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TMI Blog2018 (2) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the nonresident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case the Hon'ble DRP has erred in its interpretation of the legislative intent behind the scheme of taxation envisaged in 9(l)(vi)/9(l)(vii) read with sections 115A/44DA and 44BB , ignoring the decisions in the cases of M/s Rolls Royce Pvt Ltd [2007-TII-03-HCUKHAND- INTL] and M/s ONGC As Agent of M/s Foramer France [(2008) 299 ITR 438 Uttarakhand]. 2.1 Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in not appreciating the fact that proviso to section 44DA brought about by the Finance Act 2011 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling v/s CIT. 2.2 The Hon'ble DRP has erred in not appreciating the fact that even in terms of ratio of the judgment in the said of OHM Ltd [[352, ITR 406 (Delhi)] cited by it, the provisions of section 44BB are not applicable where the scope of the services/facilities provided by an assessee is general in nature falling under section 115A/44DA of the Act. 2.3 The Hon'ble DRP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as Indian Concern for the purpose of the section 115 A/44DA of the Act. 2. None present on behalf of the revenue, it was noticed that registry of the ITAT has pointed out delay for one day which has been duly communicated to the appellant but no any plausible explanation has been given by the revenue. Due date of filing of appeal was expires on 9th February, 2015 but it has been filed on 10th February, 2015. Therefore, delay for filing one day is condoned. 3. Brief facts of the case are that the assessee filed return of income on 25th September, 2010 declaring total income of ₹ 1,88,87,769/-. The case was selected for scrutiny and the statutory notices were issuing to the assessee. During the course of scrutiny proceedings the ld. Assessing Officer observed that the assessee NRC had international taxation with associated enterprises (AE) during the year and accordingly the case was proposed for being referred to the TPO u/s 92CAI of the IT Act. The TPO has passed order u/s 92CA(III) of the IT Act on 10.01.2014. The assessee filed objection regarding the proposed income is computed by the TPO of ₹ 4,72,19420/- against the objection of the assessee. The DRP I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act the presumptive rate of taxation is applicable to a nonITA No. 795/Del./2015 7 resident 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'' (emphasis supplied). The activities being performed by the assessee cannot be said to be not 'in connection with' prospecting etc of mineral oil as it is an integral part of the drilling operation for prospecting etc of mineral oil. In fact, the assessee provided key technical personnel for conducting actual drilling operation under its contract with Pride Foramer, viz senior tool pusher, barge manager, rigs superintendent, chief electrician, rigs safety training advisor. The contract with ONGC also recognized the oil drilling activity which was carried out, required crew and the rig had to be managed by the technical personnel. The list of personnel and crew are available in the contract in Annexure B. Therefore the operation of highly specialized offshore oil drilling rig could be done only with the assistance of personnel provided by the assessee. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illing operations for exploration or exploitation of oil and natural gas. 3. In view of the above opinion, and cases of Scan Drilling Co., Dy. Commissioner of Income Tax Vs. Schlumberger Seaco Inc. (1994) 50 ITD 348 (Cal) the consideration for rig management services was not be treated as fees for technical services and for the purpose of Explanation 2 to section 9(1) (vii) of the Income Tax ct, 1961." 4.3.2 Further, as submitted by the Ld. AR, sections 44DA and 1J5A apply to a case where the income earned by a non-resident or foreign company by way of royalty or FTS is received from Govt, or an Indian concern, whereas in the case of the assessee, the payments have been received from another non-resident company and hence cannot be brought under the purview of section 44DA of the Act. In fact, on identical facts the Flon'ble AAR in Spectrum Geo Ltd., In re (2012) 209 Taxman 397 held that the income derived by the applicant from an activity in connection with prospecting etc for mineral oil from another foreign company would be subject to tax u/s 44BB and not under section 44DA/ 115A of the Act. The relevant portion of the ruling is extracted below: "12. The inquiry now i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee during the year under consideration on account of sen/ices rendered should be brought to tax by applying the deemed profit ratio of 10% u/s 4488 of the Act. The AO is directed to do accordingly. The assessee's grounds no. 1.1 and 1.2 are accordingly disposed of." 4.4 On careful examination on the matter, following the detailed direction of the DRPfor A.Y. 2009-10 (as reproduced above) and the rule of consistency, we are of the considered opinion that the nature of business of the assessee for the year under consideration being identical to that of A.Y. 2009-10, the amount received by the assessee for this year from the said contract with Pride Foramer should also be brought to tax by applying the deemed profit of rate 10% u/s 44BB of the Act. The AO is directed to do accordingly. The above grounds of objection are accordingly disposed of. 5. in ground nos. 2.1 and 2.2, the assessee has taken an alternative argument 7ngt the provisions of section 90(2) would be applicable in the case and as per article 7 read with article 5 of the India-USA DTAA the net profit attributable to the PE of the assessee in India should be brought to tax which is 7.5%. i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f above noted discussion, we have no hesitation to hold that there is no ambiguity, perversity or any other valid reason to interfere with the impugned order of the DRP and thus we uphold the same. Consequently, the sole effective ground of the Revenue being devoid of merits in both the appeals is dismissed." 5. The ld. AR also further submitted that the issue is re-covered in favour of the assessee by the order of the Hon'ble Supreme Court in the case of ONGC vs. CIT reported at 376 ITR 306 (SC) wherein it has been held that the payments for providing various services in connection with prospecting extraction and production of oil would be assessed u/s 144BB and not u/s 44DA of the Act. Held portion of the judgement is as under ■ A careful reading of the provisions of section 44BB(1) shows that in case of a non-resident providing services or facilities in connection with or supplying plant and machinery used or to be used in prospecting, extraction or production of mineral oils, the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10 per cent of the aggregate of the amounts paid or payable to such non-resident assessee as mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is abundantly clear that drilling operations for the purpose of production of petroleum would clearly amount to a mining activity or a mining operation. ■ The facts indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the nonresident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D. 6. After observing the submissions of the assessee and order of the Authorities below and case law relied by the Ld. A.R. We are observed that the facts and circumstances of the case are remained unchanged from the last year. The case laws relied by the assessee are squarely applicable in the case of the assessee for the impugned assessment year. Respectfully following the judgment of Hon'ble Supreme Court and in case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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