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TMI Blog2015 (2) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... irement stipulated by sec. 44BB and thus, qualifies its income earned thus to be treated and taxed as per the special provision and not otherwise as contended by the Revenue. We could not find any restriction or fetter in section 44BB as contended by the Revenue to disqualify the assessee in applying the said section to compute its tax. We cannot read what is not said in sec. 44BB and add words in sec. 44BB to bring in a restricted interpretation as contended by the Revenue to the effect that only direct contract with the oil producing company would only qualify. It is nobody's case that assessee is not a non-resident nor it has not given on hire its ship for the purpose of prospecting for or extracting or production of mineral oils. So the assessee falls in the special provision meant for computing profits and gain in connection with the business of exploration etc. of mineral oils; and its income has to be computed as per the said provision unless and otherwise the assessee claims lower profits and gains as stipulated under sub-section (3) of section 44BB. Also we take note of the fact that in A.Y. 2004-05, the AO accepted the claim of the assessee that the income need to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'used or to be used' are used in context of plant and machinery and not to specify the person who shall use it i.e. the term use or to be used is in conjunction with the term 'prospecting, extraction or production of mineral oils. This means that the plant and machinery can be used when it is hired or at a later point of time by the hirer for prospecting, extraction or production of mineral oils and the term does not imply that it can be used by the hirer or sub-hirer or any other hirer in the chain which may unending. The DRP held that it is settled that the intention of the legislature should not be looked into by resorting to aids in representation where the language of the provision is unambiguous and clear. Thus, the DRP concluded that the legislature never intended to include receipts of sub-hiring under the purview of section 44BB of the Act otherwise the term 'in connection with' would have also been extended to be used for the activity of supplying plant and machinery on hire as well. The statute is clear that the term 'used or to be used' is for the hirer only and there is no scope of extending this provision to sub-hirer or other in the chain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a PE in India and as such royalty has been charged to such PE as it is being taxed at a deemed profit rate of 10%, which, by deeming fiction, includes all expenses of the payer in relation to the PE. Since the 'Plant and Machinery' is to be utilized by the PE of the payer in India, there is no doubt that the payments would be charged to PE only and would be deemed to have been included u/s 44BB. As such, the royalty receipts of the sub-lessor are taxable in India. The AO on the other hand had proceeded on the basis that CGG is not entitled to the benefit of section 44BB of the Act. (f) Be that as it may, the DRP concluded since there is a DTAA in the present case, royalty shall be taxed as per the rate provided under the respective DTAA, in this case @ 10% of the gross receipt. Thus, the revenues of the assessee by way of equipment rentals on leasing of seismic survey vessels will be taxable as equipment royalty, both under the domestic law as well as under the provisions of DTAA. (g) The DRP also upheld the levy of interest under section 234B of the Act. 4. The AO framed final assessment order in accordance with the directions of DRP. The income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a-vis section 9(i)(vi) and Article 13 of the DTAA on the facts and circumstances of the case. 7. The DRP in this regard has held as under:- On careful perusal of the provisions of section 44BB (1), it would be obvious that for being eligible for beneficial provisions of this section, the following conditions must be fulfilled: a. The assessee should be a non-resident and b. Should be engaged in the business of: (i) providing services or facilities in connection with prospecting/or, or extraction or production of. Mineral oils or (ii) supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils Thus the receipt of only such non-resident assessee, who supplies plant and machinery on hire used, or to he used, in the prospecting for, or extraction or production of mineral oils shall be eligible for the benefit of Sec 44BB(1). The words 'used or to be used' are used in terms of the Plant and Machinery and not to specify the person who shall use it i.e. the clause 'used, or to he used' is in conjunction with the clause 'in the prospecting for, or extraction or production of minera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9(1)(vi), which are reproduced as under:- (iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;] From the above, it is clear that if an amount of the type referred to in Sec 9(1)(vi) is not included in amounts referred in Sec 44BB, then such amount would be taxable under provisions of Sec. 9(1)(vi) of the Income-tax Act, 1961. The provisions of Sec 44BB does not apply in the case of the assessee for the reason that it is not undertaking the activities specified in Sec 44BB itself. It is only supplying 'plant and machinery on hire to a person, who further supplies it on hire for putting to use for the purpose as specified in Sec 44BB. The intention of this provision was to provide benefit to the persons supplying plant and machinery on hire to the entities involved in business of prospecting for or extracting or production of mineral oil exploration itself. The provisions of Section 44BB were meant for the entities which incur huge expenses and which are complex in nature which it difficult to compute income under Article 7 of DTAA. Therefore, to simplify the computation of income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payments would be charged to PE only and would be deemed to have been included u/s 44BB. As such, the royalty receipts of the sub-lessor are taxable in India. Generally, the rate of taxation of royalty is concessional as compared to the normal rate of taxation applicable to foreign companies. When there is no DTAA, domestic law provides for taxation u/s 9(1)(vi) of the Act. If Section 115A is attracted then the rate of taxation is 10%. If the royalties are effectively connected with PE, then they are taxed on net basis u/s 44DA. In other cases, by necessary implication, the royalty would be taxable at maximum marginal rate. But in cases, where DTAA exists, as in present case, royalty shall be taxed as per the rate provided under the respective DTAA, in the case @ 10% of gross receipts. Thus, the Panel is of considered view that revenues of the assessee by way of equipment rentals on leasing of seismic survey vessels will be taxable as equipment royalty, both under the domestic law as well as under the provisions of DTAA. This ground of objection is, therefore, rejected. 8. Before us the ld counsel for the assessee Shri Deepak Chopra summarized the facts as under:- a. CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenues received by it were offered to tax as per the provisions of section 44BB of the Act on a deemed profit of 10%. 10. Ld counsel further contended that the first issue that has arisen for determination is whether the benefit of section 44BB of the Act is available to a sub-contractor since both the AO as well as the DRP have held that it was not the intention of the legislature to extend the benefit indefinitely and the benefit of section 44BB does not extend to the sub-hirer. Against the said observations of the AO/DRP Shri Deepak Chopra pointed out that the DRP, in the assessee's own case in previous assessment year, i.e. AY 2006-07, under the same facts and circumstances, has directed that the assessee's income should be brought to tax by applying the deemed profit ratio of 10% u/s 44BB of the Act. And for these it was pointed out that in Assessment Year 2004-05, also the AO had allowed the benefit of Section 44BB to the assessee company. And since there is no change in the facts and circumstances, on the principle of consistency itself as held by the Hon'ble Supreme Court in Radhasoami Satsang 193 ITR 32 (SC) and Delhi High Court in 279 ITR 86 (SC), so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational v. DCIT (49ITD590) 2. Microperi SPA Milani v. DCIT (82 ITD 369) (Bombay) 3. WavefieldInseis ASA (320 ITR 290)(AAR) 4. Bourbon Offshore Asia (P) Ltd. (337 ITR 122) (AAR) 5. Siem Offshore Inc (337 ITR 207) (AAR) 6. Lloyd Helicopters Pty Ltd. (249 ITR 162)(AAR) 14. Thus, according to Shri Deepak Chopra from a perusal of the above judicial precedence, it is evident that no distinction has been carved out in the provisions of section 44BB of the Act between the main contractor and the sub-contractor; and so long as both activities i.e. of the contractor as well as the sub-contractor/hirer are linked to the activity of exploration, extraction or production of mineral oils and any other interpretation like what the AO/DRP has made is not what the statute says or is that intention of the legislature. Therefore, according to the ld counsel in the present case it is also evident that CGG was engaged in conducting the siesmic surveys which are an integral part of the prospecting/exploration activity. Hence, the equipment provided by the assessee (i.e. vessels) were used by CGG for the purposes of exploration activity and as such the revenues received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 115A also do not apply on the facts of the present case. Therefore the ld counsel prays that the impugned order be set-aside and earlier order accepting the stand of the assessee may be upheld for consistency. In next part of applicability of interest under section 234B the ld. Counsel submitted that this issue now stands covered in favour of the assessee by the following decision of the Delhi and Uttarakhan High Court- DIT v. Maersk Company Ltd. (334 ITR 79 )Utt) DIT v. Jacabs Civil Incoporated (330 ITR 578) CIT v. Tide Water Marine International (309 ITR 85) 20. On the other hand the ldCIT DR Shri Sanjeev Sharma submitted that the assessee has earned its income from time chartering of vessels to M/s. CGG Services as royalty as against its computation of income under section 44BB of the Act. And according to him, the DRP rightly held that the receipts of the appellant are taxable as royalty under Article 13 of India France DTAA at the rate of 10% on gross basis. 21. According to the ld CIT DR during the year assessee (owner) has time chartered two vessels (CGG Fohn and CGG Maramaton) to M/s. CGG marine SAS, France the charterer. 22. The ld CIT DR took ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement was extended for a period of one year from January 25, 2004 (page 94). The Charterer is C.G.G. Marine SAS, France. 24. The ld CIT DR Shri Sanjeev Sharma took our attention to Paragraph 1 of the written submission of the assessee, which states that vessels have been provided to M/s Cornpanigne Generale De Geophysique (CGG). Page 1 of PB which shows that CGG Services has entered into contract with ONGC for carrying out seismic operations. Paragraph 2 of the written submission of the assessee also states CGG Services had entered into three contracts with ONGC for providing personnel and equipment, plan and executes acquisition of 3D seismic data and basic 3D seismic data processing. The flow of transactions between CGG Marine SAS France and CGG Services is not explained by the assessee. Therefore according to the ld CIT DR, The assessee has chartered/ hired the vessels to CGG Marine SAS France and the same are finally hired to (possibly in a chain) CGG Services who has carried out seismic survey for ONGC which is engaged in the business of prospecting, extraction and production of mineral oil. 25. According to the ldCIT DR, agreement between assessee and CGG was entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to make payments was incurred and the payments are borne by that permanent establishment or fixed base then the royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 29. According to the ld CIT DR, the vessels have been used by CGG Services in India and payments have been made for using the vessels for its business in India and payments were incurred and are borne by the permanent establishment of the CGG situated in India therefore the royalty is deemed to arise in India. 30. According to the ldCIT DR, the payments are based on per day rate and not based on actual use. Additionally, providing fuel is also responsibility of the charterers. The use of the vessel is dependent on the user and the assessee has no role in its use whether used in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. DRP has stated that, in regard to activity of supplying plant and machinery on hire the terms in connection with are not used indicating that the terms used or to be used are meant for hirer only when the charterers are using the same in their business of business of prospecting, extraction and production of mineral oil. 33. According to him, the section 44BB uses the expression in connection with in regard to non-resident engaged in the business of providing services or facilities, whereas, the expression in the prospecting for, or extraction or production of mineral oil has been used in case of non-resident supplying plant and machinery. The scope of expression in connection with came up for consideration before the Hon'ble AAR in the case of Geofizyka Torun SP. ZO.O. (2009-TII-24-ARA-INTL/320 ITR268)). Paragraphs relevant to the issue were pointed out and are reproduced below. 6.1. The expression 'in connection with' is important and has to be construed to have expansive meaning. While explaining the meaning of similar and inter-changeable expressions viz. pertaining to and in relation to , the Supreme Court observed in the case of Doypack Sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income War Tax Act which reads as under: 66. Subject to the provisions of this Act, the Exchequer Court shall have exclusive jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this Act. 6.3. In V.A. Vasumathi v. CIT 123 ITR 94 the Kerala High Court observed while interpreting Section 48(1) of the Income-tax Act that the words in connection with such transfer mean intrinsically related to the transfer and the expenditure has to be connected with the transfer. 7. Keeping the above exposition of the phrase In connection with , it is crystal clear that the services offered by the applicant is in connection with the prospecting for or extraction of mineral oils, which business Is carried on by the applicant's employers viz. those In the business of all and aas production. The real; intimate and proximate nexus between the services performed by the applicant in India and the prospecting for or extraction of mineral oils (which expression Includes petroleum and natural gas) is very much present in the Instant case. 36. Geofizyka's customer was ONGC. The test applied by the Hon'ble AAR was the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the authorities below. 40. The ld counsel Shri Deepak Chopra in his rejoinder to the submission of the ld CIT DR submitted that there is no dispute that seismic survey activities form part of exploration activity and as such are eligible for the benefit under section 44BB the Act and the revenue is in agreement with the assessee in regard to the same. The main issue, which arises for determination in the present case, is whether the assessee being a subcontractor is eligible for claiming benefit of section 44 BB of the Act and pointed out that the assessee's case is that it has provided vessels to CGG who has used the same for carrying seismic data acquisition for ONGC which is admittedly in exploration activity. 41. In respect to the contention of the ld CIT DR that the flow of transactions between CGG Marine SAS France and CGG Services is not explained by the assessee; and that the assessee has charter hired to CGG Marine which are finally hired in chain to CGG Services; and based on these alleged facts the ld CIT DR has concluded that the assessee is into leasing business. To this contention and conclusion of the ld DR, the ld Counsel submitted that CGG Services S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in exploration, prospection and production of mineral oils. 43. It was also stated by the ld counsel that the provision no where lays down that charterers should be engaged directly in the business of prospecting, extraction or production of mineral oils. According to the ld AR the conclusions of the Ld.CIT DR are also fallacious on account of the reason that the provision clearly envisages the non-resident assessee to be engaged only in the business of supplying plant and machinery. The only condition imposed, so to speak, is that such plant and machinery has to be used or should be used for the purposes of prospecting, extraction or production of mineral oils. The user is not defined and as such the user could be a third person as well. Hence, where the provision does not create any discrimination between the person who actually does the activity of prospecting, extraction or production and the person who supplies the plant and machinery for such prospection to be carried out, a narrow interpretation of the provision should not be drawn. The basic condition to be satisfied in the said provision is that the main contractor should be engaged in the provision of services or fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reservoirs). Seismic surveys can paint a picture of the subsurface in order to better target the oil and gas reserves. This results in fewer dry holes and even avoids drilling if seismic data suggests a low potential for oil or gas. Accordingly, for any oil and gas exploration activity, seismic survey is the first step and perhaps the most critical part of the activity. Hence, such services are directly related and in fact are a part of the exploration/ prospecting activities for mineral oil (petroleum and natural gas). 46. In this regard, reference was also drawn to Model Production Sharing contract ('Model PSC') (please refer page 184-NELP VIII and page 189 definition of the Exploration operations at point 1.43) which forms the basis of any oil and gas field development activity in India. The Exploration operations as defined under Model PSC also includes seismic activities. The definition Exploration operations is reproduced as under: operations conducted in the Contract Area pursuant to this Contract in searching for Petroleum and in the course of an Appraisal Programme and shall include but not be limited to aerial, geological, geophysical, geochemical, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the tax would be recoverable. Thus, both these provisions i.e. sec. 44B and sec. 172 of the Act applies to non-residents engaged in the business of shipping where there is carriage of passengers, livestock etc. Section 172 is an alternative mechanism, which permitted that instead of making an ad-hoc assessment on the non-resident before the ship were to leave the port in India; the agent in India would make the provisions for payment of taxes at in the manner specified in the said provision. These sections are not applicable per-se to the instant case, however, it is mentioned because sec. 172 of the Act, was an issue in Gosalia Shipping Pvt. Ltd. (113 ITR 307) SC which was heavily relied by the ld.CIT DR to support the contention that the agreement of the assessee was a time-charter and so the special provision of sec. 44BB is of no avail to the assessee. We will deal with the said contention later. And in order to adjudicate the issue in hand, it would be apposite to reproduce the provision of law involved in the matter. So Section 44BB is reproduced below:- SECTION 44BB [Special provision for computing profits and gains in connection with the business of exploration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral oil includes petroleum and natural gas . 50. An analysis of the said section reveals that it (sec. 44BB) is a special provision in respect to an assessee who is a non-resident for computing profits and gain in connection with the business of exploration, etc of mineral oils. The charging provisions is contained in sub-section (1) of Section 44BB, the relevant part of which provides that where an assessee, non-resident is engaged in 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, a sum equal to ten percent of the aggregate of the amount specified in sub-section (2). What attracts sec. 44BB is the generation of income (operational income). It should be remembered that ownership of a ship per se will not attract sec. 44BB. It is the income arising on account of supplying of plant/ship on hire used in the prospecting for, or extraction or production of mineral oils in India. On a plain reading of the said provision it would be apparent that the section envisages the case of an assessee who is engaged in the business of supplying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s something different from what the words used by them convey in their accepted sense. The charter-party was drawn in a standard form approved by the New York Produce Exchange and there is no warrant for supposing that though the payment which the charterers bound themselves to make to the owners of the ship was on account of the carriage of goods, the parties described it as being payable for the use and hire of the vessel, in order to avoid the payment of Indian income-tax . While adjudicating on the controversy involved the Hon'ble Supreme Court held that the crux of the transaction was that the charterers were not liable for to pay to the owners any amount on account of carriage of goods and hence the provisions of section 172 of the Act were not applicable. In the said case the principle laid down was that a time charter simplicitor would not fall within the charging provisions contained in sub-section (2) of Section 172 of the Act, since to fall within the purview of section 172 of the Act the payment has to be for the carriage of passengers, goods etc. Let us now examine whether this judgment helps the contention of the revenue. For that it would be relevant to examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, Lord Wright made these weighty observation: that if the contract is clear and unambiguous, its true effect cannot be changed merely by the course of conduct adopted by the parties in acting under it. 57. Guided by the said principles, we now propose to examine the various clauses of the Charter agreement between the Appellant and the Charterer. The Appellant had provided two seismic survey vessels namely - CGG Fohn and CGG Harmattan to M/s CGG (also a non-resident company incorporated in France) for carrying out geophysical prospection. Copy of the Time Charter Agreement between the assessee and CGG for 1:01IN is at page 12 to 57 of the paper book. The agreement between the Appellant and CGG for vessel Harmattan is at pages 58 to 105 of paper book. The Time Charter agreement (for the research vessel FOHN) between the Appellant and CGG is at page 12 of the paper hook. Clause 1.1 of the said agreement (on page 12 of the paper book) provides that the owners (i.e. the Appellant) offers to hire and the Charterers (i.e. CGG) accept to rent the vessel and its crew for an activity of Geophysical prospection. It is also provided that the said vessel is fitted out and equipped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book (Appendix 2) in the technical specifications of the Vessel in clause 10 separate Spaces have been provided on the vessel for Seismic survey part of the vessel. Similarly in Appendix 3 (on page 29 of paper book). Survey Lab details on the vessel have been provided. Similar terms are contained in the time charter agreement in respect of the Vessel HARMATTAN. 58. All the above terms go to evidence that the above agreements were not time charters simplicitor. The Charter agreement filed in the present case contemplates the vessels being taken on hire by the applicant and the nomenclature of hire , and for carrying out geophysical prospection. The term . 'offers to hire', and 'accept to rent the vessel' and 'its crew for an activity of Geophysical prospection'. The clause 1.2 states that 'at the end of the charter period if any geophysical study is in progress the charterers will be allowed to complete the study'; and in the clause 4.2 it is agreed that that 'during the entire charter period the equipment on the vessel shall comply with the list given in Appendix 2 the compressors needed for geophysical activity'. Further, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting out the ships/vessels on hire. There is also no doubt that the vessel has been taken on hire by the applicant for the purpose of enabling the applicant to carry on the seismic survey and data acquisition operations which are essential for prospecting of mineral oil. The requirement of sub-sect(1) of S. 44BB is that the vessel/ship must be used in the prospecting for or extraction of mineral oils. A chase vessel provided by PF is inextricably linked to the prospecting operations. Once the deployment of the vessel in the prospecting operations is considered to be integral part of such operations, the second part of S. 44BB(1) is triggered. It is immaterial whether the vessel is deployed in the prospecting activities pursuant to a direct contract with the oil producing company or pursuant to a contract with the seismic survey services provider. The person at whose instance the chase vessel participates in the seismic survey is not relevant to decide whether the requirements of the section are satisfied. The time charter party agreement filed in the present case contemplates the vessel being taken on hire by the applicant and the nomenclature 'hire' and 'pay hire for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices. On the whole, it appears that the transaction falls more appropriately under the second limb of sub-so (1) of S. 4488 rather than the first limb. Therefore the income derived by PF ought to be computed in accordance with provisions of s. 44BB. As per s. 44BB r/w Part II of the First Schedule to the IT Act, the effective rate at which the tax has to be withheld from the payments made by the applicant to PF would be 4.223 per cent. The consideration for services provided by PF could not be construed to be in the nature of 'royalty' under S. 9(1) (vi). Once s. 44BB is attracted, it is common ground that the computation has to be made in accordance with that provision and no other special provision, viz., s. 44DA or s. 115A would come into play in view of the fact that the payment is being made by a non-resident to another non-resident. ii) Bourbon Offshore Asia (P). Ltd. (337 ITR 122)(AAR) The applicant is engaged in the business of providing offshore oil and gas marine subsea services. It also offers range of offshore oil service vessels to global oil and gas industry. Under the contract with TOIVL, who in turn is providing various offshore drilling and support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 is not attracted. The services being provided by the applicant are not technical services. Hence, the applicant can claim to be assessed in terms of s. 4488 especially since there is no case the':ONGC is not involved in prospecting, exploration and extraction of oil and the services being provided by the applicant are services in connection with that activity. (iv) Lloyd Helicopters Pty Ltd. (249 ITR 162 )(AAR) It is s. 44BB and not s. 44BBA which is more appropriate to the present case. In the first place, the question of taxation here pertains to a non-resident assessee which is providing facilities and services and leasing out plant and machinery in relation to a business in exploration for, and extraction and production of, mineral oil. It may be that the company-or rather the group to which it belongs-may have a wider area of operations but the issue here is only regarding activities in relation to business of mineral oils. Secondly, though the business operations in the present case attract the provisions of sub-so (1) of s. 44BBA, that section can be invoked only in cases where the operator is deriving income of the categories specified in sub-so (2) of that sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely be said to relate to only the provision of services and facilities and hire of plant and machinery in relation to an oil business carried on by C. Therefore, the present case is one governed by s. 44BB rather than by s. 44BBA. The parties considered it expedient to agree that C should be able to command the helicopter and allied services of the applicant as and when required; it was not sufficient for them merely to enter into a contract agreeing to pay for fare and freight as and when passengers or material were transported. There is a material distinction, in the commercial sense, between the two types of contract and one cannot ignore it. 60. A reading of the aforesaid judicial precedence clarify that sec. 44BB does not distinguish between the main contractor or a sub-contractor as has been interpreted by the AO and the DRP. The conclusions of the AO and the DRP are erroneous on account of the reason that the provision clearly envisages the non-resident assessee to be engaged in the business of supplying plant and machinery on hire. The only condition imposed, so to say, is that such plant and machinery has to be used or should be used for the purposes of prospecting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the ld DR cannot be read into section 44BB, to exclude the assessee from it. 62. Now when we look into the facts of the case in the light of the discussion above we find that assessee is in the business of supplying plant/ ship on hire which is being used for prospecting for or extraction or production of mineral oils. Therefore, on the whole, it appears that the transaction falls under the second limb of sub-section (1) of sec. 44BB. The intention of the Parliament to exclude construction, assembly and mining or like project from the purview of fees for technical services is to draw a line of distinction between business activities and mere rendering of services. On no stretch of imagination can we hold that the nature of receipts on account of provision of supply of vessels on hire basis can have character of fees for technical services within the meaning of Expln. 2 to s. 9(1)(vii). The services required by CGG (Hirer) are rendered by the assessee by lending the vessels on hire cannot bear the character of fees for technical services. The assessee's income no doubt is derived from letting out the plant/ship which is used for prospecting for or extraction or product ..... X X X X Extracts X X X X X X X X Extracts X X X X
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