AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 800
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....ding the insertion of provisos in section 44BB/ 44DA/ 115A and the rationale behind the introduction of said amendments in the Finance Bill 2010 in holding that the income of the assessee company from 'technical services' from non-PSC Partners was covered under the presumptive provisions of section 44BB? 2. Whether on the facts and circumstances of the case, the Ld. CIT (A) has erred in considering interest income as taxable and chargeable to tax as per provision of article 11 of DTAA@ 15%. 2.1 Whether the Ld. CIT(A) has erred in considering the interest income as taxable and chargeable to tax as per provision of article 11 of DTAA @ 15%? The interest income has been earned in respect of income tax refund which is attributable to the income of the assessee by virtue of existence of PE in India and carrying out of business activity in India through that PE. Therefore, interest income u/s 244A is treated as business income. Moreover, the jurisdictional Hon'ble High Court of Uttarakhand, in the case of BJ Services Co. ME Limited denied the claim of DTAA in respect of interest income and has held this interest to be business income. 3. The appellant prays ....
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....ed u/s 9(1)(vi)/9(1)(vii) r.w.s 44DA of the Act by the Assessing Officer (A.O) as against such receipts offered by the Assessee under the ambit of Section 44BB of the Act has been decided by the Co-ordinate Bench of the Tribunal in Assessee's own case for Assessment Year 2013-14 ad 2014-15 in ITA No. 6026/Del/2017, 6171/Del/2017 & 6714/Del/2017 vide order dated 07/05/2025, wherein while deciding the issue in favour of the Assessee, the Co-ordinate Bench of the Tribunal of the Tribunal held as under :- "5. We now advert to the basic relevant facts. This assessee is admittedly a company engaged in the business of providing drilling fluids, coring, completion, tubing & perforation, liner hanger, open hole logging, cementing services and supply of drilling bits, provision of software and AMC services etc. The first and foremost issue herein which has arisen between both the parties is that of assessment of it's revenue receipts derived from all services except provision of software, support and AMC activities which had been held by the learned Assessing Officer as fee for technical services u/s 9(1)(vii) r.w.s. 115A r.w.s. 44DA of the Act. We wish to make it clear that....
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....um to the Finance Bill, 2010, clarifies that it is not the kind of business which is material but it is the nature of services which is of importance to determine whether receipts are taxable as fee for technical services under section 44 DA of the Act or under section 44 BB of the Act. In order to ascertain the aforesaid, it would be pertinent to have a look at the contractual agreements and scope of work as provided in the contract. 5.7 The Assessing officer at para 6 of the assessment order has observed that these services cannot be considered as any activity relating to mining activity and basically in these activities assessee is providing technical and consultancy services and therefore covered the under definition of FTS as per provision of section 9 (1) (vii) of the Act. " 5.8 On perusal of the judgment of Hon'ble Supreme court of India in civil appeal number 731 of 2007 in the case of ONGC Ltd vs. CIT and others it is found that the issue before the Hon'ble court was to decide whether certain services in connection with prospecting, extraction or production of mineral oil is chargeable to tax as "fees for technical services" under section 44D read....
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....Section 9(1) (vii) of the Income Tax Act, 1961 as under: "Explanation 2. - For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or tike project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries". 2. The question whether prospecting for, or extraction or production of, mineral oil can be termed as 'mining operations, was referred to the Attorney General of India for his opinion. The Attorney General has opined that such operations are mining operations and the expressions 'mining project' or 'like projects' occurring in Explanation 2 to Section 9 (1) (ii) of the Income Tax Act would cover to Section 9(1) (vii) of the Income Tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. 3.....
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....d gas exploration" 11. It is also urged on behalf of the appellants that the instruction/ Circular dated 22.10.1990 issued by the CBDT was binding on the primary authority on the ratio of the decision of this Court in K.P. Varghese Vs. Income Tax Officer, Emakulam and Others. It has been further pointed on behalf of the appellants that even under the provisions of Section 3D of the Oil Fields (Regulation and Development) Act 1948 a mining lease means a lease granted for the purposes of searching for, winning, working, getting, making merchandisable, carrying away or disposing of mineral oils or for the purpose connected therewith and such a lease includes an exploring or prospecting lease. Reference has also been made to the Petroleum and Natural Gas Rules, 1959 Framed under Section 5 of the aforesaid Act. Under Rule 4 of the said Rules no person can prospect for petroleum except pursuant to a Petroleum Exploration License (PEL) granted under the Rules and no person can mine petroleum except in pursuance of a Petroleum Mining License (PML) granted under the Rules. It is pointed out that under Rule 7 of the Rules of 1959 a petroleum mining license (PML) entitles the license....
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....d 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 gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted and 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 and exploration of mineral oils, exhaustively referred to earlier, it is abundantly clear that drilling operations for the purpose of production of petroleum would clearly amount to a mining activity or a mining operation. Viewed thus, it is the proximity of the works contemplated under an agreement, executed with a non- resident assessee or a foreign company, with mining activity or mining operations that would, be crucial for the determination of the question whether the payments made under such an agreement to the non-resident assessee or the foreign company is to be assessed under Section....
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.... 1535 Laboratory testing under simulated reservoir conditions. 13. 1514 Consultancy for optimal exploitation of hydrocarbon resources. 14. 2797 Consultancy for all aspects of Coal Bed Methane. 15. 6174 Analysis of data of welts to prepare a job design. 16. 1517 Geological study of the area and analysis of seismic information reports to design 2 dimensional seismic surveys. 17. 7226 Opinion on hydrocarbon resources and foreseeable potential. 18. 7227 Opinion on hydrocarbon resources and foreseeable potential. 19. 7230 Opinion on hydrocarbon resources and foreseeable potential. 20. 6016 Opinion on hydrocarbon resources and foresee able potential. 21. 6008 Evaluation of ultimate resource potential and presentations outside India in connection with 22. 1531 Review of sub-surface well data, provide repair plan of wells and supervise repairs. 23. 733 Repair of gas turbine, gas control system and inspection of gas turbine and generator. 24. 741 Repair and inspection of turbines. 25. 737 Repair, inspection and overhauling of turbines. 26. 736 Inspection, engine p....
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....es before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. 14. Consequently, all the appeals are allowed with no order as to the casts. " 5.9 In the said order the Hon'ble Court had examined the contracts involved in the group of cases and summarized the brief description of the works covered under each of the said contracts in a table between pg 19-21 of the said order. In view of the ratio of the above judgement, it is to be seen whether the receipts on account of "provision of software and AMC, support services, training of software etc" is covered within the scope of work under the contracts examined by the Hon'ble Supreme court in the said order. It is the scope of work and nature of service that determines taxability under section 44 BB and 44DA of the Act. 5.10 Along with the submission, the appellant has provided a copy of the brochure of WellCat Software, Decision Space Software (Seismic Analysis / Attributes / Interpretation/ Velocity Modelling Software) and Open Wells Software as per annexure 1, 2,3& 4 of the submission. On going through the brochure, the key features of the soft....
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....ions reporting system offers a comprehensive solution to track, report, and analyze rig operations from site sourcing through to abandonment. It provides simple, visual solutions, to speed up data entry and leverages the industry standard EDM to store, manage and share data with Landmark suit of integrated engineering applications. 5.11 It is clear from the description of the key features of the software supplied by the appellant that all such software were used for the purpose of exploration of mineral oil. It, is clear enough form the description of work at serial no. 10, 11, 12, 15, 15, 43 and 44 of the table inserted in the ONGC Ltd case (supra) that the purpose of the software supplied by the appellant is squarely covered with the scope of work involved in the contracts examined by the Hon'ble Supreme court in the above said order. The scope of work does not indicate that the services provided were exclusively in the nature of technical, consultancy and managerial in nature as per section 9(1) (vii) of the Act. The services provided by the Appellant were very much in connection with exploration of mineral oil. 5.12 The appellant has also relied upon the d....
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....e CIT(A) lower appellate discussion extracted hereinabove has erred in law and on facts in reversing the assessment findings assessing the assessee's three impugned services of software support services and AMC etc. u/s 9(1) (vii) r.w.s. 115A r.w.s. 44DA of the Act. The assessee's case on the other hand invites our attention to pages 24 to 25 in the paper book comprising of the tribunal's learned Third Member's order(s) deciding the issue against the department in DCIT Vs. Western Geco International Ltd. (2023) 157 taxmann.com 736 (Del .- Trib.) as under: "2. On account of difference of opinion between the Learned AM and Learned JM of ITAT, C Bench, New Delhi this matter was referred to the learned third member of ITAT for consideration and disposal u/s. 255(4) of the Act by the Hon'ble President ITAT. 3. The Learned third member ITAT vide order dated 30.09.2022 considered the following questions arising from the difference of opinion between two differing members in this case :- "1. Whether, in view of the facts and circumstances of the case and in law, the revenue received by the assessee on account of provision of facilities and ser....
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.... production of, mineral oils in India, would not form part of aggregate amount referred to in clauses (a) and (b) of sub-section (2) of Section 44BB of the Act. To the similar effect is the decision of Hon'ble High Court in the case of Director Income-tax Vs. Mitchell Drilling International (P.) Ltd. [2016] 380 ITR 130 (Del.), wherein it was held that the service tax collected by the assessee for passing it on to Government was not to be included in gross receipt in terms of Section 44BB(2) read with Section 44BB (1) of the Act for the purpose of computing presumptive income of the assessee under Section 44BB of the Act. Respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Schlumberger Asia Services Ltd. (supra) as well as that the Hon'ble Delhi High Court in the case of Mitchell Drilling International (P.) Ltd. (supra), I hold that the amount received by the assessee in the present case as reimbursement of service tax is not including in the gross turnover for the purpose of computing taxable income under Section 44BB of the Act. 37. I accordingly agree with the view taken by the learned judicial Member on both the issues and....
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....d at 15% as per Article 11 of DAA between India and USA. The Ld. A.O. taxed the interest on income tax refund at maximum marginal rate instead of Article 11 of DTAA with USA as claimed by the Assessee. The Ld. CIT(A) followed the order of the Tribunal dated 08/12/2022 in the case of Expro Gulf Limited in ITA No. 4198/Del/2017 and C.O. No. 165/Dle/2018 held that interest on income tax refund shall be taxed as per the provisions of DTAA. Aggrieved by the order of the Ld. CIT(A), the Department preferred the present Appeal. 12. The Ld. Departmental Representative submitted that the Ld. CIT(A) committed error in considering the interest income as taxable and chargeable to tax as per the provision of Article 11 of DTAA at 15%, by relying on the assessment order sought for allowing the Appeal. 13. Per contra, the Ld. Assessee's Representative submitted that there is no error in the approach of the Ld. CIT(A) in following the ratio laid down by the Tribunal in the case of Expro Gulf Ltd. (supra), wherein the Tribunal followed the Judgment of Hon'ble High Court in the case of B. J. Services ME Limited, thus sought for dismissal of the Ground No. 2 and 2.1 of the Revenue. 1....