TMI Blog2012 (12) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities 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". Revenues earned by the non-resident from rendering such specific services are covered by Section 44BB. It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim "Generallia specialibus non derogant". It is again a well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident, that would 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. The amendment made by the Finance Act, 2010 w.e.f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Petro Gas and CGG Veritas. 4. Aggrieved by the order passed under Section 197 of the Act as above, the assessee filed an application before the Authority for Advance Ruling (AAR) under section 245Q of the Act. The assessee claimed that oil and gas exploration activity was directly related to and was part of the exploration/prospecting activities for mineral oil (i.e. Petroleum and Natural Gas) and such services clearly fell within the ambit of Section 44BB and 10% of the revenues which were deemed to be the profits from such activities was taxable at 4.223%. The AAR accepted the assessee's claim and it is the correctness of the conclusion of the AAR that is called in question in the present writ petition. 5. The main contention of the learned Senior Standing Counsel for the Revenue is that the AAR erred in its decision that Section 44BB would apply to the present case and that it failed to note that the appropriate provision to be applied was Section 44DA read with section 9(1)(vii), Explanation 2. On the other hand the contention urged on behalf of the assessee is that it is Section 44BB which is the more specific of the two sections and which made "special provision for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 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." "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 pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or to a person who, having been appointed before 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India. 7. When Section 44BB was first inserted by the Finance Act, 1987 with retrospective effect from 01.04.1983, it was applicable to all assessees irrespective of their residential status. By Finance Act, 1988, the provision was specifically confined in its applicability to non-residents only and the amendment made to that effect was also made with retrospective effect from 01.04.1983. Section 44DA was inserted by the Finance Act, 2003 w.e.f 01.04.2004 and it applies to a non-residents only. The other amendments which we have to notice is that the second proviso to Section 44DA was inserted by the Finance Act, 2010, w.e.f 01.04.2011; by the same Act a reference to section 44DA was inserted in the proviso to sub-section (1) of section 44BB. 8. In coming to its decision that Section 44BB is the appropriate section which is applicable to the assessee, the AAR followed its earlier decision in Geofizyka Torun Sp. Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44DA. In substance, therefore, the contention of the Revenue in the case before us is identical to its contention before the Division Bench of this Court in the decision cited supra. It was held by this Court as under: "The Tribunal concluded that a reading of the provisions of section 44BB as well as Explanation 2 to section 9(1)(vii) of the said Act clearly showed that the consideration in question paid or payable by the assessee to NDAL for the services rendered was covered by the provisions of section 44BB and not by section 9(1)(vii) of the Act. This conclusion of the Tribunal is based on the finding that the nature of services rendered by NDAL to the assessee at its off-shore rigs on the high seas were part and parcel of the activities engaged in by the assessee at the off-shore rigs set up for exploration, prospecting and production of mineral oil from the sea bed. The Tribunal found as a fact that the movement of the rigs from one well to another was a very technical and cumbersome process requiring technical expertise which was provided by NDAL. This involved various processes starting with soil testing and evaluation of available data, after which the foreign technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision that is applicable? As between the competing provisions, namely section 9(1)(vii) read with section 44DA and section 44BB, section 44BB being a more specific provision, that provision should prevail for the purposes of computation. Section 44DA, it may be recalled, provides for the method of computation of income by way of fees for technical services received by a non-resident or a foreign company carrying on business through a permanent establishment in India. If the non-resident is engaged in the business of providing services in connection with the prospecting, etc., of mineral oils, the computation provisions relating to fees for technical services will have to yield to section 44BB. It may be noticed that in a case of business governed by section 44BB, normally, the enterprise concerned would be having a permanent establishment in India. It is difficult to envisage a situation of a person being engaged in providing services or facilities in connection with prospecting and extraction of mineral oils not having a fixed place of business from where the operations are carried on. Thus, the existence of permanent establishment is a common feature both in section 44DA as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. 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 contemplated by the provision is more specific than what is contemplated by Section 44DA. Section 44BB refers specifically to "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". Revenues earned by the non-resident from rendering such specific services are covered by Section 44BB. It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim "Generallia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 computation of profits, and to understand the amendments as having been inserted only to clarify the position. So understood, the proviso to sub-section (1) of Section 44BB can only mean that the flat rate of 10% of the revenues 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 sub-section (1) of Section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section read with Explanation 2 to Section 9(1)(vii) of the Act, then an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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