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2016 (5) TMI 1250 - ITAT DELHI

2016 (5) TMI 1250 - ITAT DELHI - TMI - Taxability of assessee's income 44BB - 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 - Held that:- 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 dec .....

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is retrospective. Moreover, we find that Hon’ble Supreme Court in the case of ONGC [2015 (7) TMI 91 - SUPREME 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, t .....

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(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 appeals were heard together and are being disposed of by a composite order for the sake of convenience. First we take up ITA no. 5363/Del/2012 (AY 2006-07): 2. This appeal arises out of the assessment order dated 14.8.2012 pas .....

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The onboard data processing involved processing the data acquired to remove distortions arising during the acquisition stage and convert the data into usable form. It was further explained that the seismic activities constituted an integral part of oil and gas exploration activities and the acquisition of seismic data was a crucial and an initial step in the prospecting for mineral oil which aids in identifying hydrocarbon bearing structures for development and production of mineral oil. 4. Duri .....

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gains in connection with the business of exploration etc. of mineral oils in the case of non-resident and since assessee was rendering technical services, therefore, section 44BB was not applicable. He issued a notice u/s 142(1), in response to which the assessee pointed out that its income was taxable u/s 44BB of the Act as the services rendered by it were not technical services within the meaning of Explanation 2 to section 9(1)(vii) of the Act. The assessee further pointed out that for servi .....

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ndments 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 .....

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erred in assessing income at RsA,55, 11 ,0501- as against RsA,48,07,5701- computed by the Appellant u/s 44BB of the Income-tax Act, 1961 ("the Act") for the assessment year 2009-10. 4. That the learned DDIT has erred in holding that provisions of section 44BB of the Act are not applicable to the services rendered by the Appellant to the Indian customer and in taxing the income u/s 44DA of the Act. 5. That the learned DDIT has erred in not appreciating that seismic data acquisition and .....

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igher authorities took a view contrary to his perception of law. 8. Without prejudice to the above grounds, the learned DDIT has erred in holding that the amendment as made by Finance Act, 2010 in proviso to section 44BB(1) for excluding the income covered by the provisions of section 44DA from its purview w.e.f. 1.4.2011, is clarificatory and accordingly, retrospective in nature. 9. Without prejudice to the above grounds, the learned DDIT has erred in holding that the services rendered by the A .....

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s of section 27l(1)(c) of the Act are not attracted on facts of the case. 8. Ld. counsel further referred to the decision of Hon ble Supreme Court in the case of ONGC Ltd. Vs. CIT (2015) 376 ITR 306 (SC), wherein it has been held that wherein 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 contra .....

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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 fixed place of profession, and fees for technical services paid un .....

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l services". Therefore, w.e.f. 1.4.2004 fee for technical services which. is not connected with permanent establishment of business or fixed place of profession in India, will be taxable u/s l15A(l)(b) of the Act. As observed earlier section 44DA was inserted in proviso to section 44BB (1) by the Finance Act, 2010 with effect from 1.4.2011 and simultaneously inserted second proviso to section 44DA applicable from assessment year 2011-12 according to which provisions of section 44BB (1) will .....

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be divided in following categories: (i) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil having business PE or fixed place of profession-(section 44DA); (ii) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil without having business PE or fixed place of profession- (section l15A); (iii) Other fee for technical services having business PE or fixed place of profession-(se .....

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owever, 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 .....

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and machinery on hire, used or to be used, in the prospecting for, or extraction or production of mineral oils including petroleum and natural gas. Section 44DA is also a provision which applies to nonresidents only. It is, however, broader and more general in nature and provides for assessment of the income of the nonresident by way of royalty or fees for technical services, where such non-resident carries on business in India through a permanent establishment situated therein or performs servi .....

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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 connect .....

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. 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. This was stated to be the "rule of harmonious construction" by the Supreme Court in Venkataramana Devaru v. State of Mysore, AIR 1958 SC 255. If as contended by the Revenue, Section 44DA covers all types of services rendered by the non-resident that would reduce sec .....

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on (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 pai .....

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ent in India and for expenditure towards reimbursement of actual expense by the permanent establishment to its head office or to any of its other offices is allowed from the revenues received by the non-resident. Because of the different modes or methods prescribed in the two sections for computing the profits, it apparently became necessary to clarify the position by making necessary amendments. That perhaps is the reason for inserting the second proviso to sub-section (1) of Section 44DA and a .....

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rted 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 percent of the revenues cannot be deemed to be the profits of the nonresident 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 f .....

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d their respective spheres of operation or to take away 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 Benche .....

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spective 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 retrospective. We find that this issue has been dealt elaborately by Hon ble Jurisdictional High Court (Uttrakhand) in B.J. Services (supra). We are not inclined to accept the contentions advanced on behalf of the revenue, reproduced earlier, for the simple reas .....

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examined the interplay between section 44BB and 44D and has also not considered the effect of amendment in the proviso to section 44BB. 14. Ld. CIT(DR) relied on the decision of Hon ble Uttrakhand High Court at Nainital in the case of CIT Vs. ONGC as representative assessee of M/s Rolls Royce Pvt. Ltd. in ITA no. 86 of 2007 dated 20.09.2007. He pointed out that in this case the Tribunal s order, holding that the receipts were taxable u/s 44BB have been set aside and it has been held that the tec .....

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10-11. The insertion of section 44DA in the proviso to section 44BB w.e.f. 1.4.2011, has been held to be prospective in nature, which has been considered in detail in the case of Baker Hughes Asia Pacific Ltd. Vs. Addl. DIT (supra). We have extracted the findings of various decisions relied by ld. counsel for the assessee in detail and, therefore, it would suffice to observe to refer to the decision of Hon ble Delhi High Court in the case of OHM Ltd. (supra), wherein in para 12 it has been held .....

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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. .....

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he 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. In view of above discussion, the assessee s appeal is allowed. ITA no. 1247/Del/2015 (AY 2006-07): 18. This appeal arises out of assessment order dated 22.12.2014 passed by the AO .....

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ed order passed by the AO is set aside and the assessee s appeal is allowed. ITA no. 2652/Del/2011 ( AY 2006-07): 19. This appeal has been filed by assessee against the order dated 31.3.2011 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 2006-07. 20. While dealing with assessee s appeal being ITA no. 5363/Del/2012, against the assessment order dated 14.8.2012 passed by the A .....

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