TMI Blog2016 (5) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT ] has set at rest the entire controversy by holding that provisions of various services in connection with the prospecting for, or extraction or production of mineral oils, is taxable on presumptive basis u/s 44BB of the Act. The services carried on by assessee are in connection with the prospecting for mineral oils and, therefore, following the decision of Hon’ble Supreme Court, the assessee’s appeal deserves to be allowed - ITA nos : 1247/Del/2015, 2652/Del/2011, 5363/Del/2012, 491/Del/2014, 2297/Del/2012, 5364/Del/2012 - - - Dated:- 25-4-2016 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI : JUDICIAL MEMBER For The Appellant : Shri Amit Arora CA and Sh. Sandeep Nagpal CA For The Assessee : Sh. Anuj Arora CIT(DR) ORDER PER S.V. MEHROTRA, A.M: The captioned appeals have been preferred by the assessee against separate orders of Deputy Director of Income Tax (International Taxation) Circle 2(2), New Delhi ( AO ). ITA nos. 2652/Del/2011 for A.Y. 2006-07 and ITA no. 2297/Del/2012 for A.Y. 2007-08 have been filed against separate orders passed u/s 263 by the Director of Income tax (International Taxation)-II, New Delhi. All these appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee further pointed out that the amendment to section 44BB by way of insertion of section 44DA in the proviso to section 44BB was prospective in nature and, accordingly, the applicability of sections 44D and 44DA got excluded. 6. The AO, however, after considering the provisions of section 44BB and also taking into consideration the amendments brought in w.e.f. 1.4.2011 by Finance Act 2010, concluded that assessee s receipts were effectively connected with the project office of the assessee in India and, therefore, taxable u/s 44DA of the I.T. Act and Article 7 of DTAA between India and USA. He observed that the Global net profit rate as per global financial statement filed by the assessee was 10.157% and applying the same rate to the gross receipts he computed the business income of assessee at ₹ 4,55,11,050/-. 7. Being aggrieved with the order of AO the assessee is in appeal before us and has taken following grounds of appeal: 1. That the order of learned Deputy Director of Income-tax, Circle 2(2), International Taxation, New Delhi ( DDIT ) read with directions of DRP u/s 144C is bad both in law and on facts of the case. 2. That the order of the learned D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant purpose of agreement is for prospecting, extraction or production of mineral oil, though there may be certain ancillary works contemplated thereunder, then the payments received by the nonresident assessee or foreign companies under the said contracts are assessable under the provisions of section 44BB and not section 44D of the Act. 9. Ld. counsel for the assessee submitted that the gross receipts of assessee are taxable u/s 44BB because insertion of section 44DA in the proviso to sec. 44BB w.e.f. 1.4.2011 has been held to be prospective in nature. He submitted that AO has given specific finding of permanent establishment of assessee being there in India. He referred to the decision of ITAT Delhi Bench in the case of CGG Veritas Services SA Vs. Addl. Director of Income-tax (International Taxation) (2012) 50 SOT 335, wherein in para 46 of the order the Tribunal has, inter alia, observed as under: 46. On combined reading of section 44DA(1) and 115A(1)(b) it is clear that the provisions of section 44DA(1) are applicable in the case of a non-resident assessee who carries on business in India through a permanent establishment, or performs professional services from a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessable either u/s 44DA or section l15A of the Act depending on fact whether such receipts are effectively connected with PE or fixed place of profession, or not. However, for assessment year 2004-0S to 2010-11 the consideration received for fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall outside the scope of section 44DA and will be assessable under section 44BB (1) of the Act for the simple reason that proviso to section 44BB(1) does not contain section 44DA for these years. 10. He further referred to the decision of Hon ble Delhi High Court in the case of DIT Vs. OHM Ltd. wherein Hon ble Delhi High Court in paras 11 12 has observed as under: 11. We do not think that there is any error in the view taken by AAR. Basically the rule that the specific provision excludes the general provision has been applied. Section 44BB is a special provision for computing the profits and gains of a non-resident in connection with the business of providing services or facilities in connection with, or supplying plant and machinery on hire, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue Trivandrum, AIR 1964 SC 207 it was held that a familiar approach in such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. 12. The second proviso to sub-section (1) of Section 44DA inserted by the Finance Act, 2010 w. e. f. 01.04.2011 makes the position clear. Simultaneously a reference to Section 44DA was inserted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resident or the foreign company should carryon business in India through a permanent establishment situated therein and the right, property or contract in respect of which the royalty or fees for technical services is paid should be effectively connected with the permanent establishment. Such a requirement has not been spelt out in Section 44BB; moreover, a flat rate of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. 11. Ld. counsel further referred to the decision of the ITAT Delhi Benches in the case of Baker Hughes Asia Pacific Ltd. Vs. Addl. DIT, rendered in ITA nos. 5283/Del/2010 and 420/Del/2012 and others 2014-TII- 104-ITAT-DEL-INTL, wherein in para 65 the Tribunal has observed as under: 65. The department s contention is that section 44DA inserted by the Finance Act, 2010 w.e.f. 1-4-2011 in section 44BB is retrospective and, therefore, royalty and fees for technical service should be taxed u/s 44DA and not u/s 44BB. In our opinion, the amendment cannot be held to be retrospective particularly because it brings substantial change in the taxability of assessee. It is well settled law that an amendment to the taxing statute if results in higher tax burden on assessee then it is prospective in nature and not retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or effacing the fundamental nature of both the provisions and their respective spheres of operation or to take away the separate identity of section 44BB. 17. As far as the reliance of ld. CIT(DR) on the decision of Hon ble Uttrakhand High Court in ONGC s case is concerned, we find that the said decision is not applicable to the present set of facts more particularly because there the services rendered by assessee were of inspecting the three units of RR Avon Gas Generator Driven Process Gas Compressor at SHP Platform, whereas the assessee in our case is carrying on seismic surveys the receipts from which have been held taxable u/s 44BB in various decisions noted in the submissions advanced by ld. counsel for the assessee. Further, the decision relied upon by ld. CIT(DR) has not considered the effect of insertion of sec. 44DA in the proviso to section 44BB. On the other hand, we find that Tribunal in the case of Baker Hughes Asia Pacific Ltd. (supra) has relied on the decision of Hon ble Jurisdictional High Court (Uttrakhand) in B.J. Services for rejecting the department s contention that section 44DA inserted by Finance Act 2010 w.e.f. 1.4.2011 in section 44BB is retrospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ITA no. 5363/Del/2012, we have held that the gross receipts received by the assessee are taxable u/s 44BB and not u/s 44DA of the Act. Facts of the case remaining the same, for the very same reasons herein also we allow the assessee s appeal by holding that assessee s income is taxable u/s 44BB of the Act. ITA no. 2297/Del/2012 (AY 2007-08): 23. This appeal has been filed by assessee against the order dated 23.3.2012 passed by the Director of Income-tax u/s 263(1) of the Income-tax Act, 1961, for revising the order passed by the AO, accepting assessee s income returned u/s 44BB in AY 2007-08. 24. While dealing with assessee s appeal for AY 2006-07, on merits we have held that the gross receipts received by the assessee are taxable u/s 44BB and not u/s 44DA of the Act, therefore, the impugned proceedings u/s 263(1) have become academic in nature and, therefore, the assessee s appeal is allowed. ITA no. 5364/Del/2012 (AY 2009-10): 25. This appeal arises out of the assessment order dated 14.8.2012, passed by the AO u/s 143(3) of the I.T. Act, 1961, pursuant to DRP s directions dated 16.7.2012 u/s 144C(5) of the I.T. Act. 26. While dealing with assessee s appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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