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2016 (7) TMI 826 - ITAT DELHI

2016 (7) TMI 826 - ITAT DELHI - TMI - Application of deemed profit rate of 10% u/s 44BB - revenues earned from a non-resident company on account of provision of technical personnel for executing contracts with M/s. ONGC - DRP after considering the relevant decisions held that section 44BB of the Act being a more specific provision shall prevail over the general provisions of the Act and that the services rendered by the Subcontractor at the off shore rigs of a contractor is part and parcel of ac .....

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uarely covered in favour of the assessee and the DRP was not justified and correct in directing the AO to assess income of the assessee from non-resident company on account of provision of technical person for executing contract with ONGC shall be taxed applying due profit rate of 10% u/s 44BB of the Act. - Decided against revenue. - ITA No. 1156/DEL/2014, ITA No. 1157/DEL/2014 - Dated:- 11-7-2016 - SHRI G.D. AGRAWAL. VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Department .....

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many as 14 grounds of appeal. However, the only effective grievance of the Revenue has been mentioned in Ground No. 1 which reads as under: 1. Whether on the facts and the circumstances of the case the Hon ble Dispute Resolution Panel ( DRP ) has erred in directing the Assessing Officer to apply the deemed profit rate of 10% u/s 44BB of the Income Tax Act, 1961 ( The Act ) on the revenues earned by the assessee from a non-resident company on account of provision of technical personnel for execut .....

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r contra, the ld. CIT-DR strongly supported the impugned order and vehemently contended that the DRP was not justified in directing the AO to apply the deemed profit rate of 10% u/s 44BB of the Act. However, the ld. CIT-DR further submitted that if the assessee is contending that the issue is covered in favour of the assessee, then the ld. AR should be directed to file a chart showing which ground of the Revenue is covered by which order of the Hon ble Supreme Court, High Court or the Tribunal. .....

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e ld. AR to file a detailed chart showing how these issues are covered in favour of the assessee. Thus, the request of the ld. CIT-DR for directing the assessee is rejected. 6. Further, from the order of the DRP dated 18.12.2013 passed u/s 144C(5) of the Act, we observe that the DRP granted relief to the assessee with the following observations and conclusion: 4.3 On careful consideration of the mat e I we find that under the provisions of section 44BB of the Act the presumptive rate of taxation .....

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ct, the assessee provided key technical personnel for conducting actual drilling operation under its contract with Pride Foramer, viz senior tool pusher, barge manager, rigs superintendent, chief electrician, rigs safety training advisor, The contract with ONGC also recognized the oil drilling activity which was carried out, required crew and the rig had to be managed by the technical personnel. The list of personnel and crew are available in the contract in Annexure B, Therefore the operation o .....

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the applicability of the section to the assessee. What is required under the section is that the services/ facilities provided by the assessee should be "in connection with" prospecting etc of mineral oil. No where it is mandated that the services should be provided directly by the party who is engaged in prospecting etc. of mineral oil or is directly a member of the Production Sharing Contract as is sought to be made out by the AO. The above view has been confirmed by the Hon'ble .....

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n on the basis of the opinion of the Attorney General of India, it was instructed that the exclusion from the definition of FTS in respect of 'mining end like project' appearing in Explanation 2 to section 9(1) (vii) of the Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. As such, these activities would be outside the ambit of FTS u/s 9( 1 )(vii). The relevant part of the instruct .....

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and carrying out drilling operations for exploration or exploitation of oil and natural gas. 3. In view of the above opinion, and cases of Scan Drilling Co.Dy. Commissioner of Income Tax Vs. Schlumberger Seaco Inc. (1994) 50 ITD 348 (Col) the consideration for rig management services was not be treated as fees for technical services and for the purpose of Explanation 2 to section 9( 1) (vii) of the Income Tax Act, 1961." 4.3.3 Further, as submitted by the Ld. AR, sections 44DA and 115A app .....

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prospecting etc for mineral oil from another foreign company would be subject to tax u/s 4488 and not under section 44DA/ 115A of the Act. The relevant portion of the ruling is extracted below: "12. The inquiry now is whether the income derived by the applicant from performing its contract with the UAE Company would be assemble to tax as, fees for technical services under section 440, 440A, or 11SA of the Act. Admittedly, the income derived by the applicant is from a UAE company and not fro .....

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has to be rejected. Since, income derived by the applicant, is from an activity in connection with the prospecting for mineral oils and from a foreign company, the applicant would be entitled to claim to be assessed under section 4488(1) of the Act. The ruling, therefore, on question no 3 is that the income derived by the applicant are to be computed in accordance with the provisions of section 44 BB (1) of the Act." (Emphasis supplied). 4.3.4 Further, as pointed out by the Ld. AR, the AO&# .....

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Court in DIT vs. OHM Ltd. (2012) 212 Taxman 440 (Delhi) has held that section 4488 of the Act being a more specific provision shall prevail over the general provisions of the Act and that the services rendered by the sub-contractor at the offshore rigs of a contractor is part and parcel of activities for extraction etc of mineral oils and would be covered u/s 4488 of the Act. 4.3.6 In view of the above, considering the facts of this case, the statutory provisions and clear legal pronouncements o .....

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