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TMI Blog2012 (12) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... paid for mobilisation as well as de-mobilisation of its vessels from the site area and for providing services in connection with the prospecting for extraction or production of mineral oils. 3. The assessee applied to the concerned authority under Section 197 of the Act for issuance of a certificate for receiving payments after deduction of tax at the lesser rate of 4.223% as per the provisions of section 44BB. It contended that Section 44BB was applicable to the revenues earned in respect of services in connection with the prospecting for extraction or production of mineral oils and not any of the other provisions of the Act. Under Section 44BB, 10% of the gross revenues are deemed to be profits of the business and the effective tax thereon would amount to 4.223%) (of such profits). The concerned authority competent to issue the certificate under section 197 did not accept the assessee's contention and passed an order, directing the assessee to receive payments after suffering tax deduction at source at the rate of 10% (+ surcharge + education cess) in respect of all revenues received from Petro Gas and CGG Veritas. 4. Aggrieved by the order passed under Section 197 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to in sub-section (1) shall be the following, namely: - (a) The amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) The amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of this section,- (a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (b) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) "permanent establishment" shall have the same meaning as in clause (iiia) of section 92F. Explanation 2 : For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries". (2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having been ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar view has been taken by a Division Bench of this Court in Director of Income-tax v. Jindal Drilling & Industries Ltd., [2010] 320 ITR 104. In that case the question was whether the services rendered by the non-resident company for transportation and checking up of rigs, review of design and issuance of suitability certificate to the assessee, which was a resident company, were covered under section 9(1)(vii) read with Explanation 2 thereto or under section 44BB of the Act. The question arose in the context of tax deduction at source on the remittance by the assessee, the resident company, to the non-resident company. The contention of the Revenue in that case was that the remittance represented, "fee for technical services" within the meaning of Explanation 2 below Section 9(1)(vii). The contention of the assessee, on the other hand, was that the remittance represented income for rendering of services of the nature described in section 44BB of the Act. Though there is no express reference to section 44DA in the decision, there is reference to Explanation 2 to Section 9(1)(vii) of the Act, which is found to be incorporated into section 44DA. In substance, therefore, the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. We fully agree with their conclusion. No substantial question of law arises for our consideration. The appeals are dismissed." 10. The relevant portion of the order of the AAR in the case of Geofizyka Torun (supra), which order was adopted and followed by it in its impugned order is as below: - "As already discussed, section 44BB which was inserted into the Act with effect from April 1, 2004, is a special, specific and exclusive provision dealing with the computation of profits of non-resident assessees engaged in the business of providing services in connection with or supplying plant and machinery on hire to be used "in the prospecting for, or extraction or production of, mineral oils". It is in the company of three other sections (which we have referred to earlier as 44BB series) specially providing for computation of profits of the non-residents/foreign companies engaged in the specified types of business. True, profits arising from the business specified in section 44BB may also fall within the ambit of fees for technical services chargeable under section 9(1)(vii). But, the question is which is the appropriate computation provision that is applicable? As between the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then operate in a very limited field." 11. We do not think that there is any error in the view taken by AAR. Basically the rule that the specific provision excludes the general provision has been applied. Section 44BB is a special provision for computing the profits and gains of a non-resident in connection with the business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used, in the prospecting for, or extraction or production of mineral oils including petroleum and natural gas. Section 44DA is also a provision which applies to non-residents only. It is, however, broader and more general in nature and provides for assessment of the income of the non-resident by way of royalty or fees for technical services, where such non-resident carries on business in India through a permanent establishment situated therein or performs services from a fixed place of profession situated in India and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with the permanent establishment or fixed place of profession. Such income would be computed and assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that section 44DA also requires that the non-resident or the foreign company should carry on business in India through a permanent establishment situated therein and the right, property or contract in respect of which the royalty or fees for technical services is paid should be effectively connected with the permanent establishment. Such a requirement has not been spelt out in Section 44BB; moreover, a flat rate of 10% of the revenues received by the non-resident for the specific services rendered by it are deemed to be profits from the business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by the non-resident for the business of the permanent establishment in India and for expenditure towards reimbursement of actual expense by the permanent establishment to its head office or to any of its other offices is allowed from the revenues received by the non-resident. Because of the different modes or methods prescribed in the two sections for computing the profits, it apparently became necessary to clarify the position by making necessary amendments. That perhaps is the reason for insert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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