TaxTMI 
TaxTMI 
2024 (2) TMI 791
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsel appearing on behalf of the respondent / assessee, we note that before us it has been conceded that insofar as the issues emanating from Section 9(1)(vii) read with Section 44DA of the Income Tax Act, 1961 ["Act"] are concerned, the same stands conclusively answered by the Supreme Court in its judgment rendered in Oil and Natural Gas Corporation vs. Commissioner of Income Tax & Anr. [(2015) 376 ITR 306]. 2. Having gone through the detailed order which was penned by us on 22 February 2023, we note that the solitary issue which now remains pertains to Section 44BB of the Act. That provision reads as under: "44BB. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. [(4) Notwithstanding anything contained in sub-section (2) of Section 32 and sub-section (1) of Section 72, where an assessee declares profits and gains of business for any previous year in accordance with the provisions of sub-section (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assessee for such previous year.] Explanation.-For the purposes of this section,- (i) "plant" includes ships, aircrafts, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business; (ii) "mineral oil" includes petroleu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....FTS under section 9(l)(vii) of the Act. That being the case, the provision of the Act being more beneficial in such a scenario, as per section 90(2) of the Act, will be applicable. Therefore, there is no need for us to examine the applicability of the term 'FTS' under India - France Tax Treaty. Thus, once the amount received by the assessee does not fall within the definition of FTS under section 9(1)(vii) of the Act, by default, section 44DD would not apply to such payment." 4. A reading thereof would clearly and in our considered opinion qualify the pith and substance test and be viewed as being inextricably linked to the primary contract as propounded by the Supreme Court in Oil and Natural Gas Corporation and the principles r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 supplying plant and machinery on hire, used or to be used in the prospecting for, or extraction or production of mineral oils". Revenues earned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resident or the foreign company should carry on business in India through a permanent establishment situated therein and the right, property or contract in respect of which the royalty or fees for technical services is paid should be effectively connected with the permanent establishment. Such a requirement has not been spelt out in section 44BB ; moreover, a flat rate of 10 per cent. of the revenues received by the non-resident for the specific services rendered by it are deemed to be profits from the business chargeable to tax in India under section 44BB, whereas under section 44DA, deduction of expenditure or allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on (1) of section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section 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 per cent. 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, with effect from April 1, 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 ....