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2016 (7) TMI 199 - ITAT DELHI

2016 (7) TMI 199 - ITAT DELHI - TMI - Taxability of the amount paid to the non-resident / foreign companies under the contract - assessed u/s 44BB or 44DA - Held that:- The pith and substance of each of the contracts/agreements is inextricably' connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that b .....

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Smt. Beena A. Pillai, Judicial Member For the Appellant : Sh. P. Dam Kanunjna, Sr. DR For the Respondent : Sh. Kavish Syal, CA ORDER Per Bench All these appeals are filed by the revenue directed against separate but identical orders of the Commissioner of Income Tax (A)-II, Dehradun dated 16.1.2012. As the issues arising for our consideration are identical in all these cases, for the sake of convenience they are heard together and disposed of by way of this common order. 2. Facts of the case :- .....

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resident of United Kingdom (UK) in ITA No. 4998/Del/12 and 4652/Del/13 and of USA ITA No.4654/Del/13. 2.1. The nature of work of the contract were as under:- I.T.A. No. Nature of work 4998/Del/2012 The non-resident was engaged to process three dimensional (3D) seismic data of the block NEC-DWN- 2002/2 in Mahanadi Basin at its premises in UK. Seismic data indicates existence of hydrocarbons deep inside the earth and helps to identify where to drill for the same. 4652/ Del/ 2013 Under contract dat .....

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before Ld. CIT(A), the assessee relied upon the order DATED 27.12.2011 for A.Y. 2008- 09. The Ld. CIT(A) held that the services rendered by the non-resident company to assessee would fall within the ambit of Section 44BB of the Act. He also relied upon the decision of ITAT, Delhi Bench in the case of CGG Veritas reported at 50 SOT 335 (Del.). Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal on the following grounds: 3. Grounds: I.T.A. No. 4998/Del/2012 (Assessment Year 2009-10 .....

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not taxable under the provisions of section 44DA r.w.s 115A of the Act, 1961, even though the nature of services rendered by the assessee were technical in nature and were not for a project undertaken by the assessee, as required by explanation 2 to section 9(l)(vii). 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the assessee had deemed PE as per proviso to Article 5(2) of the Indo-UK DT AA by virtue of which the income of the assessee was taxab .....

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ions with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT, delivered on 17.11.2005. 5. Whether on the facts and circumstances of the case the CIT(A) has erred in deleting the interest U/S 234B by relying upon the decision of Hon'ble Delhi High Court in the case of Jacabs Civil Incorporation! Mitsubishi Corporation (2010) ITR 578 (Delhi) which has not been accepted by th .....

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favour of the assessee vide order passed by Hon'ble Supreme Court in assessee s own case , reported in (2015) 59 Taxman.com 01/ 376 ITR 306. 3.3 We have perused the orders passed by the authorities below, arguments advanced by both the side and the decision passed by Hon'ble Supreme Court in the assessee s own case. The only issue that arises from the grounds of appeal filed by the Revenue is in respect of the taxability of the amount paid to the non-resident / foreign companies under t .....

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ing, extraction or production of mineral oils, the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10 per cent of the aggregate of the amounts paid or payable to such non-resident assessee as mentioned in sub-section (2). On the other hand, section 44D contemplates that if the income of a foreign company with which the government or an Indian concern had an agreement executed before 1-4-1976 or on any date thereafter the computation of income would be .....

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for the purposes of the expression, i.e., 'fees for technical services' any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration which would be chargeable under the head 'salaries'. Fees for technical services, therefore, by virtue of the aforesaid Explanation will not include payments made in connection with a mining project. 1. The Income-tax Act does not define the expressions 'mines' or 'minerals'. T .....

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ct. Regard must also be had to the fact that mineral oils is separately defined in section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which the Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation, i.e., Oil Fields (Regulation and Development) Act, 1948. Reading section 2 (j) and 2W) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Developme .....

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for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D. 3.5 Respectfully following the same, we dismiss the grounds raised by the Revenue in this appeal. Accordingly .....

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in hiring of integrated consultant for development of Vashistha and S1 fields) were not in the nature of fees for technical services as defined in sec. 9(1 )(vii) of the Act. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the income of the assessee was not taxable under the provisions of sec. 44DA r.w.s 115A even though the nature of services rendered by the assessee were technical in nature liable to tax under section 44DA of the I.T. Act., 1961 .....

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rought 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 into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT. 4.1 In I.T.A.No. 4652/Del/2013, the non-resident / foreign company was engaged in the process of discovering oil and gas fields need to be developed by drilling appropriate number of wells, e .....

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own case , reported in (2015) 59 Taxman.com 01/ 376 ITR 306. 4.3 We have perused the orders passed by the authorities below, arguments advanced by both the side and the decision passed by Hon'ble Supreme Court in the assessee s own case. The assessee has received services for the purpose of activities relating to prospecting for or exploration of mineral oils. The only issue that arises from the grounds of appeal filed by the Revenue is in respect of the taxability of the amount paid to the .....

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and the Oil Fields (Development and Regulation) Act, 1948. While construing the somewhat parimateria expressions appearing in the Mines and Minerals (Development and Regulation) Act, 1957 regard must be had to the provisions of Entries 53 and 54 of List I and Entry 22 of List II of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately de .....

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ral oils, exhaustively referred to earlier, it is abundantly clear that drilling operations for the purpose of production of petroleum would clearly amount to a mining activity or a mining operation. 2. The facts indicate that the pith and substance of each of the contracts/agreements is inextricably' connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may .....

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ssed. 5. Grounds: I.T.A.No. 4654/Del/2013 (Assessment Year 2010-11): 1. Whether on the facts and circumstances of the case, the CIT(A) has erred in bringing to tax the receipts of non-resident from design, composition and implementation of multi- disciplinary teams (MDT), defining team members roles and responsibilities, developing team charters, coaching the team leads, identification of skill gaps, designing a footprint of functional excellence, providing training in the area of asset manageme .....

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not apply in respect of income in the nature of FTS, for a project not undertaken by the assessee, which is squarely covered under section 44DA and corroborated by clarificatory proviso to sec. 44BB and sec 44DA. 3. Whether on the facts and circumstances of the case, the CIT(A) has erred in accepting the claim of assessee regarding existence of PE in appeal when the assessee had failed to declare this in his return or before the Assessing Officer, to prevent proper enquiry and avoid higher rate .....

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case of Global Industries Pacific Pte. Limited, which is distinguishable on fact ignoring that AAR Rulings are case and fact specific. 5. Whether on the facts and circumstances of the case the CIT(A) has erred in relying upon the decision of the ITAT in the case of M/s CGG VERITAS Services, SA in ITA No. 4653/0el/2010 (on the issue that once a PE is established to be in place then the income has to be treated as business profits and assessable under section 44 BB) which has not been accepted by .....

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han section 44BB of the Act. 5.1 In I.T.A.No. 4654/Del/2013, the non-resident / foreign company was engaged in Exploration & Production (E&P) operations of ONGC are handled by Basins and Assets, respectively. A work centre which is primarily engaged in exploration is termed as a basin whereas a work centre which is primarily engaged in production is termed as an Asset. Multidisciplinary teams (MDT s) of various technical personnel work in Assets and Basins to carry out the E&P operat .....

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