TMI Blog2016 (7) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... specting 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 and the appeal filed by the Revenue stands dismissed. - Decided in favour of assessee. - I.T.A .No.5602/Del/2013, I.T.A .No.5400/Del/2013 - - - Dated:- 13-5-2016 - SHRI S. V. MEHROTRA ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For The Appellant : Shri Anuj Arora, CIT DR For The Respondent : Shri Nageshwar Rao, Adv., Shri Shailesh Kumar, Adv. ORDER PER BEENA PILLAI, JUDICIAL MEMBER: The present cross appeals have been preferred by the assessee as well as revenue against order of Ld. CIT (A), Dehradun wide order dated 30/07/2015 for assessment year 2010-11 on the following grounds of appeal: 2. Brief facts of the case are that the assessee are as under; 2.1. The assessee is a non-resident company, incorporated under the laws of British Virgin Islands, and is engaged in the business of acquisition and processing of twodimensional (2-D) and three-dimensional (3-D) seismic data for companies engaged in exploration and production of mineral oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, maintenance and support of Omego Software Licences 19,444,291 ONGC Contract No.901005356 Agreement dated 03.08.2006 For Hiring of AMC Servsics for a period of 3 years for Omego Processing System on Board M/V Saga Sandhani 999,567 ONGC Work order No 5010037378 Purchase order dated 05.03.2008 Installation and Commissioning of all the software license 20,339,354 Reliance Industries Ltd. Contract No. OG1 - 3653385date 16.03.2008 3D Seismic Data Onshore d Processing 33,049,053 Reliance Industries Ltd. Contract No. OG13650181 date 06.02.2008 Advanced processing (2.5D d Inversion) of CSEM Imaging 6,339,637 Reliance Industries Ltd. Contract No.OG1-3606488dated 31.07.2006 3D Data Onshore Processing 27,536,585 Reliance Industries Ltd. Contract No.OG1-3621135/001 dated 09.02.2007 2D Data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had received gross receipts of ₹ 7,40,75,72,086/- from the above contracts. The assessee had offered its income for taxation as per section 44BB of the Income-tax Act. 2.5. The AO observed that section 44BB was applicable for computing profit and 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 services in the nature of seismic surveys , the applicable section was 44BB and said services could not be taxed under sections 44D, 44DA or 115A of the Act. The 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. 2.6. The AO, however, after considering the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s attributable to distance travelled outside India: 1. The learned CIT(A) has erred in taxing receipts amounting to ₹ 634,638,677 from mobilization/ demobilization of vessels attributable to distance travelled outside India under section 44BB of the Act without appreciating that such activities are carried outside India and not subject to tax in India. Taxability of service tax charges 2. The learned CIT(A) has erred on facts and in law in taxing receipts on account of service tax charges amounting to ₹ 25,50,30,477 under section 44BB of the Act as opposed to Appellant's claim for non-taxability of such receipts. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal so as to enable the Hon'ble Tribunal to decide the appeal in accordance with the law. Rervenues Appeal ITA No. 5400 1. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in holding that the revenues of the assessee from the activities of proceedings of PD line data, long- term lease of marine vessels, AMC for hiring of MT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sed co Forex International Drilling vs CIT. 8. Whether on the facts and circumstances of the case, CIT(A) has erred in not appreciating the findings given by the AO who has held that the receipts of the assessee is in the nature of Fee for Technical Services and has estimated the income by applying deemed profit rate of 25% on gross receipts as per the provisions of Rule 10 of the Income tax Rules, 1962 in the absence of books of accounts. 5. We shall 1st deal with the issue relating to taxability revenues from seismic data acquisition and processing services as fee for technical services or under section 44BB or under section 44DA or under section hundred and 115A of the act. 5.1. The Ld.AR submitted that the assessee offered income under section 44 BB of the act at a deemed profit of 10% of gross revenues. He further submitted that the Revenue was not afforded to tax by the assessee as the same were attributable to activity outside India. The Ld.AR submitted that the revenue received from mobilisation/demobilisation has been mentioned separately in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions of Ld. counsel for the assessee. Thus these grounds of the assessee are dismissed. 5.3. Respectfully following the decision of this tribunal in assessee s own case for assessment year 2009-10 we are inclined to dismiss this ground of appeal raised by the assessee for the year under consideration. Accordingly ground No. 1 raised by the assessee in its appeal stands dismissed. 6. Ground No. 2 raised by the assessee relates to the service tax charges which were reimbursed to the assessee were treated as part of the receipt. The Ld. AR submits that this issue now stands settled by the order of Hon ble jurisdictional High Court in the case of the DIT Vs. Mitchell Drilling International Pvt. Ltd. in ITA No. 403/2013. 6.1. On perusal of the judgment of the Hon ble High Court in DIT Vs. Mitchell Drilling International Pvt. Ltd (supra), the question that was considered is as under: whether the amount of service tax collected by the assessee from its various clients should have been included in gross receipts while computing its income under the provisions of section 40 4B of the act? The Hon ble High Court in para 17 has held as under: 17. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of profession, and fees for technical services paid under the contract is effectively connected with such permanent establishment or fixed place of profession in India. In section l15A(l)(b) the Finance Act, 2003 with effect from 1.4.2004 substituted words a non-resident (not being a company) or a foreign company includes any income by way of royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA for words a foreign company, includes any income by way of royalty or fees for technical 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 not be applicable in respect of income referred to this section. On combined reading of proviso to section 44BB (1) and second proviso to section 44DA-it is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said contracts are assessable under the provisions of section 44BB and not section 44D of the Act. The relevant extract of the decision by the Hon ble Court is as under; The above facts indicate that the pith and substance of each of the contracts/agreement is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement east 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 assessee is all foreign companies under the said contracts is more appropriately assessable under the provisions of section 44 BB and not section 44D of the act. On the basis of the said conclusion reached by ours, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the Learned Appellate Commissioner as affirmed by the Learned Tribunal. 8. Ld. CIT(DR), however, submitted that the Hon ble Supreme Court in the case of ONGC (supra), has not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttarakhand High Court was 2007-08 does he submitted that the amendment being prospective in nature would not be applicable to the year prior to 2012-13. 9. We have considered the rival submissions and have perused the record of the case. The assessment year under consideration is 2010-11, which is prior to assessment year 2011-12. The insertion of section 44DA in the proviso to section 44BB is w.e.f. 1.4.2011, has been held to be prospective in nature, which has been considered in detail by decisions of this Tribunal and that of the jurisdictional High Court in the following case; 9.1. Baker Hughes Asia Pacific Ltd. Vs. Addl. DIT in ITA nos. 5283/Del/2010 and 420/Del/2012 and others 2014- TII-104-ITAT-DEL-INTL, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 . Revenues earned by the non-resident from rendering such specific services are covered by Section 44BB. It is a well settled rule of interpretation that if a special provision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim Generalliaspecialibus non derogant'. It is again a wellsettled 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 section 44BB to a useless lumbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of profits, and to understand the amendments as having been inserted 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 fall under the subsection read with Explanation 2 to Section 9(1)(vii) of the Act, then an assessee rendering such services as provided in Section 44BB cannot claim the benefit of being assessed on the basis that 10 percent of. the revenues will be deemed to be the profits as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w. e. f. 01.04.2011 in both the sections, cannot have the effect of altering 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. We do not, therefore, see h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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