2011 (7) TMI 1342 - AAR - Income Tax

Summary

Issues involved:
The judgment addresses the taxation of revenues earned under a seismic data acquisition and processing contract in India u/s 44BB of the Income-tax Act, 1961. It also considers the taxability of mobilization/demobilization revenues attributable to vessel journeys outside India.

Taxation under section 44BB:
The applicant, a foreign company engaged in seismic data acquisition, sought clarification on the taxability of revenues earned in India under a contract with another foreign company. The applicant argued that only the portion of income attributable to operations in India should be taxed u/s 44BB, not as fees for technical services.

Interpretation of provisions:
The revenue contended that section 44BB applies specifically to certain activities in the oil and gas sector, excluding technical or managerial services. The judgment referenced relevant case law and clarifications to support the view that income in the nature of fees for technical services or royalties is excluded from section 44BB.

Contractual obligations:
The applicant was responsible for providing vessels and seismic crew for data acquisition, processing, and survey work in designated offshore blocks. The judgment highlighted the mining-related nature of the services provided, falling outside the scope of section 9(1)(vii) of the Act.

Decision on Question 1:
The Authority ruled in favor of the applicant, affirming that revenues from the seismic data acquisition and processing contract are taxable under section 44BB of the Income-tax Act, 1961.

Taxation of mobilization/demobilization revenues:
Regarding the second question, the judgment emphasized that income can only be taxed in India if it accrues or arises in India. It concluded that the entire mobilization/demobilization revenues related to seismic data activities should be taxable in India at a specified rate.

Application of section 44BB(3):
The judgment clarified that once an assessee opts for taxation under section 44BB(1), the provision deems profits at a specified percentage without scope for splitting amounts. If an applicant desires detailed computation, they must opt for section 44BB(3) but cannot apply both sub-sections simultaneously.

Final decision:
In summary, the judgment upheld the taxability of revenues under the seismic data contract u/s 44BB, excluding fees for technical services. It also determined that the entire mobilization/demobilization revenues should be taxed in India, emphasizing the specific provisions and options available under section 44BB for income computation.