2016 (11) TMI 739 - AAR - Income Tax

Hiring of services for 3D OBC Seismic Data Acquisition & Processing in Sector-II - taxability in India in accordance with section 44BB(1) - Held that - As decided in OIL & NATURAL GAS CORPORATION LIMITED Versus COMMISSIONER OF INCOME TAX & ANOTHER 2015 (7) TMI 91 - SUPREME COURT the works carried out by the applicant are liable to be covered under the provisions, of Section 44BB of Income Tax Act. We have taken the same view in four earlier rulings and, therefore, we are convinced that the provisions of Section 44BB being a special provision was brought into existence to encourage the activities of mineral exploration.We accordingly hold that the consideration received by the applicant from the, alleged contract will be taxable in terms of Section 44BB.

Summary

Issues:
Taxability of revenues earned under a specific contract with Oil & Natural Gas Corporation Limited (ONGC) according to Section 44BB(1) of the Income Tax Act, 1961.

Analysis:
The applicant, a Russian company engaged in geophysical services for oil and gas exploration, sought a ruling on the taxability of revenues earned under a contract with ONGC. The Department initially raised no objections to admitting the matter, indicating agreement with the applicant's position. Referring to a previous judgment involving ONGC, the Department concurred that the applicant's activities fell within the purview of Section 44BB of the Income Tax Act, which pertains to special provisions for computing profits related to mineral exploration services. The Department's stance aligned with the applicant's interpretation, leading to a consensus that the applicant's activities were covered under Section 44BB.

The Authority for Advance Rulings, after considering the arguments presented, found that the question raised by the applicant was conclusively addressed in the earlier ONGC judgment by the Apex Court. The Authority highlighted that this ruling was consistent with their previous decisions, emphasizing the legislative intent behind Section 44BB to promote mineral exploration activities. Consequently, the Authority ruled that the consideration received by the applicant under the contract with ONGC would be taxable in accordance with Section 44BB. The application was thus disposed of based on this determination.