TMI Blog2012 (12) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... ;, for short) as claimed by it or under section 44DA of the Act as claimed by the petitioner which is the Revenue. 2. The respondent-assessee is a company incorporated under the laws of the United Kingdom and is a tax-resident of that country. It is engaged in the business of providing geophysical services to oil and gas exploration industry; it conducts electromagnetic survey, processing and interpretation of data. The data so collected through the survey is used in off shore oil industry. Two companies namely Petro Gas E P, LLC and CGG Veritas Services SA awarded contracts to the assessee for procuring data, processing and interpreting the data in respect of an off shore exploration block in India. The respondent is paid for mobilisation as well as de-mobilisation of its vessels from the site area and for providing services in connection with the prospecting for extraction or production of mineral oils. 3. The assessee applied to the concerned authority under Section 197 of the Act for issuance of a certificate for receiving payments after deduction of tax at the lesser rate of 4.223% as per the provisions of section 44BB. It contended that Section 44BB was applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee, being a non-resident engaged in the business of providing services, or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or [section 44DA or] section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely: - (a) The amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) The amount received or deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices : [Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section.] (2) Every non-resident (not being a company) or a foreign company shall keep and maintain books of account and other documents in accordance with the provisions contained in section 44AA and get his accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. Explanation.-For the purposes of this section,- (a) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (b) royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) permanent establishment shall have the same meaning as in clause (iiia) of section 92F. Explanation 2 : For the purposes of this clause, fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services that are in the nature of technical services within the meaning of Explanation 2 to section 9(1)(vii) are to be computed in accordance with 44DA, very little purpose will be served by incorporating special provision in 44BB for computing the profits in relation to the services connected with the exploration and extraction of mineral oils. The provision will then operate in a very limited field. (refer Para 8.1) It was then observed that: It is not our view that section 44BB will become otiose or altogether redundant, but it is our view that its scope and content will be unduly curtailed by adopting the interpretation sought to be placed by the revenue. (refer para 9.8) 9. In our view there is no error in the view taken by the AAR. A similar view has been taken by a Division Bench of this Court in DIT v. Jindal Drilling Industries Ltd. [2010] 320 ITR 104 (Delhi). In that case the question was whether the services rendered by the non-resident company for transportation and checking up of rigs, review of design and issuance of suitability certificate to the assessee, which was a resident company, were covered under section 9(1)(vii) read with Explanation 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee were covered under this expression. It is also to be noted that the nature of services rendered by the NDAL to the assessee were specifically excluded by Explanation 2 to section 9(1)(vii) of the said Act which expressly uses the following words but does not include consideration for any construction, assembly, mining or like project undertaken by the resident. So, the sums of money received by the NDAL from the assessee were not includible in the definition of fees for technical services as provided in section 9(1)(vii) read with Explanation 2 thereto. Such receipts were, however, specifically provided for in section 44BB of the said Act. Both the Commissioner of Income-tax (Appeals) and the Tribunal have also arrived at this conclusion. We fully agree with their conclusion. No substantial question of law arises for our consideration. The appeals are dismissed. 10. The relevant portion of the order of the AAR in the case of Geofizyka Torun (supra), which order was adopted and followed by it in its impugned order is as below: - As already discussed, section 44BB which was inserted into the Act with effect from April 1, 2004, is a special, specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the specific nature envisaged by section 44BB, the computation provision therein would prevail over the computation provision in section 44DA. In other words, the income received by a non-resident businessman for the technical services provided in relation to prospecting and extraction of mineral oil, will be wholly governed by section 44BB for the purposes of computation. If all the services that are in the nature of technical services within the meaning of Explanation 2 to section 9(1)(vii) are to be computed in accordance with section 44DA, very little purpose will be served by incorporating a special provision in section 44BB for computing the profits in relation to the services connected with exploration and extraction of mineral oils. The provision will then operate in a very limited field. 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 Corpn. (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 carry on 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 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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