TaxTMI 
TaxTMI 
2022 (3) TMI 84
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....), Mumbai ("the Assessing Officer") under Section 195 of the Act, 1961, came to be rejected. 3. The background facts leading to this petition can be summarized as under: (a) The petitioner is a public limited company and an engineering conglomerate and carries out varied business activities through independent divisions. On 6th February, 2006, the petitioner had entered into a contract with the Oil and Natural Gas Corporation Ltd. ("ONGC"), whereunder the petitioner was awarded the contract for survey (pre-engineering, pre-construction/pre-installation and post-installation), design engineering, procurement, fabrication, load out, tie-down/seas fastening tow out/sail out, transportation, installation, hook-up modifications of existing facilities, testing, pre-commissioning, commissioning of the BCP Booster Compressor Platform Project situated at an offshore location on Bombay high. On 28th February, 2006, the petitioner along with Samsung Heavy Industries Company Limited entered into another agreement with ONGC to execute the wok of survey, design engineering etc. under the Vasai East Development Project. (b) To execute the contractual obligations, the petitioner had to transp....
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....not governed by Section 115A. 6. The petitioner, through its representative, appeared before the Assessing Officer and furnished the necessary clarification and documents. However, by an order dated 15th February, 2008, under Section 195 of the Act, 1961, the Assessing Officer held that the petitioner was required to withhold taxes at the rate of 11.729% of the invoice amount paid to the non-resident assessee. In the process, the Assessing Officer recorded that the payments to be made by the petitioner for hire of tugs and barges was for commercial equipments and, therefore, it would fall within the meaning of royalty in terms of Clause (iva) of Explanation 2 to Section 9(1)(vi) and would be exigible to tax at the rate of 10% in view of Section 115A of the Act, 1961 as well as Article 12 of the Singapore Treaty. It was further observed that Section 44BB was inapplicable as the said dispensation was applicable only to a person, who renders services or supplies plant and machinery to a party in the business of actual exploration of mineral oil and since the petitioner was not engaged in the business of exploration of mineral oil and was only assisting ONGC in the said business, the ....
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....1961 as the payment was in connection with the use or right to use commercial equipment. Mr. Pardiwalla strenuously submitted that the authorities fell in the aforesaid error as they lost sight of the exception carved out by the latter part of Clause (iva) to the effect that 'such consideration does not include the amounts referred to in Section 44BB of the Act'. Had the authorities considered the wide amplitude of the special provision for computing profits and gains in connection with the business of exploration etc. of mineral oils, incorporated in Section 44BB, by employing the expression, "in connection with", the authorities would not have taken such a narrow view that the use of the barges and tugs to carry the BCP-B2 Booster Compressor from the yard to offshore platform was a case of mere transportation of equipment. Mr. Pardiwalla laid emphasis on the end use of the services and facilities. If the service or facility is inextricably linked with the prospecting for, or extraction or production of, mineral oils, the special dispensation provided under Section 44BB of the Act, 1961 must be extended to a non-resident assessee as it was intended to achieve a definite purpose. ....
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....rvices or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 44DA or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. .......... The relevant part of Section 195 reads as under: Section 195: 195. [(1) Any person responsible for paying to a nonresident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) [or section 194LD] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of....
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....usiness of providing services or facilities or supplying plant and machinery on hire, and (iii) The services or facilities so provided shall have connection with prospecting for, or extraction or production of, mineral oil, or; (iv) the plant and machinery so supplied on hire should be used in the prospecting for, or extraction or production of, mineral oils. (v) If the aforesaid conditions are satisfied, then a sum equal to 10% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains chargeable to tax. 17. It would be contextually relevant to note that under Explanation 2 to Section 9(1)(iv), which defines "royalty" for the purpose of the said clause to mean consideration, inter alia, for the use or right to use any industrial, commercial or scientific equipment, the amounts referred to in Section 44BB stand excluded (Clause (iva)). 18. In the light of the aforesaid, the pivotal question which wrenches to the fore is, whether, in the facts of the case at hand, the payment made by the petitioner towards charter hire of the tugs and barges for executing the contract entered into with ONGC falls within the purview of Section 44B....
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....ing the compression module of platform, from petitioner's yard to offshore platform. At this juncture, it would be contextually relevant to note that in connection with the execution of the said contract, the Director General of Hydro Carbons had issued Essentiality Certificate to import the cargo (barge) for the petroleum operations. 22. Can the transportation of the Compression Module be said to be a mere transportation of equipment/material? In our view, answer to this question is required to be explored in the context of the utility of the equipment to the exploration, extraction and production of the mineral oils. Whether the said equipment used was indispensable for, or is inextricably connected with, exploration, extraction and production of mineral oils bears upon the controversy at hand. 23. From the text of Section 44BB extracted above, it becomes evident that the emphasis is not on the service, facility or plant and machinery. What is the linchpin of the provision is the connection of the service or facility with, or the use of the plant and machinery on hire for, exploration, extraction or production of mineral oils. The Explanation 2 to Section 44BB provides that for....
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....Court in paragraphs 13 and 14 are instructive and hence extracted below: "13. The Income Tax Act does not define the expressions "mines" or "minerals". The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Development and Regulation) Act 1948. While construing the somewhat pari materia expressions appearing in the Mines and Minerals (Development and Regulation) Act 1957 regard must be had to the provisions of Entries 53 and 54 of List I and Entry 22 of List II of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting ....