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TMI Blog2023 (6) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee-company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation/support of software licences, etc., is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation 2 to section 9(1)(vii) of the Act being consideration received for mining or like projects and the same, therefore, is not taxable under section 44DA and revenue received for the same accordingly is taxable under section 44BB of the Act. And amount received by the assessee as reimbursement of service tax is not includible in gross turnover for the purpose of computing taxable income under section 44BB of the Act. HELD THAT:- As decided by Learned third member revenue received by the assessee company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation / support of software licenses, etc, is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals)-II, Dehradun for the assessment year 2011-12. The grounds of both the appeals are as under : I. T. A. No. 6536/Delhi/2014 1. Whether on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in holding that the revenue received by the assessee, including amounts alleged to be in the nature of 'reimbursements' from various entities (other than revenue from M/s. BHP Billiton covered by the hon'ble Authority for Advance Rulings) on account of the provision of facilities and services of seismic data acquisition, planning and carrying out of presurvey studies, taking marine data and confirming prospects, maintenance/upgradation/support of software licences, etc. ('services') was taxable under section 44BB of the Income-tax Act, 1961 ('the Act') as opposed to section 44DA read with section 9(1)(vii) of the Act. 2. Whether on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in ignoring the effects of the amendment brought in vide Finance Act, 2010 with effect from April 1, 2011, in terms of which income covered by section 44DA has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot includible in gross turnover even for the purpose of computing taxable income under section 44BB. (a) The learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that the provisions of section 44BB are a self-contained code providing for computation of profits at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from income are deemed to have been allowed to the assessee. (b) Whether the learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that once the receipts held as taxable under section 44BB of the Act, there is no scope for computing or recomputing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits under section 44BB of the Act and obviating the need for accounting for individual receipts and payments, etc. (c) Whether the learned Commissioner of Income-tax (Appeals) has erred in ignoring the ratio of the judgment in the case of Chow ringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) ; [1973] 31 STC 254 (SC) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) has erred in failing to take note of the observations of the hon'ble High Court in the case of DIT v. Mitsubishi Corporation [2011] 330 ITR 578 (Delhi) that the role of the assessees/payee/deductee in short-deduction or non-deduction of tax needs to be ascertained before claim regarding non-liability to interest under section 234B of the Act is accepted a proposition affirmed subsequently in the case of DIT (International Taxation) v. Alcatel Lucent USA Inc. [2014] 2 ITR-OL 276 (Delhi) (judgment of the Delhi High Court dated November 7, 2013 in I. T. A. No. 327 of 2012). 8. 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. I. T. A. No. 6436/Delhi/2014 Ground No. 1 Taxability of reimbursement of expenses The learned Commissioner of Income-tax (Appeals) has erred on facts and in law in holding that receipts on account of reimbursement of various expenses amounting to Rs. 9,30,10,042 are to be included in computing the gross receipts for the purpose of the estimation of income under section 44BB of the Act as opposed to the appellant's claim for non-taxability of such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erations to acquire the 2D geographical survey (page 80) 2. BHP Billiton Petroleum (International Exploration) Pty. Ltd. 8600026440 (amendment to contract 8100003844) 8-10-2010 Expanded to include 2D coverage over NELP-VIII blocks (excluding Angria Bank area) 3. BHP Billiton Petroleum (International Exploration) Pty. Ltd. 8100003844 Provision for marine seismic data reprocessing services 4. BHP Billiton Petroleum (International Exploration) Pty. Ltd. 8100003940 Provision for marine seismic data reprocessing services 5. BP Exploration (Alpha) Ltd. CON-IND-09-001 18-12-2009 Provision for 2D marine seismic data reprocessing services 6. Calm Energy India Pty. Ltd. 4600001353 27-1-2010 Processing of 3D pre stack time migration and prestrack depth migration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elected data to finalise the final processing parameters and 3D seismic data processing 16. EN India 226/AN/PROC/2009 6-11-2009 To carry out 3D marine seismic data processing services. 2.1 The assessee claimed that section 44BB of the Income-tax Act was applicable in its case and it offered income in accordance with provisions of section 44BB of the Income-tax Act. The relevant provisions of section 44BB of the Income-tax Act, reproduced as under : (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee being a non-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, a sum equal to ten per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession' : Provided that this sub-section shall no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the above list. From the scope of work it is seen that includes processing or 2D/3D marine seismic data, survey long-term lease of marine technology, hiring of Q-marine vessel with the help of its personnel and equipment, seismic data acquisition and processing, hiring of vessel and technology, in contracts with RIL, GSPCL and ONGC. The scope of work for ONGC is to take the defined Q-marine data through a designed workflow of interpretation and confirm prospects through risking/ranking and culmination in drilling recommendations. Planning and carrying out pre-survey studies and executing the acquisition and processing of 3D seismic data using Q-marine technology in different survey areas of western and eastern offshore. Gross revenues of Rs. 198,92,34,667 have been reported from ONGC. The scope of work for GSPCL is planning and carrying out presurvey studies and executing the acquisition and processing of 3D seismic data using Q-marine technology in KG-OSN-2001/3 block. Gross revenues of Rs. 42,67,26,835 have been reported from GSPCL. The scope of work for RIL is consultancy for two KK-III-D1 and KK-III-D2 blocks to find solutions to the intriguing geological intric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith BHP Billiton Petroleum (International Exploration) in A. A. R. No. 938 of 2010 (Western Geco International Ltd., In re [2011] 338 ITR 161 (AAR)) along with Authority for Advance Rulings in the following cases : (i) Global Geophysical Services Ltd., In re [2011] 332 ITR 418 (AAR) (A. A. R. No. 873 of 2010) (ii) Bergen Oilfield Services AS, Norway, In re [2011] 337 ITR 167 (AAR) (A. A. R. No. 857 of 2009) (iii) OHM Ltd., In re [2011] 335 ITR 423 (AAR) (A. A. R. No. 935 of 2010) (iv) Geofizyka Torun SP. Z. O. O., In re [2010] 320 ITR 268 (AAR) (A. A. R. No. 813 of 2009) (v) Lloyd Helicopters International Pty Ltd., In re [2001] 249 ITR 162 (AAR). (vi) Seabird Exploration FZ LLC., In re [2010] 320 ITR 286 (AAR) (A. A. R. No. 815 of 2009) (vii) Scan Drilling judgment (I. T. A. No. 6147/Delhi/1987, dated June 24, 1989) Other judicial pronouncements have also been relied upon which have been considered and are found to be not applicable to the case of the assessee. The advance rulings are case specific and are applicable to the cases in which they have been pronounced by the Authority for Advance Rulings. 4.3 The contention of the assessee has been carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Hindustan Ideal Insurance Co. Ltd. v. Life Insurance Corporation of India, AIR 1963 SC 1083. (i) Proviso to section 44BB explains and clarifies the main provision as the terms 'services or facilities' used therein are not defined and the two terms used are too general in nature. The proviso thus restricts the applicability of the substantive provisions of section 44BB in relation to those persons who are either engaged in the business for prospecting, etc., for mineral oil (section 42) or foreign companies who received fees for technical services from an Indian concern, etc., (44D) or in the cases of non-residents and foreign companies receiving fees for technical services (section 115A) and persons covered by the notification issued by the Central Government (section 293A). (ii) Proviso would be rendered useless we are to hold that section deals with all sorts of services be it of general nature, as a class in itself as well services of technical, consultancy or managerial nature which form a distinct and separate species of services. This can also be explained by provisions contained at least in three (3) tax treaties which India has entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 44BB. This is implied in the amended provisions of sections 44BB and 44DA with effect from April 1, 2011. These amendments, are clarificatory in nature and as evident from the relevant para of the Finance Bill, 2010 which is reproduced below and which explains the rationale behind amendments to these sections : 'Income of a non-resident providing services or facilities in connection with prospecting for, or extraction or production of, mineral oil Under the existing provisions contained in section 44BB(1) of the Income-tax Act, income of a non-resident taxpayer who 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 is computed at ten per cent., of the aggregate of the amounts paid. Section 44DA provides the procedure for computing income of a non-resident, including a foreign company, by way of royalty or fees for technical services, in case the right, property or contract giving rise to such income are effectively connected with the permanent establishment of the said non-resident. This incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edco Forex International Drill Inc. v. CIT [2005] 279 ITR 310 (SC) delivered on November 17, 2005 where the hon'ble court observed as under (page 318) : '. . . An Explanation to a statutory provisions may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time the main provision came into force. But if it changes the law it is not presumed to be retrospective irrespective of the fact that the phrases used are it is declared or for the removal of doubts.' 4.6 Further, the hon'ble High Court of Uttarakhand in the case of CIT v. Rolls Royce P. Ltd. [2007-TII-03-HC-UKHAND-INTL] has held that fees for technical services cannot be taxed under section 44BB of the Income-tax Act, 1961. The relevant portion of the judgment is reproduced below : 4.7 Thus, following the hon'ble Supreme Court as mentioned above, the clarification brought in by the amendment must be read into the main provision with effect from time that the main provision of section 44BB came in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date . . . Explanation 2. For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trademark or similar property ; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trademark or similar property ; (iii) the use of any patent, invention, model, design, secret formula or process or trademark or similar property ; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ; (iva) the use or right to use, any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB ; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any construction, assembly, mining or like project undertaken by the recipient'. It is important to note here that the Legislature has not used the word 'in connection with' in this Explanation. Therefore, the benefit of this will only be available to those assessees who are actually undertaking construction, assembly or mining project. In the case of the present assessee, it has neither taken any construction, assembly, mining nor any like project. In fact, these projects have been taken by companies like O.N.G.C., Reliance Industries, etc. The assessee is rendering services to these companies who have undertaken these projects. Therefore, it is clear that the assessee does not qualify for the claim of section 44BB and technical services are not covered under the provisions of section 44BB of the Income-tax Act, 1961. 4.10 From the plain reading of the Act, it is clear that the presumptive sections are neither charging sections nor elaborate the nature of income in the hands of the assessee. For categorisation of income, there are separate sections. The provisions of section 44BB cannot override the provisions of those sections. It is to be understood that if an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngless if royalty and technical services fees arising out of a business cannot at all fall within the purview of section 44D. The entire scheme of the Act section 9(1)(vi) and (vii), section 44D, section 115A clearly shows that the underlying idea is to give special tax treatment to income by way of royalties and fees by way of technical services of foreign companies in two ways : by prescribing a flat rate lower than the general rate of tax on the other income by taxing the gross amount of receipts of this nature without providing for any deductions therefrom, a mode of taxation evolved after a good deal of thought and discussions between nations where double taxation is involved. The mode of taxation and relief provided in the double tax avoidance agreement, also shows that royalties and fees for technical services are taxed on a basis different from business except where they arise in the course of a business with a permanent establishment in India. Section 44BB and section 44D have thus both to be given effect to and the only way of doing it is by restricting section 44BB to income that does not fall within the scope of section 44D ; it is this that is made clear by the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Double Taxation Avoidance Agreement entered into by the Government of India provide a presumptive rate of tax at 10 per cent. When translated to the turnover they will result a profit rate of 25 per cent. The assessee should have maintained books of account and should have got its accounts audited as provided in law. The case of the assessee is not covered under section 44BB of the Income-tax Act and therefore the contention of the assessee claiming protection under section 44AA(2)(iii) is misconceived. 4.18 The discussion in above paragraphs clearly indicates that section 44BB appears as a benefit section for the operators engaged in oil exploration, prospecting and production and since to perform these three activities, men and machines would be required by them, the benefit is implied to extend to such personnel and tools directly utilised for the work on location of prospecting, exploration or production of mineral oil by the operators. The assessee obviously does not come in this category and thus is wrong in stretching the benefits of section 44BB to itself, in order to avoid the payment of tax in India. The procurement of technicians and equipment by the assessee, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 44DA are applicable to it in the year under consideration. The assessee also has a permanent establishment in India as already held above. As per the provisions of section 44DA of the Income-tax Act the assessee was required to maintain books of account and get accounts audited for computing profits therein which the assessee has not done. The submissions of the assessee have been considered. The asses see has a permanent establishment in India and is rendering services through its permanent establishment as defined in the Act. It has an office and employees through whom he is carrying out operations in India. This fact is confirmed from the view that the assessee himself has claimed the benefit of section 44BB. Since the assessee is rendering services through its permanent establishment the provisions of section 44DA are applicable in the case of the assessee. Since the assessee has not produced any details of expenses, the revenue received by it from rendering of various services and rental receipts is to be taxed at 25 per cent. profit rate. The above propositions and observations and treatment of the contractual receipts of the assessee from providing serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of various types including fees for technical services. If such income is received from 'Government' or 'an Indian concern and the rate of tax applicable on such income'. The chargeability of the income of the nature of fees for technical services received from a non-resident under section 44DA or section 115A, the manner of computation of such income and the rate of tax applicable on such income would be governed by the normal provisions laid down in the Act. Thus the income received by the assessee from the three is subject to the conditions laid down therein. The Assessing Officer is therefore directed these three companies under section 9(1)(vii)(c) and tax it at the normal rates applicable to the income of a foreign company. If the provisions of section 9(1)(vii)(c) do not apply due to non-fulfilment of conditions laid down therein, the Assessing Officer shall tax the income from these three non-resident companies under section 44BB.' Accordingly in view of the above directions of the Dispute Resolution Panel the income of the assessee from contracts executed with these three companies are held taxable under section 9(1)(vii)(c) of the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced as under : 7. Reimbursements : During the year the assessee has received Rs. 9,30,10,042 as reimbursements which were not shown as part of gross receipts and have been excluded. Further, the assessee has also not offered to tax service tax receipts of Rs. 13,98,69,523. The assessee is also in receipts of service tax reimbursement on services contract amounting to Rs. 14,50,67,928. The assessee was required to show cause why payments of service tax may not be included in your gross contractual receipts and taxed accordingly. The assessee vide letter dated February 21, 2014 has submitted that : Service tax being a statutory liability in nature, is collected by the assessee for and on behalf of the Central Government, therefore the same could not be added in the total receipts for the purpose of determination of presumptive profit under section 44BB of the Act. It has been stated that WGIL is merely a conduit for collecting service tax and having the same deposited into the Government treasury. The same does not become the income of the service provider. In other words, the service provider acquires no title to the receipts by way of service tax. There is no el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007. 5. CIT v. Trans Ocean Offshore Inc. [2008] 299 ITR 248 (Uttarakhand) ; [2007-TII-13-HC-Ukhand-Intl] dated October 8, 2007. 6. Sedco Forex International Inc. v. CIT [2008] 299 ITR 238 (Uttarakhand) ; [2007-TII-02-HC-Ukhand-Intl] dated September 28, 2007. 7. CIT v. Halliburton Offshore Services Inc. [2008] 300 ITR 265 (Uttarakhand) dated September 20, 2007. In the above case, it has been held by the hon'ble High Court that all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or out side India) are mutually inclusive. This amount is the basis of determination of deemed profits and gains. From the extracts of the judgments as above, it is evident that the amounts received by the assessees by way of reimbursement of service tax are to be included in gross receipts of the assessee liable to be offered for taxation. It is immaterial whether the revenues are being finally assessed as fees for technical services on gross basis or on net basis. Further the payment of service tax (claimed not includible in gross receipts by assessee for the portion it has accepted to has received service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross value of services provided by him. Hence, the service tax paid by him to the Government is a statutory payment. He is allowed to recover the same from his customers. But the amount paid by the customer to the service provider against service tax is not statutory payment ; it is purely a contractual one. If the customer does not pay service tax to the service provider he would have not done any contravention of the service tax law and the service tax authority cannot proceed against him. The service provider may, of course, file a civil suit for violation of the terms of contract. Similarly, if the service provider does not receive or charge service tax from his customer, he cannot say that he would not pay the service tax to the Government. He has to pay the tax irrespective of whether he charges it from his customers or not. A look at section 68 of the Finance Act, 1994 shows that the liability to pay the service tax, is on the service provider. There is no provision that the service provider need not pay the tax if the service receiver does not pay it to the service provider. Section 73A of the Act and rule 6 relied on regarding the depositing of tax with the Government cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be compensated by the Government in the transaction where it incurs loss. The fact is that the profit is determined not transaction-wise but with reference to the gross value of transactions done by the assessee during a particular period, i.e., the previous year. It is the net outcome of profit or loss on all the transactions entered by it during the previous year that is called its profit. Hence if a transaction does not result in profit it cannot be said that it should be ignored for purposes of computation of profit of business. There is another reason why it is a misnomer to say that service tax receipt by the assessee has no profit element in it. It is well known that service tax operates on principle of Cenvat. The service tax paid by the assessee on the services received by it in course of its business is allowed as a rebate against the amount collected by it against service from its customers. It is only the net collection, if any, that he pays to the Central Government. In presumptive tax the assessee may be getting deduction for various expenses and allowance which in normal computation he might have not got. Finally, if the assessee feels that normal computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the hon'ble court that no excise duty and sales tax were leviable in respect of exports. The detailed reasoning given by the hon'ble court reads as follows (page 773 of 245 ITR) : '. . . Under section 80HHC, the Legislature intended that the profits from exports should not be taxed. For this purpose, a formula has been introduced whereby if the business is of composite nature then the proportionate profit relatable to the export business is to be found out by multiplying the profits of a business by the export turn over and dividing the product by the total turnover. This formula finds place in section 80HHC(3) as it stood at the relevant time. Under clause (b) of the Explanation to section 80HHC, export turnover is defined to mean sale proceeds received in India by the asses see in foreign exchange. Under the said definition, export turnover is defined to mean the sale proceeds of any goods which are exported out of India but which will not include freight or insurance. Clause (ba) defines total turnover to exclude freight or insurance. This clause (ba) explains the turnover in a negative manner so as to exclude freight or insurance. Therefore, a combined reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lliburton Off shore Services Inc. [2008] 300 ITR 265 (Uttarakhand). The foregoing discussion leads to the inescapable conclusion that for purposes of presumptive determination of the assessee's profit, the quantum of amount received by it from its customers against its service tax obligation has to be considered as part of the receipt. If the assessee deals that the profit determined in this manner is excessive and that its profit was actually lower it has the option to produce its books of account and tax audit report so that its income could be determined under the regular provisions of Income-tax. By excluding a part of its regular business receipt in its computation, it has tried to reduce its profit and thereby evade payment of tax. In view of the foregoing discussion, the amount is treated as part of its receipts. In view of the above, thus the entire receipts on account of reimbursements of receipts on account of service tax are taken into account to determine deemed profit of the assessee for the year. In view of the above, the entire receipts of service tax, reimbursement and service tax on reimbursement receipts which has not been offered to tax, and taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax G. No. 6 G. No. 4 Reimbursement of expenses not chargeable to tax G. No. 6 Disallowed However, subsequent in the order of Baker Hughes Asia Pacific Ltd., issued by your goodself, your goodself placing -reliance on the decision of the Income-tax Appellate Tribunal, New Delhi in the case of Precision Energy Services Ltd. (I. T. A. No. 5609/Delhi/2012) held service tax reimbursements to be not includible in the revenue chargeable to tax under -section 44BB. G. No. 5 Complete credit of TDS not allowed G. No. 8 Directed AO to allow complete credit. G. No. 6 Interest under section 234B incorrectly levied G. No. 9 Deleted levy of interest Placed reliance on the decision of the UK High Court in the case of Maersk Co. Ltd. [2011] 334 ITR 79 (Uttarakhand) G. No. 7 Initiation of penalty proceedings under section 271B erroneous G. No. 11 Initiation held to be not appealable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her and without prejudice to the submissions filed earlier. 1. Without prejudice to the claim of the appellant that the receipts are not in the nature of 'fees for technical services' the appellant claims that specific provision (section 44BB) overrides general provisions (section 44DA). 1.1 The assessee wishes to place reliance on the decision of the hon'ble Delhi High Court in the case of DIT v. OHM Ltd. wherein the hon'ble court upheld the ruling of the AAR that specific provision (section 44BB) overrides general provision (section 44DA). 1.2 The interplay between section 44BB and section 44DA has been examined in detail by the hon'ble Delhi High Court in the case of OHM Ltd. (supra). The hon'ble court has relied upon the well-settled rule of interpretation that if a special provision is made for a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim 'generalia specialibus non derogant'. Further, the court has also relied upon another well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical services. The question as to whether or not the services were specific and essential for the oil and gas E and P operations or were general fees for technical services was never considered by the court. In view of the above facts, the High Court ruled that The court upheld its earlier ruling in the case of OHM Ltd. (supra) ; and Accordingly it went on to hold that even though the income was in the nature of fees for technical services falling within section 44DA, the provisions of section 44BB would nevertheless apply because the taxpayer was engaged in the business of providing services in connection with prospecting for mineral oil. A harmonious construction of the Delhi High Court's decision in the case of OHM Ltd. and PGS Geophysical AS would be that income from services which are specific to the oil and gas E and P sector shall be subject to the computation provisions of section 44BB as opposed to section 44DA. In making the assertion we wish to submit as under : The hon'ble Delhi High Court in the case of PGS Geophysical has nowhere dissented from its earlier judgment in the case of OHM Ltd. On the contrary, the court has categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome altogether. However, on this issue the hon'ble jurisdictional High Court is against the appellant and the case law cited by the learned Assessing Officer on pages 11, 12 and 13 of the impugned order, would squarely place this issue against the appellant. This ground is accordingly dismissed. 6. Ground No. 4 challenges the inclusion of service tax in the turn over for consideration for computing income. While it is a fact that for the assessment year 2010-11 this ground has been held against this appellant, but a subsequent decision of the hon'ble Income-tax Appellate Tribunal in the case of Precision Energy Services Ltd. (I. T. A. No. 5609/Delhi/2012) places this matter squarely in favour of the appellant. This ground is thus allowed. 3. During the appellate proceedings in the Income-tax Appellate Tribunal, following particulars were filed from the assessee's side : (i) Written synopsis on behalf of the assessee for the assessment year (AY) 2011-12. (ii) Copy of decision of the hon'ble Income-tax Appellate Tribunal in the case of Western Geco International Ltd. (I. T. A. Nos. 5602 and 5400/Delhi/2013, dated May 13, 2016). (iii) Copy of decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not apply in a case where provision of section 44DA apply. He also highlighted that, simultaneously, the second proviso was inserted to section 44DA(1) of the Income-tax Act with effect from April 1, 2011 to the effect that the provisions of section 44BB shall not apply in respect of the income referred to in section 44DA(1) of the Income-tax Act. After these amendments, the learned Commissioner of Income-tax (Departmental representative) contended, with effect from April 1, 2011, i. e., with effect from assessment year 2011-12 ; income by way of royalty or fees for technical services (FTS) is to be assessed under section 44DA of the Income-tax Act, as done by the Assessing Officer ; and not under section 44BB of the Income-tax Act, as claimed by the assessee. He further drew our attention to the fact that the Assessing Officer has categorically held in the assessment order that the contractual receipts of the assessee are in the nature of fees for technical services. The learned Commissioner of Income-tax (Departmental representative) further submitted that the learned Commissioner of Income-tax (Appeals) did not adjudicate on whether the contractual receipts of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT [2015] 376 ITR 306 (SC) ; [2015] 59 taxmann.com 1 (SC). He placed reliance on DIT v. OHM Ltd. (supra), ONGC Ltd. v. CIT (supra). He further placed reliance on order dated May 13, 2016 of co-ordinate Bench of the Income-tax Appellate Tribunal, Delhi, in the assessee's own case for the assessment year 2010-11, in I. T. A. Nos. 5602 and 5400/Delhi/2013 wherein, under similar facts it was held that the services carried on by the assessee are in connection with prospecting for mineral oils and must be taxed under section 44BB of the Act in lines of decision of the Supreme Court in the case of ONGC Ltd. v. CIT (supra). The learned counsel for the assessee also placed reliance on the following cases : Order of the Income-tax Appellate Tribunal in the case of KOP Surface Products (Services) Pte. Ltd. v. Dy. DIT (I. T. A. No. 215/ Delhi/2015). Order of the Income-tax Appellate Tribunal, in the case of Dy. DIT (International Taxation) v. RPS Energy Pty Ltd. [2018] 92 tax mann.com 77 (Delhi). Order of the hon'ble Delhi High Court in the case of DIT v. Mitchell Drilling International P. Ltd. [2016] 380 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act. The resultant effect of aforesaid amendments to sections 44BB and 44DA with effect from April 1, 2011 is that income by way of royalty and fees for technical services referred to in section 44DA(1) of the Income-tax Act is not to be assessed under section 44BB of the Income-tax Act, even if it has nexus with a non-resident asses see's 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. This interpretation is consistent with the order of the hon'ble Delhi High Court in PGS Geophysical AS v. Addl. DIT (supra), as referred to in foregoing paragraph 4 of this order. 4.2 In the case before us, the learned Commissioner of Income-tax (Appeals) has granted relief to the assessee merely on the basis of nexus of business activities with oil extraction. To quote from the impugned order of the learned Commissioner of Income-tax (Appeals), it was held by the learned Commissioner of Income-tax (Appeals) : 4.2. The findings of the learned Assessing Officer and the averments of the learned authorised representatives have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, the only disputed issue is regarding taxability of reimbursement of various expenses amounting to Rs. 9,30,10,042 ; as to whether, this amount is to be included in computing gross receipts of the assessee, for the purpose of estimation of the assessee's income. At the time of hearing before us, the learned counsel for the assessee submitted that the assessee did not offer amount received as reimbursement of service tax and some other expenses, e. g., fuel charges, hotel charges, storage charges, etc., to tax as they were in the nature of pure reimbursement and did not have any element of profit ; that these other expenses were incurred by the assessee on behalf of clients in connection with providing services to the client and would have alternatively been borne by the client directly ; that the break-up and details of these expenses were submitted before the learned Assessing Officer vide submission dated February 17, 2014 filed by the assessee. Further, the learned counsel for the assessee submitted that while dealing with this issue, the Assessing Officer clearly mentioned the break-up of various amounts received by the assessee as reimbursement ; however the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue under the erroneous impression that the disputed issue related entirely to inclusion of the service tax in the turnover, ignoring the element of reimbursement of expenses. Thus, we find that both the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) have failed to consider this issue properly. Therefore, we are of the view that this issue requires fresh consideration at the level of the Commissioner of Income-tax (Appeals). In any case, we have already remanded the issue regarding applicability of section 44BB/section 44DA of the Income-tax Act to the file of the learned Commissioner of Income-tax (Appeals) in foregoing paragraph No. 4.2 of this order. In the fitness of things, therefore, in view of the foregoing, the order of the learned Commissioner of Income-tax (Appeals) on this issue is also set aside, and the issue is remanded to the file of the learned Commissioner of Income-tax (Appeals) for fresh order in the light of applicable law and facts and circumstances of the case. 7. In the combined result, the appeals of Revenue as well as assessee both are partly allowed for statistical purposes. Order pronounced in the open court on Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mitchell Drilling International P. Ltd. [2016] 380 ITR 130 (Delhi), and followed by the Tribunal in the earlier years, would not be applicable. However, my esteemed Brother has expressed that all these judgments have no relevance after the amendment brought in sections 44BB and 44DA by the Finance Act, 2010, with effect from assessment year 2011-12. Since I am unable to persuade myself with his view and concur with his finding in the proposed draft order ; therefore, I am passing my separate order, giving my reasons for dissent. 3. The controversy involved in the cross-appeals as raised in the grounds of appeal by the Revenue as well as by the assessee for the sake of brevity, were as under : Firstly, whether revenue received by the assessee including the amounts in the nature of reimbursement is taxable under section 44BB or under section 44DA ; and whether such revenue received falls in the category of fees for technical services . Secondly, whether reimbursement of service tax is includable in the gross turnover for the purpose of computing taxable income under section 44BB or not. Thirdly, whether interest under section 234B was chargeable in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in contracts with RIL, GSPCL and ONGC. 7.1 The Assessing Officer has also analysed the scope of work of ONGC, GSPCL and RIL, which has been summarised by him in the following manner : The scope of work for ONGC to take the defined Q-marine data through a designed workflow of interpretation and confirm prospects through risking/ranking and culmination in drilling recommendations. Planning and carrying out pre-survey studies and executing the acquisition and processing of 3D seismic data using Q-marine technology in different survey areas of Western and Eastern Offshore. Gross revenues of Rs. 198,92,34,667 have been reported from ONGC. The scope of work for GSPCL is planning and carrying out presurvey studies and executing the acquisition and processing of 3D seismic data using Q-Marine Technology in KG-OSN-2001/3 Block. Gross revenues of Rs. 42,67,26,835 have been reported from GSPCL. The scope of work, for RIL is consultancy for two KK-M-D1 and KK-III-D2 blocks to find solutions to the intriguing geological intricacies of various dimensions and nature and processing of selected data to finalise the final processing parameters and 3D seismic data processing. Gross rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion and analysis, he held that the provisions of section 44BB(1) do not apply in the cases where section 115A or section 44D or amended section 44DA is applicable. He also referred to the Finance Bill, 2010 introducing the amendments brought in section 44BB and section 44DA with effect from April 1, 2011 and observed that the intention of the Legislature was to exclude incomes, which are in the nature of fees for technical services or royalty from the purview of section 44BB. Thereafter, he also rejected the assessee's contention that the services provided by the assessee are covered under the exclusionary clause of Explanation 2 to section 9(1)(vii) on the ground that the benefit is only available to those assessees who are directly undertaking construction, assembly or mining project. Here, in this case, the assessee has neither taken any construction, assembly, mining nor any like project as they have undertaken by ONGC, GSPCL, RIL, etc. The assessee is only rendering services to these companies who have undertaken these projects, and therefore, the assessee does not fall in the exclusionary clause of Explanation 2 to section 9(1)(vii) and consequently does not qualify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated the assessee's submission as to how the services rendered by the assessee were directly connected with the extraction and prospecting of mineral oil which has been incorporated from pages 5 to 7 of his order including the judgments of the hon'ble Delhi High Court in the case of OHM Ltd. (supra) and PGS Geophysical AS (supra). After considering the submissions of the assessee and findings of the Assessing Officer, he categorically held that it cannot be doubted that all the services rendered by the assessee are ultimately connected with oil extraction and the submissions of the assessee give an insight into the nature of contracts executed. Once the nexus of business activity with oil extraction is proved, there can be no hesitation in holding that revenue deserves to be taxed under section 44BB. Accordingly, he allowed the assessee's ground on this point. 9.1 In so far as inclusion of certain reimbursable items in the turnover for the purposes of computing income, the learned Commissioner of Income-tax (Appeals) relied upon the decision of the Income-tax Appellate Tribunal, Delhi Bench in Precision Energy Services Ltd. (I. T. A. No. 5609/ Delhi/2012) and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting, extraction or production of mineral oils would be treated as fees for technical services or not or would be assessed under section 44BB or not, has been set at rest by the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT (supra) vide order and judgment dated July 1, 2015, which has been rendered much after the passing of the impugned orders. In this judgment, the hon'ble Supreme Court has reversed the judgment of the hon'ble Uttarakhand High Court in the case of CIT v. ONGC which has been strongly referred to and relied upon by the learned Assessing Officer. In the case before the hon'ble Supreme Court, ONGC who was a representative assessee to many non-resident companies for providing various services in connection with prospecting for, extraction or production of mineral oils. Their Lordships had to decide, as to whether, amounts paid by the ONGC to the non-resident in connection with such services is taxable for fees for technical services under section 44BB read with Explanation 2 to section 9(1)(vii) or would be taxable on presumptive basis under section 44BB. The hon'ble Supreme Court after analysing relevant provisions had also considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has accepted the contention raised by the parties that the test of pith and substance of the agreement, namely, whether the works contemplated for services to be rendered under the agreement is connected or inextricably linked with the prospecting for, extraction, or production of mineral oils or not. The agreement in question has to satisfy the said test and some of the categories of the contracts were classified into the following eight heads : 1. Carrying out seismic surveys and drilling for oil and gas. 2. Services starting/re-starting/enhancing production of oil and gas from wells. 3. Services for prospecting for exploration of oil and or gas. 4. Planning and supervision of repair of wells. 5. Repair, inspection or equipment used in the exploration, extraction or production of oil and gas. 6. Imparting training. 7. Consultancy training. 8. Supply, installation, etc., of software used for oil and gas exploration. 11.3 After considering the entire gamut of arguments and the nature of contracts, their Lordships have held as under (page 317 of 376 ITR) : 13. The Income-tax Act does not define the expressions 'mines' or 'minerals'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44BB and not section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oils. Keeping in mind the above provision, we have looked into each of the contracts involved in the present group of cases and find that the brief description of the works covered under each of the said contracts as culled out by the appellants and placed before the court is correct. The said details are set out below : Sl. No. Civil Appeal No. Work covered under the contract 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. 740 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 3. 731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce potential and presentations outside India in connection with promotional activities for joint venture exploration program. 22. 1531 Review of sub-surface well data, provide repair plan of wells and supervise repairs. 23. 733 Repair of gas turbine, gas control system and inspection of gas turbine and generator. 24. 741 Repair and inspection of turbines. 25. 737 Repair, inspection and overhauling of turbines. 26. 736 Inspection, engine performance evaluation, instrument calibration and inspection of far turbines. 27. 1522 Replacement of choke and kill consoles on drilling rigs. 28. 1521 Inspection of gas generators. 29. 1515 Inspection of rigs. 30. 2012 Inspection of generator. 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. 12. The key sequitur as culled out from the aforesaid judgment are that : (i) Proximity of the work contemplated under an agreement executed with the non-resident assessee with mining activity or mining operation is crucial for determination for the question, whether payments made under such an agreement is to be assessed under section 44BB or section 44D. (ii) Secondly, the hon'ble Supreme Court has strongly enunciated the test of pith and substance which should be adopted in looking at the agreement and work undertaken and held that the Central Board of Direct Taxes Instruction No. 1862 clearly clarifies the said test that mining projects or like projects occurring in Explanation 2 would cover rendering of services like imparting of training and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact, he has clearly stated at page 3 in paragraph 4 of his order that most of these contracts are continuing since earlier years. Now, once there is a binding precedence of the hon'ble Supreme Court on the same issue which has been followed by the co-ordinate Bench of this Tribunal in the assessee's own case for earlier assessment years, then I find it extremely difficult to hold that these judgments have been rendered nullity or are of no consequence from the assessment year 2011-12, because of the amendments brought in section 44BB and section 44DA by the Finance Act, 2010. Here, one has to see, whether the services rendered by the assessee fall in the category of fees for technical services or not and it has nothing to do with amendment brought in section 44DA or section 44BB. It is only when it is held that the services provided by the assessee fall in the category of royalty or fees for technical services, then only applicability of section 44DA is to be seen. Thus, when at the threshold such services are not reckoned as fees for technical services , then ostensibly there is no question of taxing the same under section 44DA. On this ground alone, I hold that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral 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 under the head 'Business' in accordance with the provisions of the Act, subject to the condition that no deduction would be allowed in respect of any expenditure or allowance which is not wholly or exclusively incurred for the business of such permanent establishment or fixed place of profession or in respect of amounts, if any, paid by the permanent establishment to its head office or to any of its other offices. Under section 44BB, one does not find any reference to a permanent establishment in India. The type of services con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices 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 expenses 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 inserting the second proviso to sub-section (1) of section 44DA and a reference to section 44DA in the proviso below sub-section (1) of section 44BB. A careful perusal of both the provisos shows that they refer only to computation of the profits under the sections. If both the sections have to be read harmoniously and in such a manner that neither of them becomes a useless lumber then the only way in which the provisos can be given effect to is to understand them as referring only to the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso to sub-section (1) of section 44DA inserted by the Finance Act, 2010 with effect from April 1, 2011 and simul taneous insertion of the proviso in section 44BB(1). The hon'ble High Court have clearly clarified that, since both these sections have different modes and method prescribed for computing the profit, therefore, the Legislature thought it fit to clarify the position by making a necessary amendment. After analysing both the provisos and giving a harmonious construction to both the duly inserted provisos, their Lordships held that both these sections have to be read harmoniously that neither of them becomes useless lumber. The proviso to section 44BB(1) contemplates a flat rate of 10 per cent. of the revenue and cannot be deemed to be the profits of the non-resident where the services are of the type which do not fall under that section, but are more general in nature so as to fall under section 44DA. Similarly, the second proviso to section 44DA(1) can be interpreted to mean where services are general in nature and falls under Explanation 2 to section 9(1)(vii) then such assessee cannot claim the benefit of section 44BB. Both these amendments cannot ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already held above that now in the wake of the law enunciated by the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT (supra) any services which are inextricably linked or connected with prospecting for, or extraction or production of mineral oils, firstly, do not fall under the category of fees for technical services ; and secondly, the benefit of special provision of section 44BB is applicable. Thus clarification given by the hon'ble Delhi High Court in OHM's case clearly clinches the issue, on the effect of the amendment from the assessment year 2010-11 and not only that, in a subsequent judgment, the hon'ble Delhi High Court, again referred to the judgment of OHM and accepted the contention advanced on behalf of the assessee that when the assessee is engaged in business of providing services in connection with prospecting for mineral oils, then it would be taxable under section 44BB(1). 17. Accordingly, respectfully following the ratio laid down by the hon'ble jurisdictional High Court as well as by the hon'ble Supreme Court as discussed above, I hold that services rendered by the assessee and the revenue generated from such services would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2, out of two questions, suggested by them is exactly similar and there is no difference. As regards question No. 1, there is some difference ; and, after discussion, the learned counsel for the assessee has agreed to adopt question No. 1, as suggested by the leaned Departmental representative with slight modification with which the learned Departmental representative has also agreed. Accordingly, the following two questions are finalised as the questions arising from the difference of opinion between the two differing Members in this case which are required to be resolved by the Third Member after hearing the arguments of both the sides : 1. Whether, in view of the facts and circumstances of the case and in law, the revenue received by the assessee on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/upgradation/support of software licences, etc., is taxable as fee for technical services under section 44DA read with section 9(1)(vii) or is taxable under section 44BB of the Incometax Act, 1961 ( the Act ) ? 2. Whether, the amount received as rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or mineral oil and clearly fall under the ambit of section 44BB of the Act. In support of this contention, reliance was placed by the assessee on the Central Board of Direct Taxes Instruction No. 1862, dated October 22, 1990. It was further contended that section 44BB(1) is a special provision applicable to the non-resident engaged in the business of providing services or facilities in connection with prospecting for or extraction or production of mineral oils and, therefore, the general provisions of section 44DA has no application. 5. The Assessing Officer did not find merit in the contentions raised on behalf of the assessee. According to him, the services rendered by the assessee were in the nature of technical services and therefore the revenue generated by the assessee was liable to be treated as fees for technical services under section 9(1)(vii) of the Act. He held that section 44BB of the Act is applicable only to those persons who are directly engaged in the business for prospecting, etc., of mineral oils and the assessee-company, being a foreign company who received fees for technical services from an Indian concern, was taxable under section 44DA of the Act. He held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee were intimately connected with oil extractions going by the nature of contracts executed by it and consequently the income of the assessee from revenue generated from these services was liable to tax at presumptive rate of 10 per cent. under section 44BB of the Act. To arrive at this conclusion, he derived support from the decision of the hon'ble Delhi High Court in the case of DIT v. OHM Ltd. [2013] 352 ITR 406 (Delhi) observing that the application of section 44BB vis-a-vis section 44DA of the Act was clarified by their Lordships in the said decision after taking into consideration the amendments brought in these two sections with effect from April 1, 2011. He further relied on the decision of Delhi Bench of the Income-tax Appellate Tribunal in the case of Precision Energy Services Ltd. (I. T. A. No. 5609/Delhi/2012) to hold that the reimbursement of service tax was not to be included in the turnover of the assessee-company for the purpose of computing its income by applying the presumptive rate of 10 per cent. under section 44BB of the Act. 7. The decision of the learned Commissioner of Income-tax (Appeals) holding that the case of the assessee-company was cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the assessee-company as the services were being provided in the year under consideration under the same contracts which were continuing from the earlier years. Reiterating the nature of services, it was submitted on behalf of the assessee-company that the scope of services provided to various clients included processing of 2D/3D marine seismic data, survey, long-term lease of marine technology, hiring of Q-Marine vessels and seismic data acquisition and processing, which were closely and intrinsically related to exploration and production of mineral oil as seismic survey activities and one of the most critical parts of exploration activities. It was submitted that similar issue was decided by the Income-tax Appellate Tribunal in the assessee's own case for the assessment year 2010-11 wherein it was held under similar facts and circumstances that services rendered by the assessee are in connection with prospecting of mineral oil and covered under section 44BB of the Act. Reliance was placed on behalf of the assessee on the decision of the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT [2015] 376 ITR 306 (SC), wherein it was held that similar services prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , GSPCL and RIL were connected with prospecting for and extraction of mineral oil carried out by Indian companies. He also found that a categorical finding was recorded by the learned Commissioner of Incometax (Appeals) in paragraph No. 4.1 of his impugned order that all the services rendered by the assessee under relevant contracts are intimately connected with oil extraction. He noted that similar issue was involved in the assessee's own case for the assessment year 2010-11 and by relying on the decision of the hon'ble Supreme Court in the case of ONGC Ltd. (supra), it was held by the Tribunal that the provision of various services in connection with prospecting for or extraction or production of mineral oil is taxable on presumptive basis under section 44BB of the Act. He then referred to the decision of the hon'ble Supreme Court in the case of ONGC Ltd. (supra) rendered by judgment dated July 1, 2015 and noted that the judgment of the hon'ble Uttarakhand High Court in the case of CIT v. ONGC Ltd., which was strongly relied upon by the Assessing Officer, has been reversed by the hon'ble Supreme Court. He noted that ONGC was a representative-assessee to many n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed by the Revenue, the learned Judicial Member noted that the assessee-company in the case before the hon'ble Delhi High Court was engaged in providing geophysical services to oil and natural gas and conducted electric magnetic survey, processing and interpretation of data and the data so collected for the survey was used for the off-shore oil industries. He noted that since the services were found to be in the nature of technical services, the hon'ble Delhi High Court held that the same were taxable under section 44DA of the Act read with section 9(1)(vii) of the Act. He noted that the hon'ble Delhi High Court thus found that the services rendered by the assessee in the case of PGS Geophysical AS (supra) were covered by section 44DA of the Act which is broader and more general in nature and not by section 44BB which is a special provision for computing the profits and gains of non-resident in connection with business for providing services or facilities in connection with prospecting for, or extraction or production of mineral oil, including petroleum and natural gas. As noted by the learned Judicial Member, the effect of the amendments made to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration, i. e., assessment year 2011-12, to which he said amended provisions are applicable, are taxable under section 44DA of the Act as rightly held by the Assessing Officer and not under section 44BB of the Act as claimed by the assessee. He submitted that the effect of amendment to section 44BB and section 44DA of the Act as made with effect from April 1, 2011 has been considered by the Tribunal in the case of CGG Veritas Services SA v. Addl. DIT (International Taxation) (I. T. A. No. 4653/Delhi/2010, dated January 25, 2012) [2012] 50 SOT 335 (Delhi) and on such consideration, it is held that the combined reading of the proviso to section 44BB(1) and the second proviso to section 44DA makes it clear that fees for technical services rendered in connection with, prospecting for or extraction or production of mineral oil, though effectively connected with permanent establishment or fixed place of business fall not under section 44BB(1) of the Act and will be assessable under section 44DA of the Act. 13. As regards the decision of the hon'ble Delhi High Court in the case of OHM Ltd. (supra) cited on behalf of the assessee and relied upon by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to section 44BB and section 44DA of the Act with effect from April 1, 2011 will become redundant. 15. The learned counsel for the assessee, on the other hand, submitted that the services provided by the assessee-company under the relevant contracts during the year under consideration were not in the nature of technical services and since the receipts for the said services were not in the nature of fees for technical services, the same were covered under section 44BB of the Act as rightly claimed by the assessee and not under section 44DA of the Act as held by the Assessing Officer. He submitted that the Assessing Officer, however, held that the said services were in the nature of technical services and applied the provisions of section 44DA of the Act by relying on the decision of the hon'ble Uttarakhand High Court in the case of ONGC Ltd. (supra). He submitted that the decision of the hon'ble Uttarakhand High Court in the case of ONGC Ltd. (supra), however, has been subsequently reversed by the hon'ble Supreme Court as rightly noted by the learned Judicial Member. He contended that the hon'ble Supreme Court, after applying the test of pith and substance , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts executed with BHP Billiton Petroleum (International Exploration) Pty. Ltd. He contended that the assessee had approached Authority for Advance Rulings (AAR) regarding the taxability of revenue received from BHP Billiton Petroleum contract which was being offered for tax for the first time and the Authority for Advance Rulings vide its order dated July 25, 2011 held that revenues from the BHP Billiton Petroleum contract were taxable under section 44BB of the Act after taking into consideration the amendment made by the Finance Act, 2010 with effect from April 1, 2011. He pointed out that the appeal filed by the Revenue against the order of the Authority for Advance Rulings has already been dismissed by the hon'ble Uttarakhand High Court. 18. Reliance was placed by the learned counsel for the assessee in support of the assessee's case on the issue under consideration on the recent decision of the hon'ble Delhi High Court in the case of Paradigm Geophysical Pty. Ltd. v. CIT (International Taxation) (W. P. (C) No. 1370 of 2019, dated March 13, 2020) [2020] 424 ITR 521 (Delhi) to contend that the hon'ble Delhi High Court relying on the judgment of the hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same was rendered on July 9, 2014, that is well before the decision in the case of ONGC Ltd. (supra) came to be rendered by the hon'ble Supreme Court on July 1, 2015. He pointed out that the assessment year involved in the said case was 2008-09 and the nature of services provided being fees for technical services was not disputed in the said case. 20. I have considered the submissions of both the sides and also perused the relevant material available on record including the respective orders passed by the differing Members and the judicial pronouncements cited by both the sides. The assessee, in the present case, is a non-resident company having a permanent establishment in India. During the year under consideration, it provided services to Indian companies under the various contracts and, as noted by the Assessing Officer himself, the scope of services as provided by the assessee-company under the said contracts mainly entered into with RIL, GSPCL and ONGC, by and large included processing of 2D/3D marine seismic data, survey, long-term lease of marine technology, hiring of Q-marine vessel with the help of its personnel and equipment, seismic data acquisition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 22. The Assessing Officer did not accept the claim of the assessee. According to him, the services provided by the assessee were not covered by exclusion provided in Explanation 2 to section 9(1)(vii) of the Act and the said services being in the nature of technical services, the income generated by the assessee-company from rendering the said services was chargeable to tax as per the provisions of section 44DA of the Act which read as under: 44DA. (1) The income by way of royalty or fees for technical services received from Government or an Indian concern in pursua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of ONGC (supra). 23. As submitted on behalf of the assessee, the decision of the hon'ble Uttarakhand High Court in the case of ONGC (supra), relied upon by the Assessing Officer to hold that the case of the assessee is covered under section 44DA of the Act and not under section 44BB of the Act, has been subsequently overruled by the hon'ble Supreme Court by its judgment dated July 1, 2015, of ONGC Ltd. v. CIT reported in [2015] 376 ITR 306 (SC) and by relying on the same, the Tribunal in the assessee's own case for the immediately preceding year, i. e., 2010-11 has decided a similar issue in favour of the assessee vide its order ONGC Ltd. v. CIT reported in [2016] 71 taxmann.com 166 (Delhi), wherein it was held : that since the services rendered by the assessee-company are in connection with prospecting for, or extraction or production of mineral oil, the income generated from the said services is taxable on presumptive basis under section 44BB of the Act and not under section 44DA of the Act. 24. At the time of hearing before me, the learned Departmental representative has contended that the decision of the hon'ble Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, the issue relating to the applicability of section 44BB read with Explanation 2 to section 9(1)(vii) of the Act was independently examined by the hon'ble Supreme Court. In this regard, reference was made to Instruction No. 1862 issued by the Central Board of Direct Taxes on October 22, 1990. As stated in the said circular, a question whether prospecting for or extraction or production of mineral oil can be termed as mining operations was referred to the Attorney General of India for his opinion. He opined that such operations are mining operations and the expressions mining project or like projects occurring in Explanation 2 to section 9(1)(vii) of the Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. In view of the said opinion, it was clarified by the Board in the Instruction dated October 22, 1990 that the consideration for such services will not be treated as fees for technical services for the purpose of Explanation 2 to section 9(1)(vii) of the Act and the payments for such services to a foreign company will be income chargeable to tax under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ONGC continued to remain the same as in the immediately preceding year, i. e., assessment year 2010-11 since the same contracts were continuing from earlier years except for the contract with BHP Billiton Petroleum (International Exploration) Pty. Ltd. As submitted by the learned counsel for the assessee, there were four contracts executed by the assessee-company with BHP Billiton Petroleum (International Exploration) Pty. Ltd., involving similar nature and scope of work ; and, the assessee had approached the Authority for Advance Rulings (AAR) regarding the taxability of revenue received from BHP Billiton Petroleum contracts which was being offered for tax for the first time. He has placed a copy of the order dated July 25, 2011 passed by the Authority for Advance Rulings in appeal bearing No. A. A. R No. 938 of 2010 (reported at Western Geco International Ltd., In re [2011] 338 ITR 161 (AAR) wherein the issue was decided vide paragraph No. 5 as under (page 165) : 5. In terms of the contract, the applicant is to provide vessels and seismic crew at the area of operations to acquire the 2D geophysical survey in the MB/KK blocks off-shore India to BHP Billiton. The vessels are to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the provisions of section 44BB of the Act was applicable and not section 44DA of the Act. It is pertinent to note that the writ petition filed by the Revenue against the order of the Authority for Advance Rulings (AAR) dated July 25, 2011 is dismissed by the hon'ble Uttarakhand High Court observing that the issue is squarely covered by the judgment of the hon'ble Supreme Court in the case of ONGC (supra). 29. As already noted, even though the issue involved in the case of ONGC (supra) before the hon'ble Supreme Court was in the context of applicability of the provisions of section 44BB vis-a-vis section 44D of the Act, the applicability of section 44BB of the Act in the facts of the assessee's case was independently decided by the hon'ble Supreme Court after having found that the services rendered by the assessee in the said case, which are similar to the services rendered by the assessee in the present case, were not in the nature of technical services as the same were covered by the exclusion provided in Explanation 2 to section 9(1)(vii) of the Act. I, therefore, find it difficult to accept the contention of the learned Departmental representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct with effect from April 1, 2011 and after considering the nature of the provisions of section 44BB and section 44DA of the Act and by applying the relevant rule of interpretation, the matter was discussed and decided vide paragraph Nos. 11 and 12 as under (page 416 of 352 ITR) : 11. We do not think that there is any error in the view taken by the Authority for Advance Rulings. 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 pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the more specific. 12. The second proviso to sub-section (1) of section 44DA inserted by the Finance Act, 2010 with effect from April 1, 2011 makes the position clear. Simultaneously a reference to section 44DA was inserted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resi dent 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 per cent. 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 expenses by the permanent establishment to its head office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their respective spheres of operation or to take away the separate identity of section 44BB of the Act. As already noted, the issue relating to the applicability of section 44BB of the Act was considered and decided independently by the hon'ble Supreme Court in the case of ONGC (supra) and after having found that the services rendered by the assessee in the said case, which are similar to the services rendered by the assessee in the present case, were not in the nature of technical services as the same were covered by exclusion provided in Explanation 2 to section 9(1)(vii) of the Act, it was held by the hon'ble Supreme Court that section 44BB was applicable. The amendments made by the Finance Act, 2010 with effect from April 1, 2011 in section 44BB and section 44DA of the Act thus cannot have the effect of altering or effacing the legal position propounded by the hon'ble Supreme Court in the case of ONGC (supra) after taking into consideration the fundamental nature and the sphere of section 44BB of the Act which has a separate identity as held by the hon'ble Delhi High Court in the case of OHM Ltd. (supra). 32. The hon'ble Delhi High Court in another case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 situated in India. One more distinction between sections 44DA and 44BB is that, in section 44BB one does not find any reference to a permanent establishment in India and the services contemplated therein are more specific than what is contemplated in section 44DA. Thus, section 44BB is a special provision in so far as it relates to the applicability of the provision in the context of the specified services. Section 44DA applies where such non-resident carries on business in India through a permanent establishment stipulated therein or performs services from a fixed place of profession, such income shall be computed under the head 'Profits and gains of business or profession' in accordance with the provisions of the Act, subject to the condition that no deduction shall be allowed in respect of any expenditure or allowance which is not wholly or exclusively incurred for the business of such permanent establishment or fixed place of profession in India or in respect of amounts, if any, paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income falling within the scope of section 44DA(1) of the Act. However, now that the proviso has been inserted, it has fundamentally restricted the applicability of section 44BB. This proviso has to be given due consideration and a meaning, recognising the legislative intent. A plain reading of section 44BB(1) shows that it applies to an assessee who is engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire use, or to be used, in the prospecting for, or extraction or production of mineral oils. However, the proviso thereto carves out an exception that the sub-section shall not apply in a case where the provisions of section 44DA apply for the purpose of computing profits or gains or any other income referred to in those sections. Further, a reading of section 44DA makes it clear that it applies to the character of income which is in the nature of royalty or fees for technical services. The legislative intent behind the amendment is also evident from the memorandum to the Finance Bill, 2010 which reads as under ([2010] 321 ITR (St.) 110 ) : 'Under the existing provisions contained in section 44BB(1) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2011-12 and subsequent years.' This proviso reinforces the legislative intent to carve out an exception to the character of the income referred to in this section, i. e., royalty and fees for technical services. The principles relating to inter pretation of statute, emphatically lay down that statute should be interpreted to preserve the legislative intent. A reading of the overall scheme of sections 44BB and 44DA leaves no manner of doubt that section 44BB applies if the assessee is engaged in the business of providing services or facilities in the prospecting for, or extraction or production of minerals oils. However, if income earned by such asses see takes the colour of royalty or fee for technical services, then the computation for the purposes of determining 'profits and gains of business or profession' is to be done as per the provisions of section 44DA of the Act. Therefore, now in the current scenario if the income of the assessee is royalty or fee for technical services, then the same would be taxed under section 9(1)(vi)/(vii) read with section 115A or section 44DA, as the case may be. 33. After taking into consideration the conflict or inconsisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the hon'ble Delhi High Court that section 44DA was applicable in the case of the assessee and not section 44BB of the Act. As rightly pointed out by the learned counsel for the assessee, the said decision was rendered by the hon'ble Delhi High Court on July 9, 2014 and the benefit of the decision of hon'ble Supreme Court in the case of ONGC (supra) rendered subsequently on July 1, 2015 was not available to the hon'ble Delhi High Court while deciding the said case. Moreover, the hon'ble Delhi High Court had an occasion again to consider a similar issue subsequently in the case of Paradigm Geophysical Pty. Ltd. (supra) which was decided on March 13, 2020. In the said case, the assessee-company was engaged in the business of developing and providing customised software enabled solutions and annual maintenance services. The solutions provided by the assessee-company were used by oil and gas industry in relation to excavation, extraction, production activities and seismic analysis. The assessment year involved was 2012-13 and the issue was whether the case of the assessee was covered by the provisions of section 44BB or section 44DA of the Act. After analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the decision of the hon'ble Uttarakhand High Court in the case of DIT (International Taxation) v. Schlumberger Asia Services Ltd. [2019] 414 ITR 1 (Uttarakhand) [FB], wherein it was held that the amount reimbursed to assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by assessee to Government of India, not being an amount paid to assessee on account of providing services and facilities in connection with prospecting for, or extraction or production of, mineral oils in India, would not form part of aggregate amount referred to in clauses (a) and (b) of sub-section (2) of section 44BB of the Act. To the similar effect is the decision of the hon'ble Delhi High Court in the case of DIT v. Mitchell Drilling International P. Ltd. [2016] 380 ITR 130 (Delhi), wherein it was held that the service tax collected by the assessee for passing it on to Government was not to be included in gross receipt in terms of section 44BB(2) read with section 44BB(1) of the Act for the purpose of computing presumptive income of the assessee under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned third member held as under :- 35. Having regard to all the facts of the case and keeping in view the legal position emanating from the judicial pronouncements as discussed above, I am of the view that the revenue received by the assessee company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation / support of software licenses, etc, is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation (2) to Section 9 (1) (vii) of the Act being consideration received for mining or like projects and the same, therefore, is not taxable under Section 44DA of the Act. The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mineral oils as held by the Hon ble Supreme Court in the case of ONGC (supra) under the similar facts and circumstances and the revenue received for the same accordingly is taxable under Section 44BB of the Act. 36. As regards the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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