2015 (12) TMI 1790 - AT - Income Tax

Payments made by ONGC and received by the non-resident assessee or foreign companies - taxable u/s 44BB or 44D - receipts of Boots and Coots International Well Control Inc., USA - Providing various services in connection with prospecting, extraction or production of mineral oil - Fees for technical services under Section 44D read with Explanation 2 to Section 9(1)(vii) OR payments be taxable on a presumptive basis under Section 44BB - HELD THAT - The said issue has already been decided in favour of the assessee by the Hon ble Supreme Court of India in assessee s own case 2015 (7) TMI 91 - SUPREME COURT held that the dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated there-under. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assesses or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D. - decided in favour of assessee

Summary

Issues Involved:
1. Taxability of receipts as "fees for technical services" under the Income Tax Act, 1961.
2. Taxability of receipts under section 44BB of the Income Tax Act, 1961.

Analysis:

1. The appellant contested the order passed by the Ld. Commissioner of Income Tax (Appeals)-II, Dehradun, arguing that the receipts from a foreign company should not be taxable in India under the India-USA Double Taxation Avoidance Agreement. The appellant raised a ground challenging the decision that the receipts are taxable as "fees for technical services" under the Income Tax Act, 1961. However, during the hearing, the appellant's representative decided not to press Ground No. 1. The Tribunal dismissed Ground No. 1 as not pressed.

2. The appellant also raised a second ground regarding the taxability of the receipts under section 44BB of the Income Tax Act, 1961. The appellant's representative cited a Supreme Court decision in the appellant's own case, where it was held that payments made by the appellant were assessable under section 44BB, not section 44D. The Tribunal noted that the issue raised in Ground No. 2 had been decided in favor of the appellant by the Supreme Court. Citing the Supreme Court's decision, the Tribunal canceled the orders of the revenue authorities on this issue and allowed the appeal in favor of the appellant.

3. The Tribunal thoroughly examined the relevant records, including the orders of the Revenue Authorities and the Supreme Court decision in the appellant's own case. Based on the Supreme Court's ruling that the contracts were primarily related to the prospecting, extraction, or production of mineral oil, the Tribunal concluded that the receipts should be assessed under section 44BB. Consequently, the Tribunal partially allowed the appeal of the Assessee, following the precedent set by the Supreme Court in the appellant's case.

This detailed analysis of the judgment highlights the key issues of taxability under the Income Tax Act, 1961, and the Tribunal's decision based on the arguments presented by the parties and the relevant legal precedents, ultimately resulting in the partial allowance of the appeal.