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TMI Blog2019 (3) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... are ancillary and subsidiary to the application for enjoyment of any right, property or information under Article 12(5)(a) of the DTAA, and secondly, the ‘make available’ clause within the meaning of Article 12(5)(b) of the DTAA between India and Netherlands. We accordingly hold that the payment in question does not fall within the scope and ambit of Article 12 of the DTAA between India and Netherlands. It follows that inasmuch as there is no permanent establishment for the services rendered in India, the receipts are not taxable under Article 7 also. Payment of Australian Company - tax protected work order - hiring of export services for feasibility of jack-up/FPSO for BHN well platform. - Held that:- in view of our finding in the preceding paragraphs while dealing with the ‘make available’ clause, for the reasons which are applicable equally to this case also, we hold that for non-satisfaction of the ‘make available’ clause within the meaning of article 12(3)(g) of the DTAA between India and Australia the impugned payment does not fall within the scope and ambit of royalty/FTS under Article 12 thereof and cannot be brought to tax in India. Payment to USA company - blowout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 44 BB of the Income-tax Act, 1961 (for short the Act ). We therefore find it just and convenient to dispose of these matters by way of this common order. 3. Facts, in brief, are that the assessee made certain payments to the nonresidents, namely, Shell International Exploration Production BV (Netherlands), J.P.Kenny Pty. Ltd (Australia), Boots Coots International Well Control Inc (USA) and National Mining Research Centre (Russia) in relation to the business of prospecting, exploration and production of mineral oil carried out by the assessee, and the receipts were claimed to be exempt from tax under the relevant provisions of the DTAA existing between India and the respective foreign country while filing the return of income. In the alternative and without prejudice to the claim of being governed by the DTAA with respect to foreign country, the receipts were claimed to be taxable under section 44BB of the Act. 4. The authorities below treated the aforesaid payments as in the nature of Fee for Technical Services (FTS) within the meaning of section 9(1)(vii) of the Act read with section 115A of the Act and held that such payments were taxable in India and on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mining, which is excluded from the purview of FTS under proviso to Explanation 2 to section 9(1)(vii) of the Act and discovered within the scope of presumptive taxation under section 44BB of the Act. It is also brought to our notice that following the aforesaid decision of the Hon ble Apex Court, various benches of the tribunal in assessee s own case in ITA 4998/del/2013 (ADIT vs ONGC) and ITA No.4989/Mum/2012 (DDIT vs ONGC), as a representative assessee of various non-residents and decided the issue in favour of the assessee. 8. Per contra, it is the argument of the Ld. DR that the factual matrix has to be seen in every case and the decision of the Hon ble Apex Court in ONGC cannot be applied to every case without looking into the factual matrix. She further submitted that the technical report submitted by the vendors is available with the ONGC so that the ONGC is enabled by the know-how to tackle similar situations with the help of the techniques that applied and depicted in the reports. In that way the make available clause is satisfied and the authorities below are justified in bringing the receipts to tax under section 9(1)(vii) of the Act read with section 115 A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude items of income which are dealt with separately in other articles of this convention, then the provisions of those articles shall not be affected by the provisions of this article; and that article 5 (7) reads that the fact that a company which is a resident of one of the states controls or is controlled by a company which is a resident of other state, or which carries on business in that other state (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. Article 12 thereof deals with royalties and fees for technical services. Article 12 (1) says that royalties and fees for technical services arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other state, whereas sub article (5) says that for the purpose of this article Fee for Technical Services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services (a) are ancillary and subsidiary to the application for enjoyment of the right, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which make availabletechnical knowledge, experience, etc or consist of the development and transfer of a technical plan or technical design. To be said to make available , the service should be aimed at and result in transmitting technical knowledge etc so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into terminology making available , the technical knowledge, skills etc. must remain with the person receiving the service even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider has gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. On facts, while the Dutch company performed the surveys using substantial technical skills, it has not made available the technical expertise in respect of such collection or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prepare subsea scope to interface with Vessel and Mumbai High facilities Facilities definition Procurement lead time. Preliminary design/construction schedule. Standards and Specification for critical items Review Installation methodology for Vessel and subseafacilities and select determine criteria for selection. Carryout process functionality review to establish basic process specification. Extend this over the life of the facility. Carry out high level controls system review. Carry out preliminary mooring and riser studies for vessel and determine optimum configuration. Metocean and Geotechnical data will reviewed bearing in mind that a permanently moored facility will be preferred as long as the risk is acceptable to ONGC. Prepare Value analysis of Project using data derived from the above and the related items on ONGC s recovery plan. Credits will be allowed in this analysis for any part of that plan which may be discounted by the Project (This will be developed jointly between ONGC and the consultant. Prepare Feasibility Report. The Report will summarize the work carried out in this phase and present Project definition, cost and schedule b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and since the assessee does not have a permanent establishment in India, its receipts are not taxable in India even as business income. An alternative plea was also taken by the assessee to the effect that at best the receipts can be taxed as per the provisions of section 44 BB of the Act. 23. Ld. DRP, however, considered the case of the assessee in the light of provisions of section 9(1)(vi) of the Act and 9(1)(vii) of the Act and Article 12 of Indo Australia DTAA, and rejected the contentions of the assessee. 24. In the light of the facts and the contentions raised, we looked into the provisions of the DTAA between India and Australia. Article 12 of this DTAA deals with royalties. Article 12 (3) reads as follows:- 3. The term royalties in this article means payments of credits, whether periodical or not, and, however, described or computed, to the extent to which they are made as consideration for: ( a) The use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trade mark, or other like property or right; ( b) The use of, or the right to use, any industrial or commercial or scientific equipment; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development and transfer of a technical plan or a design, but at that time does not include payments or credits relating to services mentioned in subparagraphs (d) and (c) that are made. However in this case the services rendered by the vendor and the numerator in the order of the Ld. assessing officer do not indicate that any technical knowledge, experience, skill, knowhow or processes are consist of the development and transfer of a technical plan or a design that was made available to the assessee so that the assessee can independently undertake such an exercise independently and without the assistance of the vendor. 26. We are convinced with this argument advanced on behalf of the assessee in view of our finding in the preceding paragraphs while dealing with the make available clause in ITA No. 5863/Del/2010 in the case of Shell International Exploration and Production BV. For the reasons which are applicable equally to this case also, we hold that for non-satisfaction of the make available clause within the meaning of article 12(3)(g) of the DTAA between India and Australia the impugned payment does not fall within the scope and ambit of royalty/FTS under Article 12 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght the total receipts of ₹ 2,07,59,268/-to tax under section 115 A read with Section 28 of the Act. 31. In the appeal preferred by the assessee, learned Commissioner of Income Tax (Appeals)-II, Dehradun considered the question whether the services rendered by the assessee have some relationship with extraction of mineral oils or not and whether section 44 BB is applicable to the case or the matter goes beyond Section 115 read with section 9 (1) of the Act. Ld. CIT(A) after dealing with the issue at length reached a conclusion that the case of the assessee deserves to be considered as falling within the purview of Section44BB of the Act and on that ground he recorded a finding that the action of the Ld. Assessing Officer cannot be supported. 32. The revenue is, therefore, in appeal before us contending that the nature of services provided by the assessee as consultant were in the nature of Fee for Technical Services (FTS) as defined under section 9(1)(vii) of the Act and income of the assessee was taxable under the provisions of section 44DA read with section 115 A inasmuch as the nature of services rendered by the assessee were technical in nature. It is further cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices in connection with Underground Coal Gasification (UCG) which is a process to convert the underground coal/lignite into combustible gases by classifying the coal in-situ; that reactants, a mix of air/oxygen rich air/water/steam are injected through injector to react with coal to form gases, liquids and ash; that produced gases are mixture of combustible (carbon-mono-oxide, hydrogen and methane) and non-combustibles (carbon dioxide, nitrogen and sulphur compounds and unreacted water vapour); that coal is gasifiedunderground by drilling boreholes from surface into the coal steam, creating linkage through coal steam between the injection and production wells and injecting air (or oxygen, water or steam) into the underground reaction zone; and that the coal is ignited to start the process of reaction to generate gases, both combustible and non-combustible and is carried to the surface where it is cleaned and upgraded for use. VastanMine Block was found suitable for carrying further work and the contract was aimed at further work in VastanMine Block and object was investigation and the detailed evaluation of the mining, geological and hydro-geological conditions of coal steam de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a view to identify suitable sites for carrying out the above procedure. He therefore submits that the services rendered by the vendors are in the nature of mining and like project and therefore, such services will not fall within the ambit and scope of Fee for Technical Services (FTS), as contemplated in Explanation 2 of Section 9(1)(vii) of the Act and in view of the judgement of the Hon ble Apex Court in the case of ONGC (supra), such services shall be construed to have rendered in relation to prospecting, extraction and production of mineral oil falling within the meaning of mining, and have to be excluded from the purview of Fee for Technical Services under proviso to Explanation 2 to section 9(1)(vii) of the Act and are covered within the scope of presumptive taxation under Section 44 BB of the Act. 40. We have gone through the decision of the Hon ble Apex Court in the case of ONGC (supra). Relevant observations given in the said judgement for the sake of ready reference are as follow:- The Income Tax Act does not define the expressions mines or minerals . The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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