1998 (10) TMI 91 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of section 44BB vs. section 44D for assessing income.
2. Nature of payments received by the non-resident company.
3. Interpretation of "fees for technical services" as defined in Explanation 2 to section 9(1)(vii).

Summary:

1. Applicability of section 44BB vs. section 44D:

The Revenue contended that the income should be assessed u/s 44D as fees for technical services, while the Commissioner (Appeals) held that it should be assessed u/s 44BB. The Tribunal had previously ruled in favor of the assessee for the assessment year 1984-85, and similar decisions were made in the cases of M/s. Scan Drilling Company and other foreign enterprises. The Tribunal reaffirmed that such agreements fall within the ambit of "mining or like project" as excluded from the definition of "fees for technical services" in Explanation 2 to section 9(1)(vii), thereby making section 44BB applicable.

2. Nature of payments received by the non-resident company:

The Assessing Officer treated the payments as fees for technical services u/s 44D, while the Commissioner (Appeals) and the Tribunal held that the payments were for services or facilities in connection with prospecting for or extraction or production of mineral oils, thus falling under section 44BB. The Tribunal noted that the contracts involved providing supervisory staff and managing drilling rigs, which are integral to the exploration and production of oil and gas.

3. Interpretation of "fees for technical services":

Explanation 2 to section 9(1)(vii) defines "fees for technical services" but excludes consideration for any construction, assembly, mining, or like project. The Tribunal highlighted that the agreements in question involved substantial activities related to mining operations, thus falling outside the scope of "fees for technical services." The Tribunal also referred to Circular No. 202 and Instruction No. 1862, which support the applicability of section 44BB for such activities.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals)'s decision that the income is assessable u/s 44BB and not as fees for technical services u/s 44D. The Tribunal emphasized the rule of consistency and relied on previous decisions, the opinion of the Attorney General, and CBDT instructions.