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TMI Blog2015 (5) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer erred in law by charging surcharge and education cess on income tax rate in excess of the maximum rate of tax prescribed under Article 12 of India-USA Double Tax Avoidance Treaty. 4. The Appellant craves leave to add, amend, modify, delete and or change all or any of the ground on or before the date of hearing. The learned Assessing officer erred in law and on facts in not allowing TDS credit of Rs. 5,75,40,691". 2. We have heard and considered the arguments advanced by the parties in view of orders of the authorities below, material made available on record and the decisions relied upon. GROUND NO. 1 3. The issue raised this ground is as to whether assessee is eligible for benefit of section 44BB of the I.T. Act on the payment received by it from leasing of oil drilling rig as royalty ? 4. The relevant facts are that the assessee company incorporated in USA is pride group entity. The assessee is in the business of providing drilling rig, services and facilities in connection with prospecting production and extraction of mineral oil under the contract with pride foramer as accepted by Oil and Natural Gas Commission (ONGC). The assessee provided offshore dril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of mineral oil . The Ld. AR also referred contents of para No. 1.5.1 to 1.6 at page Nos. 20 & 21 of the paper book which is extract of contract between pride foramer and ONGC for providing the services for drilling rig "Pride Hawai". He submitted further that in para No. 1 page No. 1 of the asstt. order and in para No. 4.4 at page No. 3 of the asstt. order the AO has wrongly inserted the word "directly" going beyond the provisions laid down u/s 44BB(1) of the Act. She was thus not correct in saying that the word "used" were not directly applied to the activities in connection with prospecting, exploration and production of mineral oil etc. Ld. AR also referred para No. 3 at page No. 5 of the asstt. order with this submission that the assessment has been finalized at the instruction of Ld. DRP making it clear that the intention of the legislature was not to include the receipt of sub hiring within the scope of section 44BB otherwise the words "in connection with" would have been employed for the activity of supplying plant & machinery on hire as well. The Ld. AR also referred page 26 of the paper book i.e. letter issued by the office of the Deputy Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided an identical issue in favour of the assessee. He submitted that as per the said decision of the ITAT where the provision under sec. 44BB of the Act does not create any discrimination between the person who actually does the activity of prospecting for or extraction of production, and the person who supplies the plants and machinery, the narrow interpretation of the provisions is not permitted. 9. Considering the above submission we find that the essence of providing benefit u/s 44BB of the Act is that besides the foremost condition of assessee being a non-resident the assesee should be, (a) first limb, engaged in the business of providing services or facilities in connection with the prospecting production and extraction of mineral oil, (b) second limb, engaged in the business of supplying of 'plant and Machinery' on hire used or tobe used in the prospecting, or extraction of mineral oils. Thus we find that for second limb the conditions are :- i) supply of plant and machinery on hire ii) and that plant and machinery are use or to be used for prospecting for extraction or production of mineral oils. The emphasis is on "use for" and not "use by". 10. The contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuting contract with ONGC, the applicant has entered into a contract with the PF from the company incorporated in Faroe Islands which had provided a chase vessel on time charter basis. Under agreement, entire operations, navigation and management of vessel provided on hire will be in exclusive command and control of vessel owner and vessel will be in exclusive command and control of vessel owner and vessel will be operated and services will be rendered as and when required by applicant. The issue before the authority was as to whether second limb of section 44BB is attracted in that case and therefore income derived by PF ought to be computed in accordance with the provisions of section 44BB. The further issue raised was as to whether as amounts falling u/s 44BB has been excluded from purview of definition of royalty, consideration for services provided by PF cannot be construed to be in nature of royalty u/s 9(1)(vi). After discussing in detail the authority have answered both the issues in affirmative. Similar view has been expressed in other cited decisions by the Hon'ble authority. The Delhi Bench of the Tribunal in the case of CGG Marine Resources vs. DCIT (supra) has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within their purview, because they only speak of Income by way of fees for technical services received from Government or an Indian concern. On this short ground, the contention of the Revenue that the Income derived by the applicant Is independently assessable under section 115A or 44DA of the Act, has to be rejected. Since, income derived by the applicant, is from an activity in connection with the prospecting for mineral oils and from a foreign company, the applicant would be entitled to claim to be assessed under section 44BB(1) of the Act. The ruling; therefore, on question no 3 is that the Income derived by the applicant are to be computed in accordance with the provisions of section 44 BB (1) of the Act." (Emphasis supplied)." 14. As discussed above, the Hon'ble Delhi Bench of the ITAT in the case of Louis Dreyfus Armateures SAS vs. ADIT (supra) has decided an identical issue in favour of the assessee has observed that if the legislature intention as contended by the Revenue was to restrict the benefit of sec. 44BB of the Act only to the main contractor or ONGC then the words after "the assessee engaged in the business of supplying plants and machinery on hire" or "pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute in this regard remained that the assessee being sub-contractor as per the Authorities below was not eligible for the benefit of section 4BB of the Act. The Delhi Bench of the ITAT in the case of Louis Dreyfus Armateures SAS vs. ADIT (supra) after discussing the issue in detail has held that the provision does not create any discrimination between the persons who actually does the activity of prospecting for or extraction or production and the person who supplies the plants and machinery, the narrow interpretation of the provisions is thus not permitted. It has been held that the basic condition to be satisfied in the said provision is that the plant or machinery supplied or lented on hire by the assessee, a non-resident should be used in the prospecting for or extraction or production of mineral oil or where equipment has been supplied, such equipment should have been used for the purpose of prospecting for or extraction or production of mineral oil. Thus, we find that there is no dispute that the contract entered into by the assessee in India was effectively connected with that PE in India and the dispute as to whether letting out drilling rig, services and facilities by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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