2020 (8) TMI 475 - HC - Income Tax

Income accrued in India - amount received by the assessee on account of the provision of seismic survey services Fee for Technical Services (FTS as defined u/s 9(1) (vii) - taxable under the provisions of Sec. 44DA r.w. Section 115A of the Act - HELD THAT - The said questions of law have already been answered by the order in ONGC vs. CIT. 2015 (7) TMI 91 - SUPREME COURT . In terms whereof, the substantial questions of law were answered in favour of the assessee and against the revenue. The said position is not disputed by both the learned counsels. Decided in favour of assessee

Issues:
1. Interpretation of Fee for Technical Services (FTS) under Income Tax Act.
2. Applicability of Section 44BB for revenues earned from seismic surveys.
3. Legislative intent behind taxation scheme under Section 9(1)(vi) and Sections 44DA/44BB.
4. Distinction between Royalty and Fee for Technical Services for taxation.
5. Special provisions for Royalties and FTS under Sections 44DA/115A.
6. Clarificatory nature of proviso to Section 44DA.

Interpretation of Fee for Technical Services (FTS):
The appellant questioned the ITAT's decision on whether the amount received for seismic survey services constituted Fee for Technical Services (FTS) under Section 9(1)(vii) of the Income Tax Act. The ITAT's ruling that the received amount was not taxable under Sections 44DA and 115A was challenged. The appellant argued that the ITAT erred in its interpretation, but the High Court referred to a Supreme Court judgment in ONGC vs. CIT, which had already addressed and resolved similar questions in favor of the assessee. Consequently, the High Court upheld the Supreme Court's decision, ruling in favor of the assessee.

Applicability of Section 44BB for seismic surveys revenues:
The ITAT's decision to treat revenues from seismic surveys under Section 44BB without considering the exclusionary proviso under Section 9(1)(vii) was contested. The appellant argued that the ITAT overlooked the aspect of eligibility under the exclusionary proviso related to "for a project undertaken by the recipient." However, the High Court relied on the Delhi High Court's decision in DIT vs. Rio Tinto Technical Services and concluded that the ITAT's interpretation aligned with the legislative intent of Sections 9(1)(vi), 44DA, and 44BB. The High Court, following the Supreme Court's precedent, resolved the issue in favor of the assessee.

Legislative intent behind taxation scheme:
The ITAT's interpretation of the legislative intent behind the taxation scheme encompassed in Sections 9(1)(vi), 44DA, and 44BB was challenged. The appellant argued that the ITAT disregarded previous decisions in cases like M/s Rolls Royce Pvt. Ltd. and M/s ONGC, which could impact the taxation scheme's application. However, the High Court found the ITAT's interpretation aligned with the legal framework and decisions, ultimately ruling in favor of the assessee based on the Supreme Court's precedent.

Distinction between Royalty and Fee for Technical Services:
The ITAT's alleged error in disregarding the distinction between Royalty and Fee for Technical Services for taxation purposes was contested. The appellant argued that the ITAT overlooked the clarificatory provisos in Section 44BB/44DA/115 and the rationale behind their introduction in the Finance Bill 2010. However, the High Court upheld the ITAT's decision, emphasizing the specific provisions for Royalties and FTS under Sections 44DA/115A and the rule of "Generalia specialibus non derogant."

Special provisions for Royalties and FTS:
The ITAT's failure to appreciate the special provisions for Royalties and FTS under Sections 44DA/115A was questioned. The appellant argued that these sections should have precedence over general provisions. However, the High Court upheld the ITAT's decision, emphasizing the specific nature of these provisions and their exclusionary impact on general provisions, in line with legal principles.

Clarificatory nature of proviso to Section 44DA:
The ITAT's alleged oversight regarding the clarificatory nature of the proviso to Section 44DA brought by the Finance Act, 2011 was contested. The appellant argued that the proviso should have been applied retroactively. However, the High Court, following the Supreme Court's guidance, upheld the ITAT's decision, emphasizing the proviso's clarificatory nature and its application in conjunction with the main provisions from the time they came into effect.

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