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2015 (12) TMI 459 - ITAT DELHI

2015 (12) TMI 459 - ITAT DELHI - TMI - Entitlement for concessional benefit u/s 44BB - income of the assessee is held as FTS - Held that:- As decided in assessee's own case we hereby held that the amount representing work like drilling and exploration of well is covered by Section 44BB of the Act and as such, liable to be reckoned u/s 44BB of the Act. - I.T.A. No. 748/Del/2013, C.O. No.71/Del/2013 - Dated:- 27-11-2015 - Shri N. K. Saini, Accountant Member And Shri Kuldip Singh, Judicial Member F .....

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the present appeal in I.T.A.No.748/Del/2013 under I. T. Act, 1961 (hereinafter referred as the Act ), sought to set aside the impugned order dated 08.11.2012 passed by Ld. CIT(A) -II, Dehradun for the Assessment Year 2009-10 on the grounds inter alia that: 1. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the provisions of well testing equipments and services was not in the nature of FTS squarely covered under section 9(1)(vii) of the I.T. Act, 1961. 2. .....

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n holding that the income of the assessee was taxable under the presumptive provisions of see 44BB and ignoring the fact that taxability U/S 44BB shall not apply in respect of income referred to in section 44DA in view of the clarificatory proviso to see 44BB and see 44DA. 4. Whether on the facts and circumstances of the case, the CIT(A) has erred in interpretation of the legislative intent behind the scheme of taxation envisaged in 9(l)(vii) r.w. 44DA and 44BB and the insertion of second provis .....

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the assessee company was covered under the provisions of section 44BB. 6. Whether on the facts and circumstances of the case, the CIT(A) has erred in relying on the case of M/s CGG VERITAS ignoring that the said decision of the ITAT has not been accepted by the department and a MA has been filed, while appeal was not filed purely on account of tax effect consideration. 7. Whether on the facts and circumstances of the case, the CIT(A) has erred in not appreciating the finding given by the AO who .....

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still pending. 9. Whether the CIT(A) has erred in not appreciating that proviso to Section 44BB is not inserted per majorem cautelam' but explains and clarifies the main provision as the term services or facilities used therein are not defined and the two terms used are too general in nature and thus once the payments are characterized as FTS under section 9(1 )(vii), they go outside the purview of Section 44BB and have to be taxed as FTS at applicable FTS rates as prescribed under the Act a .....

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that proviso to section 44DA brought about by the Finance Act 2011 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came in to effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT. 12. Whether the facts and circumstances of the case the CIT(A) has erred in holding that interest U/S 234B was not chargeable in this case by relying upon the d .....

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at: 1. That the Ld. Commissioner of Income-tax, Appeals-II, Dehradun [CIT(A)) erred in not upholding the claim of the appellant that its nature of operations in India, i.e. the work performed by the appellant in India under the various contracts with its customers, was not fees for technical services and/or royalty as defined in Explanation (2) to section 9(1)(vii) and Explanation (2) to section 9(1) (vi) respectively. 2. Without prejudice to the above, that the Ld. CIT(A) has erred in not uphol .....

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rakhand in the case of CIT Vs. ONGC as agent of Scan Drilling Company in ITR No.2 of 2001. 4. That the Ld. CIT(A) has erred in not upholding that the equipment supplied by the appellant on hire is not in the nature of royalty payments in view of clause (iva) of Explanation (2) to section 9(1 )(vi). 4. Briefly stated, the facts of this case are: during the processing of the return of income filed by the assessee qua the Assessment Year 2009-10 declaring total income of ₹ 94,72,390/-, the ca .....

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and Gas Pvt. Ltd. and Halliburton Offshore Inc. The assessee has rendered services for providing well testing equipment and services to aforesaid companies and has offered gross revenue of ₹ 9,47,23,889/-, and has computed income by applying deemed profit rate of 10% u/s 44BB of the Act. Out of the aforesaid contract, three contracts namely BG Exploration and Production India Ltd; Cairn Energy India Pty. Ltd. and Jubilant Oil and Gas Pvt. Ltd. are production sharing contracts and as such f .....

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ll slim hole DST string or with a production test incorporation a wire line retrievable down hole shut in tool. Thus, the service provided under all the three contracts relate to well testing by weenie of similar procedures. So, in view of the above procedure, the issue of taxability has been determined to be taxed as FTS and confirmed to be so in the case of Precision Energy Services for Assessment Year 2007-08 and also in the case of assessee for the Assessment Year 2008-09 where the same cont .....

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ssessee. In view of Section 144C(3)(b) of the Act, to which no objection has been filed by the assessee, the assessment is accordingly finalized on the total income of ₹ 2, 36,80,970/-. 9. The assessee carried the matter before Ld. CIT(A) by Assessment Year of filing appeal who has partly allowed the same vide impugned order. Feeling aggrieved, the Revenue has come up before the Tribunal by filing the present appeal. At the same time, assessee has also filed cross appeal by raising the ide .....

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n the decision of Hon'ble Jurisdictional High Court in the case of Rio Tinto and further relied upon the order passed by A.O. 12. However, on the other hand, Ld. A.R. reiterated his arguments extended before Ld. CIT(A) and relied upon the order passed by ITAT Delhi Bench B in I.T.A. No. 5561/Del/2011 in assessee s own case for the Assessment Year 2008-09 and further contended that the case of the assessee is fully covered by the aforesaid order passed by the Tribunal. 13. Now, the short ques .....

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the assessee to the draft order and the total income of the assessee was assessed at ₹ 2,36,80,970/-. 14. Undisputedly, the assessee s own case qua the Assessment Years 2008-09 and 2010-11 has been decided by ITAT Delhi Bench B , New Delhi vide order dated 12.02.2015. Ld. A.R. vehemently contended that the present case is covered by the order passed by the Tribunal in assessee s own case in I.T.A.No.5561/Del/2011 and 4650/Del/2014 (supra). For ready reference, the submissions of the Reven .....

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dustan Ideal Insurance Co. Ltd. Vs LIC of Indi 1963 AIR S.C.1083. 1. Proviso to Section 44BB is not inserted per majorem cautelam as canvassed by and on behalf of the applicant but it explains and clarifies the main provision as the terms "Services or facilities "used therein are not defined and the two terms used are too general in nature. The proviso thus restricts the applicability of the substantive provision of section 44BB in relation to those persons who are either engaged in th .....

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as well services of technical, consultancy or managerial nature which form a distinct and separate species of services. This can also be explained by provisions contained at least in three (3) tax treaties which India has entered into with Austria, Germany and Japan. Relevant extracts of Paragraph 3 of Article 5 relating to Permanent establishment and Article dealing with royalties and fee for technical services of these tax treaties may be referred to. It may be pertinent to mention that the l .....

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ot of technical nature and enacts a special provision for determination of tax liability of persons engaged in providing such services which would be outside the scope of technical services. 4. Instruction o. 1862 dated 22-10-1990 dealing with the interpretation of the term "Mining or like project", is issued in an entirely different context as can be seen from the statement of the case referred for the opinion of learned Attorney General and the opinion of Learned AG. From the context .....

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ative in respect of agreements after the 3151 Day of March 2003 and with this two streams for taxation of persons engaged in providing services of technical nature is evident, one for those having a PE in India (Section 44DA) and the other who do not have a PE [Section 9 (1) (vii) read with section 115A]. 6. Board's Circular No 649 dated 31-3-1993 also clarifies what situation would govern the aspect of taxability of fee for technical services where there is a treaty existent and where there .....

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the assessee is FTS. The contract with HOSI also comprise of performance of same type of activities viz. provision of Well Testing Services and Equipment. Accordingly, following the directions of DRP as old contract from last year are continuing in this year also income of the assessee is held as FTS. 15. However, Ld. Counsel for the assessee contended that since the present appeal is on identical facts and issue already raised have been decided by ITAT in I.T.A. No. 5561/Del/2011, 4650/Del/2013 .....

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sessee for the year under assessment as fee for technical services (FTS) u/s 9(1)(vii) complied with the order passed by DRP who has confirmed the stand taken by A.O. that the income of the assessee is FTS. The contract with M/s. Halliburton Offshore Services Inc. (HOSI) also relates to the performance of sale and its activities viz. provision of well testing services and equipments and consequently, the income of the assessee is held as FTS. 18. Having perused the decision of coordinate bench o .....

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looked into. This argument in our view has no merit for the reason that, the admitted position is that the assessee has a PE in India. An ROI was filed and assessment was framed on that basis. 13. The DRP had followed its own order in the case of M/s. Precision Energy Services Ltd. For Assessment Year 2007-08 and held that the income in question is taxable as FTS u/s 9(1)(vi) of the Act. The ITAT, Delhi Bench reversed this order of the DRP in the case of Precisions Energy Services Ltd. of asses .....

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