TMI Blog2015 (5) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... 44BB only if the assessee has a PE in India during the relevant period and the contract entered into by the assessee in India was effectively connected with the PE in India have been fulfilled in the present case, we are of the view that the assessee is very much eligible for the benefit available under sec. 44BB of the Act towards the hire charges of the drilling rig by applying the deemed profit ratio of 10% under the said provisions. It is held accordingly with direction to the Assessing Officer to compute the tax as such by allowing the benefit of the provisions laid down under sec. 44B of the Act - Decided in favour of assesse. Chargeability of interest u/s 234B and 234C - Held that:- As when there was no obligation for advance tax as income received by the assessee was subject to tax deduction at source and tax was also deducted in accordance with order passed u/s 195 of the Act and further that the AO has 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 the India USA Double Tax Avoidance Treaty. These issues are consequential in nature to the issue raised in ground No. 1 adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside India to pride foramer . Pride foramer SAS is a French company which is engaged in drilling activities in India for ONGC in Bombay offshore region. In its return for year, the assessee declared income u/s 44BB(1) of the Act on the ground that it was supplied plant and machinery on hire to be used in prospecting for or extraction or production of mineral oil and was thus taxable u/s 44BB(1) of the Act. The AO passed a draft order in which he proposed to tax the assesee s income as royalty u/s 9(1)(vi) (Article 12) of the India USA DTA Agreement @ 10% as against the demand profit rate of 10% of revenue as adopted by the assesee u/s 44BB(1) of the Act. The assessee raised objection against the proposal before the Ld. DRP but could not succeed. Being aggrieved the assessee has preferred present appeal before us. 5. At the outset of hearing Ld. AR pointed out that in the assessment year 2009-10 the Ld. DRP in the case of assessee itself who is presently known as ensco Offshore International LLC, vide order dated 27.12.2013 has held that the income derived by the assessee are to be computed in accordance with the provisions of section 44BB (1) of the Act. The Ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r charter hire of M/s. Pride Foramer SAS for drilling operations for a company with ONGC . 7. Ld. CIT(DR) on the other hand submitted that there is no any direct decision on the issue by the Tribunal. The order dated 27.12.2013 of the DRP in subsequent year 2009-10 allowing the eligibility of the assessee for the benefit of section 44BB(1) of the Act has not become final. Taking assistance of the contents of the page No. 1 of the agreement dated 31.3.2007 between the assessee and M/s. Pride Foramer SAS made available at page 1 to 16 of the paper book, the Ld. CIT(DR) submitted that the services and equipments were hired from the assesee as a sub contractor. He also referred contents of page No. 17 and 18 of the extract of contract dated 22.1.06 of M/s. Pride Foramer SAS and ONGC for providing services through drilling unit M/s. Pride Foramer SAS made available at page Nos. 17 to 21 of the paper book. While concluding his arguments the Ld.CIT(DR) pointed out that the Delhi Bench of the ITAT in the case of Siem Offshore A.S. Ors. Vs. ADIT ITA No. 1295/Del/2013 (A.Y. 2008-09) and ors. Vide order dated 09.09.2014 in view of the decision of Hon'ble Delhi High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the present assessee on the following grounds :- a) The Assessee is a non-resident engaged in the business of providing the drilling rig on hire. b) The rig is a plant and machinery c) The rig has been taken on hire by the Pride Foramer for the purpose of enabling the Pride Foramer to carry on the provide the drilling operation services under the contract with ONGC and rig is the key plant and machinery for prospecting and extraction of mineral oil. d) The requirement of sub-section (1) of section 44BB is that the plant and equipment must be used in the prospecting for or extraction of mineral oils. e) Without the utility of Rig no drilling operation can be carried out for extraction or prospecting of mineral Oil f) The second part of section 44BB(1) is triggered as deployment of the Rig in the extraction/ prospecting operations is considered to be integral part of such operations. g) Whether the Rig is deployed in the prospecting activities pursuant to a direct contract with the oil producing company or pursuant to a contract with subcontractor is nowhere the condition or any mandatory provision of section 44BB and thus it is immaterial whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seis ASA has clearly decided that it is immaterial whether there was a direct contract of the oil producing company or not. The case of the assessee cannot be more direct as the oil drilling operations and contract cannot be executed without the drilling unit. The Hon ble Delhi High Court in the case of Director of Income Tax vs. OHM Ltd. (2013) 352 ITR 406 (Delhi) referring a division bench decision in the case of Director of Income Tax vs. Jindal drilling and Industries Ltd. (2010) 320 ITR 104 (Delhi) has gone to confirm that services rendered by a Sub-Contractor at the offshore rigs of a contractor is part and parcel of activities engaged by the rigs set up for extraction, prospecting and production of mineral oil. 13. Besides, the Ld. DRP in the case of assessee itself for the asstt. year 2009-10 following decisions of Mumbai Bench of the Tribunal in the case of Micoperi S.P.A. Milano vs. DCIT (Supra), the Hon ble Authority of Advance Rulling in the case of Wavefield Inserts ASA (Supra) and Bourbon Offshore Asia Pte Ltd. 337 ITR 122 , Hon ble Jurisdictional High Court in the case of DCIT vs. OHM Ltd. (supra) as well as the decision of authority for advance ruling in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscrimination between the person 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 oils or where equipment has been supplied, such equipment should have been used for the purposes of prospecting for or extraction or production of mineral oils. The ITAT thus came to the conclusion that the fetter assumed by the authorities below while interpreting the provisions of sec. 44BB of the Act are manifestly absent and there is nothing in the said provisions so as to disentitled a subcontractor from invoking the said provisions. The ITAT thus did not find any fault in the claim of the assessee that Revenue received under the chartered agreements with CGG for providing two seismic survey vessels are in consideration with prospecting for extraction or production of mineral oils and, therefore, taxable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Pride Foramer as accepted by ONGC is a sub-contract and hence the assessee is not entitled to have benefit of taxability under sec. 44BB of the Act has been decided in favour of the assessee by the Co-ordinate Bench of the ITAT in the case of Louis Drefus Armateures SAS vs. ADIT (supra). Since both the conditions as pointed out by the Hon'ble Delhi High Court in the case of PGS Geophysical AS vs. ACIT (supra) have been fulfilled in the present case, we are of the view that the assessee is very much eligible for the benefit available under sec. 44BB of the Act towards the hire charges of the drilling rig by applying the deemed profit ratio of 10% under the said provisions. It is held accordingly with direction to the Assessing Officer to compute the tax as such by allowing the benefit of the provisions laid down under sec. 44B of the Act. Ground No.1 is accordingly allowed. Ground No. 2 3 16. In these grounds assessee has raised issue of chargeability of interest u/s 234 B and 234C of the Act on the basis that when there was no obligation for advance tax as income received by the assessee was subject to tax deduction at source and tax was also deducted in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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