TMI Blog2006 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... rk order No. MRBC/OBGSHP/PWC/08, dt. 20th May, 1998 had rendered services in connection with assessment of internal damage of CPI units of SHG platform and providing estimate of replacement. The assessee has offered the Revenues receipts taxable as per provisions of s. 44BB of the Act as its profits in connection with the business of exploration, etc. of mineral oils. 3. The AO was of the view that the services rendered in no way can be with reference to the services used in s. 44BB of the Act as the services rendered were purely for 'technical services' offered in connection with assessment (inspection) of internal damages to CPI units of SHG platform. According to him provisions of s. 44D r/w s. 115A of the Act were attracted. 4. In assessment proceedings before the AO, the assessee claimed that the services rendered by NRC are directly connected with the exploration for extraction and production of mineral oils. It further claimed that as per Board Instruction No. 1862, dt. 22nd Oct., 1990, rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas will be covered by the exception under the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of the appellant have been considered. Sec. 9(1)(vii) deals with income deemed to accrue or arise in India by way of 'fees for technical services'. Explanation 2 to s. 9(1)(vii) excludes "consideration for any construction, assembly, mining or like project undertaken by the recipient" from the definition of 'fees for technical services'. On the other hand, in s. 44BB of the IT Act, there is a special provision for computing profits and gains in connection with the business of exploration, etc. of mineral oils. The section applies to 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 oil and states that a sum equal to 10 per cent of the aggregate amount specified in sub-s. (2) shall be deemed to be profits and gains of such business. This section includes business of providing 'services or facilities' in connection with prospecting, extraction, production of mineral oils and Explanation to s. 44BB defines mineral oil to include petroleum and natural gas. The argument of the appellant that the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are a step-in-aid to the process of mining for oil and gas owing to the following reasons: "The services rendered by the non-resident help or aid mining by making drinkable water available for the personnel who are required to stay on the platform to carry out oil and gas production. Hence, as per the ratio of Agland's case, the services rendered in the instant case are as 'step-in-aid' to mining and receipts, therefore, cannot be termed as 'fees for technical services'. The services rendered by the non-resident help, especially by making it easier, to do mining. Even assuming that drinkable water could have been transported from onshore for consumption by the personnel, that would have been much more difficult and costlier than producing drinkable water from sea water at the offshore platform itself. Therefore, the services rendered by the non-resident which help, especially by making it easier, to carry out oil and gas production on the offshore platform, amount to a step-in-aid to mining even as per the dictionary meaning. Even if it is contended that the services rendered by the non-resident are not an integral step of mining, the same is still a step-in-aid thereto sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person acquiring the service, technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in para 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc. are made available to the person purchasing the service, within the meaning of para 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available." In support, reliance was placed on the Tribunal judgment in the case of Dy. CIT vs. Boston Consulting Group Pte. Ltd. (2005) 93 TTJ (Mumbai) 293 : (2005) 94 ITD 31 (Mumbai) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. (3) Notwithstanding anything contained in sub-s. (i), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under. sub-s. (2) of s. 44AA and gets his accounts audited and furnishes a report of such audit as required under s. 44AB, and thereupon the AO shall proceed to make an assessment of the total income or loss of the assessee under sub-s. (3) of s. 143 and determine the sum payable by, or refundable to, the assessee. Explanation.-For the purposes of this section,- (i) "plant" includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business; (ii) "mineral oil" includes petroleum and natural gas. 44D. Special provisions for computing income by way of royalties, etc. in the case of foreign companies.-Notwithstanding anything to the contrary contained in ss. 28 to 44C, in the case of an assessee, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side India; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.-For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that this service was a step-in-aid to the basic activity can also not be accepted as this is an independent activity unrelated to the basic activity. The expression "step-in-aid" used in various pronouncements was with respect to basic activity which was inextricably linked thereto. Two Tribunal orders referred before me were also not rendered on the service under consideration. The Tribunal judgment in Boston Consulting Group (P) Ltd.'s case does not refer to s. 44BB of the Act, which is under consideration in this appeal and thus shall have no application to the facts of the present case in appeal. 14. Also, it is finding of fact of the authorities below that the services in the present case are not rendered in connection with prospecting, extracting or production of mineral oils. The assessee was asked to furnish the copy of the agreement with respect to the present services. The assessee has failed to furnish this vital document despite adequate opportunities. In such circumstances, the only resort can be to the facts as established by the lower authorities. On this footing also, this ground in appeal is liable to be rejected. 15. Alternatively, the learned Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mumbai); (vi) Clifford Chance, United Kingdom vs. Dy. CIT (2002) 76 TTJ (Mumbai) 725 : (2002) 82 ITD 106 (Mumbai). 16. Article 3(1) of Indo-UK treaty, which is the basic document to be resorted to in the present case, emphatically states as follows: "3. As regards the application of this convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contacting State relating to the taxes which are the subject of this convention." Since the answer to the question posed for making a reference for the meaning of "fees for technical services" or the expression "make available" used thereunder to another treaty or tax law of Contracting State is available in the treaty under consideration, I do not find any logic to resort to Indo-US treaty for the meaning of the term "made available" used in the definition of "fee for technical services" under art. 13 of convention between Government of India and Government of United Kingdom. The treaty between the two States has to be read as a whole. Upon such reading, if a term is not found defined, then one has to understand the meaning as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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