TaxTMI 
TaxTMI 
2025 (5) TMI 2206
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessment Year 2013-14: Assessee's appeal ITA No. 6026/Del/2017 and Cross appeal ITA No. 6171/Del/2017 3. Learned counsel submits at the outset that he has instruction from the assessee side not to press it's appeal ITA No. 6026/Del/2017. Dismissed as withdrawn subject to all just exceptions in very terms. 4. Next comes the Revenue's cross appeal ITA No. 6171/Del/2017 raising the following substantive grounds: "(i) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in allowing the appeal of the assessee by completely overlooking the amended provisions of section 9(1)(i), 9(1)(vii), 44AB, 44DA of the Act which were applicable to the AY under consideration for the services provided by the assessee in respect of Annual Maintenance Contract Services, support for software and training, etc. (ii) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in placing reliance on the judgment of the Hon'ble Supreme Court in the case of ONGC vs. CIT (Civil Appeal No. 731 of 2007) by failing to appreciate that the issue of taxability u/s 44BB vs. 44DA of the Act wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the purpose of computation of profits under the presumptive provisions of section 44BB of the Act, when the said provisions are a complete code of taxation in themselves and do not distinguish between revenue and capital receipts having made allowance for expenditure including depreciation on capital assets to the extent of 90% of gross revenue. (ix) Whether the CIT (A) has erred in not appreciating the fact that the amount received by the assessee on account of equipment lost in hole' is infact the reimbursement of expenses and hence includible in the gross revenue for the purpose of computation of profits as per the provisions of section 44BB of the Act in accordance with the spirit of the ratio of the judgment of Hon'ble Uttarakhand High Court in the case of CIT Vs. Halliburton offshore Services Inc. (300 ITR 265). (x) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in holding that receipts on account of service tax are not includible in gross revenue of the assessee for the purpose of computation of profits under the provisions of section 44BB of the I.T. Act, 1961. (xi) Whether the CIT (A) has erred i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 44BB of the Act. The CIT (A) impugned lower appellate discussion has reversed the assessment findings to this effect by placing reliance on ONGC Vs. CIT (2015) 376 ITR 306(SC) as under: "5.3 I have considered the submissions of the Appellant in light of the assessment order passed by the Assessing Officer and the judgments cited by the appellant. Since Ground No. 1 to 2 are inter-related, both grounds are decided together. 5.4 The issue under dispute is the section under which the receipts from provision of software and AMC, support services, training of software etc. ought to be brought to tax. The AO has treated receipts in the nature of fee for technical services and taxed the same u/s 44DA of the Act. On the other hand, the Appellant is of view that its receipts should have been brought to tax under section 44 BB of the Act, The Appellant has primarily relied upon the judgment of the Apex Court passed in the case of ONGC (Civil Appeal No. 731 of 2007) to support its contention. 5.5 Combined effect of the provisions of sections, 44BB, 44DA and 115A is that if the income of a non-resident is in the nature of fee for technical services, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in prospecting, extraction or production of mineral oils the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10% of the aggregate of 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 (vii) 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with section 44D of the Income-tax Act, 1961. 4. A copy of the statement of the case dated 16.3.1990 (without annexures) and a copy of the Attorney General's opinion dated 13.5.90 are enclosed. 5. These instructions may brought to the notice of all the officers in your region. [F. No. 500/6/89-FTD dt. 22.10.90 from CBDT]" 10. Before us the opinion of the learned Attorney General has been placed by the learned counsel for the appellants at great length to contend that the views expressed by the learned Attorney which had been accepted by the CBDT were based on an exhaustive consideration of the provisions of the Mines Act, 1952 and the Mines and Minerals (Regulation and Development) Act, 1957 read with the relevant Entries in the Union and the State List in the 7th Schedule to the Constitution of India. It is urged that the eventual test is one of pith and substance of the agreement, namely, whether the works contemplated or services to be rendered under the agreement is directly and inextricably linked with the prospecting, extraction or production of mineral oil. It is submitted on behalf of the appellants that the agreements in question sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erstood as per the provisions of the Oil Fields (Regulation and Development) Act, 1948 read with the Petroleum and Natural Gas Rules, 1959. 12. Opposing the contentions advanced on behalf of the appellants, Shri Gurukrishna Kumar, learned senior counsel for the Revenue has urged that the opinion of the Attorney General relied upon and the CBDT Circular has no relevance to the present case inasmuch as the agreements between ONGC and the non-resident companies made it abundantly clear that what is paid to the non-resident company are fees for technical services rendered. Though such services may have some connection with the prospecting, extraction or production of mineral oil, the primary service rendered by the non-resident companies on the basis of the agreements is not for prospecting, extraction or production of mineral oil but various ancillary services like training of personnel etc. which may have a somewhat remote connection with the business of prospecting, exploration or production of mineral oils. Learned Counsel for the revenue has even suggested that if it is held that the High Court ought to have examined each agreement or contract to find out its real purpose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. Keeping in mind the above provision, we have looked into each of the contracts as culled out by the appellants and placed before the Court is correct. The said details are set out below. S. No. Civil Appeal No. Work covered under the contract 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. 740 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 3. 731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 4. 1722 Furbishing supervisory staff with expertise in operation and management of Drilling....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2. 1529 Inspection of drilling rig and verification of reliability of control systems in the drilling rig. 33. 2008 Expert advice on the device to clean insides of a pipeline. 34. 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 35. 925 Engineering analysis of rig. 36. 1519 Imparting training on cased hold production log evaluation and analysis. 37. 1533 Training on well control. 38. 1518 Training on implementation of Six Sigma concepts. 39. 1516 Training on implementation of Six Sigma concepts. 40. 6023 Training on Drilling project management. 41. 2796 Training in Safety Rating System and assistance in development and audit of Safety Management System. 42. 1239 To develop technical specification for 3D Seismic API modules of work and to prepare bid packages. 43. 1527 Supply supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 44. 1523 Supply, installation and familiarization of software for processing seismic data. The above f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Software (Seismic Analysis/Attributes/Interpretation/ Velocity Modelling Software) i. Large-volume pre-stack interpretation and analysis suit provides the seismic interpreter with dynamic access to large prestack volumes for processing, analysis and correlation with other reserve data types. The software also empowers workflows for calibrating assessment data to geology for the extraction of essential information to better generate quality prospects, seek by past reserves, or to enhance reservoir characterization work inflows. ii. Seismic attribute software provides the functionality to calculate seismic attributes from seismic data volumes as well as perform additional post processing signal enhancements of an attribute or seismic volume. It includes a comprehensive range of volume attribute calculations including continuity, curvature and sweetness, along with other industry standard calculations that can all be efficiently executed via the Decision Space Geosciences Suite. iii. Seismic interpretation software provides the core seismic interpretation workflows for mapping subsurface geology. The application provides the geohysical interpreter with full....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uced below: "7. Further, we find that in the case of ONGC vs CIT (supra) the Hon'ble Supreme Court held that if the pith and substance of each contracts/ agreement is inextricably connected with prospecting, extraction or production of mineral oil, then payment received by the non-resident assessee Or foreign companies under the said contract is more appropriately assessable under the provisions of section 44BB and not u/s 44D of the Act. The list of contracts, in the said appeal before the Supreme Court included following contracts: 1. Contract of supply, installation and familiarization of software for processing seismic data 2. Contract of supply, supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 8. In the case in hand also the software is supplied and maintained were related to various activities of exploration including for reservoir navigator, upgradation of the Geo log multimin etc. 9. In view of the above, respectfully following the decision of the Hon'ble Supreme Court in the case of ONGC versus CIT (supra) and the decision of the Tribunal (supra) i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der Section 44BB of the Act?" 4. After hearing the arguments of both the sides the Learned third member held as under:- "35. Having regard to all the facts of the case and keeping in view the legal position emanating from the judicial pronouncements as discussed above, I am of the view that the revenue received by the assessee company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation / support of software licenses, etc., is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation (2) to Section 9 (1) (vii) of the Act being consideration received for "mining or like projects" and the same, therefore, is not taxable under Section 44DA of the Act. The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mineral oils as held by the Hon'ble Supreme Court in the case of ONGC (supra) under the similar facts and circumstances and the revenue receive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of it's entire revenues u/s 44BB of the Act. Mr. Shete at this stage seeks to draw a distinction in light of the Revenue's substantive ground no. (iii) that the Memorandum of Finance Bill 2010 makes it amply clear that any service(s) which falls within the ambit of section 44DA, even if it is not for prospecting or production of mineral oils as stipulated in section 44BB of the Act. We are of the considered view that once the learned co-ordinate bench in assessee's case itself in A.Y. 2011-12 i.e. subsequent to the above statutory amendment, has settled the issue against the department, there is hardly much a need for us to revisit the entire finding once again. More so, when the issue indeed in A.Y. 2011-12 had reached upto learned "third member" which stood ultimately decided in assessee's favour. We thus reject the Revenue's instant first and foremost substantive ground in very terms. 9. The Revenue's second substantive ground raised in the instant appeal seeks to revive the Assessing Officer's action taxing the assessee's revenues on account of equipment loss in whole as per section 44BB of the Act whereas the CIT (A) has followed various case laws i.e. DIT Vs. Schlumber....