assessment Order. The Ld. DR also submitted that the arguments submitted for A.Y. 2003-04 may be taken into consideration. 5.4 The Ld. AR relied on the order of CIT (A) and submitted that the arguments for A.Y. 2003-04 may be taken into consideration and the appeal of the Revenue may be dismissed. A.Y. 2003-04 6. During the assessment year under consideration, the Assessee had also ....
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....eld that since the software rented was used for exploration and extraction of mineral oils, the income from renting of software ought to be taxed under section 44BB of the Income-tax Act, 1961. The addition of Rs. 20,55,260/- in respect of income from rental of software was therefore confirmed. Therefore, the CIT (A) held that such income was to be taxed at the presumptive rate provided in section 44BB of the Act instead of 15% as levied the order of the AO. The CIT (A) deleted the addition of Rs. 75,34,373/- which was added as income from installation and commissioning of software provided along with supply of software by the AO and Rs. 1,00,63,623/- which was added as income from training provided for use of software along with supply of software by the AO on the similar findings as given in the appellate order for A.Y. 2002-03. The CIT (A) held that income from training provided without supplying software will not get the benefit of Article 12(5)(a) of India-US DTAA. The CIT (A) held that income of Rs. 1,04,48,070/- was taxable in India. The addition of Rs. 1,04,48,070/- in respect of standalone training contracts was confirmed by the CIT (A). However, it was held that income fr....
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....stallation of Software which is used for analysis of flow rate of mineral oil to determine reservoir conditions." ii. Serial No. 44: "Supply, installation and familiarization of software for processing seismic data." The Hon'ble Supreme Court has proceeded from the specifics of the entries in the said table to broad generalized principle by stating the following right below the said table: "The above facts would indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contract is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act." The Ld. DR submitted that the word "familiarization" highlighted above with reference to serial no. 44 in the said table is equivalent to "t....
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....he year, the ground No.1 of the Revenue may be dismissed. The Ld. AR further submitted that the income from training services provided to a company engaged in exploration, extraction and productions of mineral oils is eligible for getting taxed at the presumptive rates provided in section 44BB of the Act. The law in this regard is no more res Integra. Hon'ble Supreme Court in the case of ONGC Ltd. (supra) had provided a list of services which are eligible for getting taxed under section 44BB of the Act in Para 13 of its judgment. A perusal of this list will highlight that the services provided by the Assessee are covered within the service. The Ld. AR further submitted that ground no. 2 raised by the Revenue is erroneous to the extent that it has been stated that the CIT (A) had held that the installation and commissioning services are taxable under section 44BB of the Act. As is evident from the order of the CIT (A), the installation and commissioning services being intrinsically linked to the supply of software were held to be not taxable by virtue of Article 12(5)(b) of India-US DTAA. Thus, the Ld. AR submitted that the ground to this extent may be deleted. Further, the Ld. ....
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....sp; Income from fee from included services -Installation and commissioning as a part of sale of software (5% of contract value) - Income from training services (included with sale of software) -Income from training service (standalone contract) Rs. 31,48,770/- Rs. 1,64,71,730/- Rs. 33,41,061/- Total Taxable Income as per A.O Rs. 2,29,61,561/- Tax Liability - Tax on income from fee from included services @15% Rs. 34,44,234/- Total tax Liability Rs. 34,44,234/- 7.2 The CIT (A) deleted the addition of Rs. 1,64,71,730/- which was added as income from installation and commissioning of software provided along with supply of software by the AO. In regards to the addition of Rs. 33,41,061/- for standalone training contracts confirmed by the CIT (A), it was held that income from such services ought to be taxed under section 44BB of the Act and not at the rate of 15% as levied by the AO. 7.3 The Ld. DR emphatically relied upon the Assessment Order. The Ld. DR also submitted that the arguments submitted for A.Y. 2003-04 may be taken into consideration. 7.4 The Ld. AR relied on the order of CIT....
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....ia & USA as it does not have any permanent establishment in India as defined under Article 5(2). As per the records and the submissions before us by the Ld. AR, the assessee has not participated in the activities for a period more than 10 to 15 days in India. The same was not refuted by the Ld. DR at any point of time while arguing about the status of permanent establishment of the Assessee. The CIT (A) also held that admittedly the assessee does not have any office in India and its activities are not covered by the deeming fiction of Article 5(2) of the Indo-US DTAA which is to be considered project-wise. The CIT (A) further observed that the Assessing Officer has not considered the issue as to whether the assessee had or did not have a permanent establishment. Therefore, the CIT (A) for the Assessment Year 2002-03 held that the assessee did not have a permanent establishment in India during the previous year relevant to Assessment Year 2002-03. Accordingly, the CIT (A) held that in terms of Article 7(1) of the Indo-US DTAA the sale of software which are "off the shelf" software, are not taxable in India. Thus, the assessee has succeeded in establishing that there is no permanent ....