2016 (9) TMI 346 - AAR - Income Tax

Application of section 44BB - applicant company is formed and registered under the laws of U.K and is also resident of that county entered into a contract with Oil & Natural Gas Corporation Ltd. (ONGC) for hiring of services Held that - We answer the ruling in favour of the applicant and hold that the consideration received by the applicant from the aforementioned contract dated 13-3-2012 being contract No. MR/WOB/MM/SC/2D(LO)64/2011/P96DL11005/EB-2167 between Oil and Natural Gas Corporation Limited and Marine Geology Services LLP will be covered under section 44BB of the Income-tax Act, 1961.

Summary

Issues: Application of section 44BB to activities of Marine Geology Services LLP in a contract with Oil & Natural Gas Corporation Ltd.

Analysis:
1. Application of Section 44BB: The main issue in this judgment revolves around the application of section 44BB of the Income-tax Act, 1961 to the activities of Marine Geology Services LLP, a U.K. based company, in a contract with Oil & Natural Gas Corporation Ltd. The applicant sought clarification on the taxability of the consideration received from the contract for hiring services for seismic surveys. The Authority considered previous rulings and the decision of the Supreme Court in ONGC v. CIT to determine the tax implications of the activities conducted by the applicant under the contract.

2. Judicial Precedents: The Authority highlighted that the question of applying section 44BB had been previously considered in their ruling dated 22-12-2009 and by the Tribunal in various rulings. Reference was made to the Supreme Court decision in ONGC v. CIT, where the Court analyzed similar activities. The Authority noted that the department did not raise any objections, indicating agreement that section 44BB was the relevant provision for taxing the consideration received by the applicant from the contract with Oil & Natural Gas Corporation Ltd.

3. Ruling: Based on the analysis of relevant judicial precedents and the nature of the activities conducted under the contract, the Authority ruled in favor of the applicant. It held that the consideration received by Marine Geology Services LLP from the contract with Oil and Natural Gas Corporation Ltd. fell under the purview of section 44BB of the Income-tax Act, 1961. The ruling clarified the tax treatment applicable to the specific services provided by the applicant under the contract, providing certainty regarding the tax liability arising from such transactions.