TMI Blog2014 (7) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 44BB(1) of the Act – Relying upon Geofizyka Torun Sp. zo. o.[ 2009 (12) TMI 4 - AUTHORITY FOR ADVANCE RULINGS[ - Section 44BB of the Act, being industry specific was a special provision and would, thus, override the provisions of Section 44DA(1) of the Act in respect of income which fall within the ambit of Section 44DA(1) of the Act but had arisen in respect of business carried on in connection with prospecting for, or extraction or production of mineral oils. The assessee is engaged in business for providing services in connection with prospecting for mineral oils, its income if it falls within the ambit of Section 44DA(1) of the Act would be taxable under Section 44BB(1) - the income falling within Section 115A(1)(b) of the Act which does not fall within the four corners of Section 44DA(1) of the Act would also not be taxable under Section 44BB(1) of the Act, for the reason that by virtue of proviso to Section 44BB(1) of the Act, the same is excluded - the AO would specifically have to determine as to whether the assessee had a PE in India during the relevant period and if so, whether the contracts entered into by the appellant with BG and RIL were effectively connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es fell within the definition of fees for technical services as defined by provisions of Section 9(1)(vii) of the Act, which was liable to be taxed under the provisions of Section 115A of the Act and not under Section 44BB(1) of the Act. A draft assessment order to the aforesaid effect was made by the Assessing Officer on 24.12.2010. The appellant preferred objections before the Dispute Resolution Panel (in short DRP) with respect to the said draft assessment order. The DRP rejected the assessee s objections by its order dated 18.07.2011 and directed the Assessing Officer to complete the assessment as per the draft order. Subsequently, a final assessment order was made on 29.07.2011 and the assessee s income was computed at ₹ 2,68,74,62,560/-. 2.4 Aggrieved by the assessment order dated 29.07.2011, the assessee preferred an appeal before the Tribunal, inter alia, on the ground that the nature of income of the assessee would not fall within the definition of fees for technical services by virtue of Explanation (2) to Section 9(1)(vii) of the Act and that income was liable to be taxed under Section 44BB(1) of the Act. 2.5 By the impugned order, the Tribunal remitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 44BB(1) of the Act if it was in connection with prospecting for, or extraction or production of mineral oils. It was submitted that this question was covered by the decision of the this Court in Director of Income Tax-II v. OHM Ltd.: [2012] 28 taxmann 120 (Del) which had approved the ruling of the Authority for Advanced Ruling (in short AAR) in Geofizyka Torun sp Z.O.O, In re :[ 2010] 320 ITR 268. 5. The learned counsel for the Revenue contested the submissions made on behalf of the assessee and submitted that fees for technical services received by a non-resident from an Indian concern would be taxable under Section 44DA(1) of the Act, if the assessee carried on the business through a PE in India. He submitted that this was clarified by the amendment introduced in the proviso to Section 44BB(1) of the Act by the Finance Act, 2010 with effect from 01.04.2011. He submitted that even though the period in question was prior to the said amendment, nonetheless, since the amendment was clarificatory, the same would be instructive in determining whether the income from fees for technical services was liable to be taxed under Section 44DA(1) of the Act even if the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities 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 not apply in a case where the provisions of section 42 or section 44D or section section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely : (a) the amount paid or 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 facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of sub-sections (1A) and (2), the incometax payable shall be the aggregate of, (A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of thirty per cent if such royalty is received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such royalty is received in pursuance of an agreement made after the 31st day of May, 1997 but before the 1st day of June, 2005; (AA) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of ten per cent if such royalty is received in pursuance of an agreement made on or after the 1st day of June, 2005; (B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent if such fees for technical services are received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent where such fees for technical services are received in pursuance of an agreement made after the 31st day of May, 1997 but before the 1st day of June, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore this court. Thus, in view of the said finding, the income of the assessee would be taxable under Section 115A(1)(b) of the Act unless it fell within the exclusion provided therein i.e. that such income was referred to in Section 44DA (1) of the Act. Section 44DA(1) of the Act reads as under:- Special provision for computing income by way of royalties, etc., in case of non-residents. 44DA. (1) The income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after the 31st day of March, 2003, where such non-resident (not being a company) or a foreign company carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as the case may be, shall be computed under the head Profits and gains of business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year would be liable to be computed in accordance with section 44BB(1) of the Act, in accordance with the view expressed by this court in OHM (supra). 16. This Court in the case of OHM (supra) had considered the conflict between the provisions of Section 44DA(1) and 44BB(1) of the Act and affirmed the view expressed by the AAR in Geofizyka (supra) and held that Section 44BB of the Act, being industry specific was a special provision and would, thus, override the provisions of Section 44DA(1) of the Act in respect of income which fall within the ambit of Section 44DA(1) of the Act but had arisen in respect of business carried on in connection with prospecting for, or extraction or production of mineral oils. The relevant extract of the said judgment reads as under:- 11. We do not think that there is any error in the view taken by AAR. 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 nonresident 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue Trivandrum, AIR 1964 SC 207 it was held that a familiar approach in such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. 17. Following, the aforementioned decision of this court in OHM (supra), we accept the contention advanced on behalf of the assessee that since the assessee is clearly engaged in business for providing services in connection with prospecting for mineral oils, its income if it falls within the ambit of Section 44DA(1) of the Act would be taxable under Section 44BB(1). 18. The contention advanced on behalf of the Revenue that fees for technical services earned by a foreign company in respect of a contract which is connected with the PE of such foreign company in India would be taxable under Section 44DA(1) of the Act irrespective of whether the same is connected with extraction/production of mineral oils, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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