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TMI Blog2018 (4) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with royalties/FTS. From the list of services considered by Hon’ble Supreme Court while deciding the issue in the case of ONGC vs. CIT (2005 (12) TMI 46 - UTTARANCHAL HIGH COURT) the activity carried on would indicate that pith and substance of each of the contracts/agreements is connected with prospecting, extraction or production of mineral oil. And the assessee before us is also rendering services which is connected with similar activities of prospecting, extraction or production of mineral oil. No hesitation in holding that the payments received by assessee have to be assessed under the specific provision of section 44 BB and not 115 A of the Act. - Decided against revenue - ITA No. 45/Del/2015 - - - Dated:- 16-3-2018 - SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER For The Appellant : Sh. GK Dhall, CIT, DR For The Respondent : Sh. Ved Jain, Adv. And Ms. Devina Sharma ORDER PER BEENA PILLAI, JUDICIAL MEMBER The present appeal has been filed by Revenue against the final assessment order passed by DCIT, Circle 3(1)(1), International Taxation, New Delhi under section 143(3) read with sec.144C (13) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions in the cases of M/s Rolls Royce Pvt Ltd [2007-TII-03-HC-UKHAND-INTL] and M/s ONGC As Agent of M/s Foramer France [(2008) 299 ITR 438 Uttarakhand] 3. Whether on the facts and circumstances of the case, the Hon'ble DRP has erred in disregarding the proviso to section 44BB, which specifically excludes receipts covered by section 115A, in holding that the income of the assessee from the above services was covered under the presumptive provisions of section 44BB. 3.1 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. 3.2 The Hon'ble DRP has erred in mechanically following the decision in the case of M/s OHM Ltd without first adjudicating upon the issue as to whether and how the scope of the services/facilities rendered under the contracts is not general in nature and therefore, does not qualify as FTS u/s 9(1)(vii) of the Act taxable under section 115A. 4. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in India and making payments in respect of services availed for execution of such contracts in India should be treated as Indian Concern for the purpose of the section 115A/44DA of the Act. 6. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal. 2. Brief facts of the case are as under. Assessee filed its return of income declaring a total income of ₹ 48,85,392/-on 29/08/11. The case was selected for scrutiny and statutory notices were issued to assessee in response to which Representatives of assessee attended assessment proceedings. 2.1. Ld. AO observed that assessee is a foreign company, incorporated in Australia and had entered into a contract with M/s Reliance Industries Ltd (RIL) and BHP Billiton Petroleum (International Exploration) Pty Ltd. (BHP) a company incorporated in Australia to provide personnel for carrying on geophysical and geological services for reprocessing of seismic data in respect of proprietary gravity and magnetic acquisition QC, merging, enhancement and mapping to be used in petroleum operation namely prospecting for mineral oils. Ld. AO observed that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospecting and extraction or production of mineral oils. It has been submitted by Ld. CIT DR that the Works which could be considered to be directly linked with the prospecting and exploration activities have been enlisted by Hon ble Supreme Court and the services rendered by assessee before us do not fall into any of those categories and therefore cannot be considered to be covered by the decision of Hon ble Supreme Court. He thus vehemently submitted that the services rendered by assessee are purely in the nature of FTS and has to be taxed as per the provisions of section 9 (1) (vii) of the Act. 3. We have perused the submissions advanced by both the sides in the light of the records placed before us. 3.1. Section 44 BB is a special provision for computing profits and gains of a non-resident in connection with 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. 3.2. Section 44 DA applies to non-residents only, however it is broader and more general in nature and provides for assessment of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting and exploration of mineral oils, exhaustively referred to earlier, 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. Viewed thus, it is the proximity of the works contemplated under an agreement, executed with a nonresident assessee or a foreign company, with mining activity or mining operations that would be crucial for the determination of the question whether the payments made under such an agreement to the non-resident assessee or the foreign company is to be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure for execution and details regarding monitoring. 1532 Study for selection of enhanced Oil Recovery processes and conceptual design of Pilot Tests. 1520 Engineering and technical support to ONGC in implementation of Cyclic Steam Stimulation in Heavy Oil Wells. 2794 Assessment and processing of seismic data along with engineering and technical support in implementation of Cyclic Steam Stimulation. 1524 Conducting reservoir stimulation studies in association with personnel of ONGC. 1535 Laboratory testing under simulated reservoir conditions. 1514 Consultancy for optimal exploitation of hydrocarbon resources. 2797 Consultancy for all aspects of Coal Bed Methane. 6174 Analysis of data of wells to prepare a job design. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a pipeline. 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 925 Engineering analysis of rig. 1519 Imparting training on cased hold production log evaluation and analysis. 1533 Training on well control. 1518 |Training on implementation of Six Sigma concepts. 1516 Training on implementation of Six Sigma concepts. 6023 Training on Drilling project management. 2796 Training in Safety Rating System and assistance in development and audit of Safety Management System. 1239 To develop technical specification for 3D Seismic API modules of work and to prepare bid packages. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (2011) 200 Taxman 408. 3.7. It is observed that Ld. AO taxed assessee at 10% of the gross receipt under section 115 A of the Act. However on a combined reading of sections 44 BB, 44DA and 115 A of the Act, we are of the considered view that all these sections relating to royalty/FTS operate in different fields. Where assessee is imparting services which could be a simple royalty or FTS then the same would be taxed under section 9(1)(vi)/(vii) read with 115A, but where assessee is imparting any services in relation to exploration of mineral oil then the royalties/FTS would be taxable under section 44 BB of the Act. As section 44 BB are specific provisions in relation to specific services, it would prevail over the other provisions dealing with royalties/FTS. Further from the list of services considered by Hon ble Supreme Court while deciding the issue in the case of ONGC vs. CIT (supra ) the activity carried on would indicate that pith and substance of each of the contracts/agreements is connected with prospecting, extraction or production of mineral oil. And the assessee before us is also rendering services which is connected with similar activities of prospecting, e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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