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2010 (7) TMI 672 - AT - Income TaxTaxable u/s 44BB or fees for technical services - The receipts have admittedly been earned by ARC for carrying out a feasibility study on implementation of Cyclic Steam Stimulation, or CSS - CSS helps in improving recovery of oil from oil fields by thinning of oil, reducing its viscosity or density or specific gravity, so that the oil moves from the oil formation to the bore of the oil well - The feasibility study carried out by ARC was undisputedly solely in connection with the implementation of CSS - Hence, this study was solely “in connection with extraction of mineral oil - Thus it is taxable u/s 44B 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 - The service rendered by ARC is a service directly and substantially connected with the extraction of mineral oil The Explanation 2 does not exclude the consideration for providing services in connection with the construction project. Instead, it excludes consideration for construction project which means that exclusion is only in respect of consideration paid for actual carrying on construction activities - Payments for such services to a foreign company, therefore, will be income chargeable to tax under the provisions of section 44BB of the Income Tax Act, 1961 and not under the special provision for the taxation of fees for technical services contained in section 115A, read with section 44D of the Income Tax Act, 1961 - Therefore, even though the assessee has no PE in India, the receipt under this contract is assessable under section 44BB - Decided in the favour of the assessee
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