2012 (6) TMI 8 - HC - Income Tax

Whether service rendered by the non-resident company was technical service - non-resident company, M/s. Rolls Royce Pvt. Ltd., Singapore, represented by ONGC in terms of the contract between the ONGC, inspected the existing control system of three units of RR avon gas generator driven process gas compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at off- shore installation in India Held that - company has received fee as con- sideration for the services rendered which were technical in nature and which could not be rendered by anyone else who does not have the tech- nical expertise of that RR avon gas generator driven process gas compres- sor or Y2K roll over time at offshore installation as he could not be able to inspect and give advice. Therefore, the advice given was purely technical in nature and accordingly it is held that the service rendered was a technical service squarely covered under Explanation 2 appended to clause (vii) of sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A of the Act. Decided in favour of the Revenue

Summary

Issues:
1. Interpretation of whether the service rendered by inspecting the control system of gas compressor at SHP platform is technical service.

Analysis:
The appeal under section 260A of the Income-tax Act, 1961, was filed against the order passed by the Income-tax Appellate Tribunal, Delhi Bench, which held that the amount paid to the non-resident company for services rendered to ONGC falls under section 44BB of the Income-tax Act, not under section 44D. The dispute pertains to the assessment year 2001-02. An agreement was entered into between the non-resident company and ONGC for inspection services of gas compressor units at SHP platform. The Assessing Officer taxed the amount under section 44D, treating it as technical service. The Commissioner of Income-tax (Appeals) upheld this decision, while the Income-tax Appellate Tribunal disagreed, stating that the service was in connection with the production of oil, making it assessable under section 44BB.

The primary question before the court was whether the service rendered through the inspection of gas compressor units can be considered a technical service. The non-resident company, represented by ONGC, inspected the units and provided technical advice. The court referred to Explanation 2 of section 9(1)(vii) of the Act, defining "fees for technical services." The court noted that the service provided was technical in nature, as it involved inspection by trained technical personnel and the provision of technical advice. The Income-tax Appellate Tribunal relied on a previous judgment to support the classification of the service under section 44BB.

Considering the undisputed facts and the technical nature of the service provided, the court concluded that the service fell under Explanation 2 of section 9(1)(vii) and was a technical service as per section 44D and section 115A. The court emphasized that the service required specialized technical expertise, which justified its classification as a technical service. Consequently, the court set aside the Income-tax Appellate Tribunal's judgment, affirming the decisions of the Assessing Officer and the Commissioner of Income-tax (Appeals) in favor of the Revenue. No costs were awarded in this matter.