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2021 (10) TMI 1333 - ITAT DELHIIncome accrued in India - services proved by the appellant as fees for technical services (FTS) u/s 9(1)(vii) - scope of work is in respect of Project Management Consultancy services to ONGC for completion of balance work of G1 and GS 15 development project - HELD THAT:- During the relevant assessment year the appellant assessee has received consideration from ONGC and Leighton India for providing engineering consultancy services. During the course of assessment proceeding the AO had asked the Appellant to show cause why the receipts from ONGC (and Leighton) should not be treated as FTS. Appellant explained that the consideration received by it from ONGC and Leighton India were in relation to the exploration and production of oil and natural gas and did not fall within the definition of FTS under section 9(1)(vii) of the Act. Since the consideration received by the Appellant was covered by the exclusion provided in the definition of FTS for “mining or like projects”, the same should not be treated as FTS under section 9(1)(vii). Appellant relied on the decision in case of ONGC [2015 (7) TMI 91 - SUPREME COURT] wherein the Hon’ble Supreme Court has held that where the pith and substance of an agreement is providing services for prospecting, extraction or production of mineral oils, payments made to non-resident companies are assessable under the provisions of section 44BB of the Act and not u/s 44D. From the perusal of the services and the nature of scope of work, we find that duties carried out by the appellant on contract with ONGC in fact has mining activity which was excluded from the definition of FTS u/s 9(1)(vii) as they are essential to the development and exploration of the oil and gas fields of ONGC. These services ostensibly is to be regarded as exclusion to FTS under section 9(1)(vii) and such activities need not itself be of mining or like nature so long as they are related to ‘mining or like project’ as has been clarified in the Circular No. 1862 dated 22.10.1990, that the expressions 'mining projects' or 'like projects' occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas. In parting of training is a part of mining activity only carried out by his appellant in his contract to the aforesaid parties. In so far as the reliance placed by the Ld. DR on the decision of Paradigm Geophysical Pty Limited, was on different facts as the assessee therein was involved in providing software services definition of which is covered u/s 9(1)(vi) of the Act whereas Appellant’s case is that of FTS under section 9(1)(vii) read with section 44DA of the Act. AR further explained that section 44DA of the Act can be applied only if the income in the first-place falls within the definition of FTS under section 9(1)(vii). In the Appellant’s case, since the services are covered by the exclusion in section 9(1)(vii), they do not qualify as FTS for invoking section 44DA of the Act. Accordingly we hold that not only receipt of accounts of services which has been accepted by the Ld. CIT (A) was also other scope of work relating to attending meetings but also the other activities are inextricably linked with the contract of design and engineering of submarine pipeline. Therefore the entire receipts for the ONGC as well as Leighton India are taxable u/s 44BB. Accordingly the appeal of the assessee is allowed.
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