1994 (2) TMI 102 - AT - Income Tax

Assessment Year, Mineral Oil, Mistake Apparent From Record, Profits And Gains, Retrospective Effect, Retrospective Operation

Summary

Issues Involved:
1. Applicability of Section 44BB for assessment years 1983-84, 1984-85, and 1986-87.
2. Applicability of Section 44BB versus Section 115A for the assessment year 1987-88.
3. Definition and interpretation of "fees for technical services" under Section 9(1)(vii) and its impact on the applicability of Section 44BB.

Issue-wise Detailed Analysis:

1. Applicability of Section 44BB for Assessment Years 1983-84, 1984-85, and 1986-87:
The assessee, a non-resident company, entered into contracts with ONGC and Oil India Ltd. (OIL) for services related to on-shore explanatory wells. The assessments for these years were made prior to the introduction of Section 44BB by the Finance Act, 1987, which was given retrospective effect from 1-4-1983. The assessee moved applications under Section 154 for rectification of the assessments by applying Section 44BB. The ITO rejected these applications. The CIT(A) accepted the assessee's contention and directed the computation of income under Section 44BB. The Tribunal upheld the CIT(A)'s orders, stating that non-consideration of Section 44BB constituted a mistake apparent from the record, and the assessments must be rectified by applying Section 44BB.

2. Applicability of Section 44BB versus Section 115A for the Assessment Year 1987-88:
For the assessment year 1987-88, the ITO completed the assessment under Section 143(3) and applied Section 115A read with Section 44D(b), rejecting the assessee's claim for applying Section 44BB. The CIT(A) directed the computation of income under Section 44BB. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's activities constituted a business of providing services or facilities in connection with the extraction or production of mineral oil. The Tribunal emphasized that the mere fact that the assessee supplied equipment and personnel did not mean it was rendering only technical services. The Tribunal concluded that the assessee's income should be computed under Section 44BB, not Section 115A.

3. Definition and Interpretation of "Fees for Technical Services" under Section 9(1)(vii) and its Impact on the Applicability of Section 44BB:
The Department contended that the fees received by the assessee for services rendered to ONGC and OIL should be treated as "fees for technical services" under Section 9(1)(vii), Explanation 2, and thus fall under Section 115A. The assessee argued that its income did not constitute fees for technical services within the meaning of Explanation 2 to Section 9(1)(vii). The Tribunal agreed with the assessee, noting that the exclusionary part of Explanation 2 to Section 9(1)(vii) took the case out of the sweep of the Explanation. The Tribunal referred to various Tribunal orders and the opinion of the Attorney General, which supported the view that the assessee's activities fell within the scope of Section 44BB. The Tribunal also cited the CBDT Circular dated 22-10-1990, which clarified that payments for such services to a foreign company would be income chargeable under Section 44BB, not under Section 115A read with Section 44D.

Conclusion:
The Tribunal upheld the CIT(A)'s orders for all the assessment years, concluding that the assessee's income should be computed under Section 44BB. The appeals filed by the Revenue were dismissed.