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2016 (8) TMI 255 - ITAT DELHI

2016 (8) TMI 255 - ITAT DELHI - TMI - Taxability of income - revenues received by the assessee, on account of the provision of slick-line services, wire-line services, well-testing services etc., including provision of technical personnel, to various entities was taxable u/s 44BB or Section 44DA read with Section 9(l)(vii) - Held that:- As decided in assessee's own case AO was not justified in holding that the income of the assessee arising from performance of A1 Mansoori Specialized Engineering .....

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.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Amit Arora, CA For The Revenue : Sh. P Dam Kanunjana, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This the appeal filed by the revenue against the order of the ld CIT(A)-II, Dehradun, dated 04/09/2014 for the Assessment Year 2011-12 and assessee has filed cross objection in the above appeal. 2. The revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances .....

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ct of the amendment brought in vide Finance Act, 2010 w.e.f. 01.04.2011, in terms of which income covered by section 44DA has been specifically excluded from the scope of section 44BB for Asstt Years 2011-12 (the year under consideration) onwards. 2.1 Whether on the facts and circumstances of the case, the Ld CIT (A) has erred in ignoring the distinct scheme of taxation of Fee for Technical Services ('FTS') and Royalty and disregarding the insertion of provisos in section 44BB/44DA/ 115A .....

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neral in nature falling under section 44DA(l) of the Act. 2.3 The Ld CIT(A) has erred in mechanically following the decision in the case of M/s OHM Ltd without first adjudicating upon the issue as to whether and how the scope of the services/facilities rendered under the contracts is not general in nature and therefore, does not qualify as FTS u/s 9(l)(vii) of the Act taxable under section 44DA. 3. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that .....

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CIT(A) has erred in ignoring the decisions of jurisdictional High Court in the cases of ONGC as Agent of Foramer France and M/s Rolls Royce Pvt Ltd [2007-TM-03-HC-UKHAND-INTL] 5. Whether on the facts and circumstances on the facts, the Ld CIT(A) has erred in reversing the action of the AO who, having held that the assessee's revenues on account of aforesaid services under Contracts with various entities are liable to be taxed u/s 44DA , rightly estimated the income of the assessee by applyi .....

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hable on facts as it dealt with a case where the employer failed to deduct tax at source despite the specific provisions of the Act in terms of which the employer was mandatorily required to deduct tax from the salary paid to the employee. In the said case, the Hon'ble Court held that an employee is not liable to pay advance tax on salary because u/s 192 there is an obligation on the employer to deduct tax at source. The case does not lay down a general proposition of law that interest u/s 2 .....

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ity to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgment of Delhi High Court dated 7.11.2013 in ITA No. 327 & Ors of 2012). 3. The assessee has raised the following grounds of appeal in the cross objection:- 1. That the Ld. Commissioner of Income-tax, Appeals-ll, Dehradun [CIT(A)] erred in not holding that the nature of operations undertaken by the respondent under the various contracts with its customers was not fees fo .....

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he above, that the Ld. CIT(A) has erred in not holding that the scope of operations of the respondent are squarely covered by the decision of the jurisdictional High Court of Uttarakhand in the case of CIT Vs. ONGC as agent of Scan Drilling Company in ITR No. 2 of 2001. 4. Without prejudice to any of the above, that the Ld. CIT(A) has erred in not holding that section 44DA could not have applied in respect of payments received by a non-resident assessee from another non-resident. 5. Without prej .....

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eld to be fees for technical services as per section 9(1) (vii) of the Act and further as the assessee has not produced books of accounts and according to the Assessing Officer the assessee is rendering such services through its permanent establishment in India, he computed the income of the assessee on estimate basis deeming profit rate of 25% of the gross receipts as business income. The contention of the assessee was that the above income received by the assessee is from providing services an .....

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in turn held that that services rendered by the appellant has direct nexus with oil extraction and therefore following the decision of Hon ble Delhi High court in case of OHM Ltd. 352 ITR 406 (Del), he held that gross receipt of the assessee shall be dealt with u/s 44BB of the Act and not characterized as fees for technical services or royalty. Against this order of the ld CIT(A) revenue has filed an appeal and assessee has filed cross objection. 5. Before us the ld DR relied upon the order of t .....

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tted that the cross objection filed by the assessee is supportive in nature. 6. We have carefully considered the rival contentions. The issue of taxability of the receipt on identical facts and circumstances has been considered in assessee s own case in ITA NO. 5868/Del/2011 vide order dated 30.12.2015 as under:- 7. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that the assessee re .....

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ed by the AO. 8. Now this issue has been settled by the Hon'ble Apex Court in the case of Oil & Natural Gas Corporation Ltd. Vs CIT & Anr. in Civil Appeal No. 731/2007 vide order dated 01.07.2015. In the said case it has been held as under: A1 Mansoori Specialized Engineering "13. The Income Tax Act does not define the expressions "mines" or "minerals". The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Development .....

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Act to include natural gas and petroleum in respect of which 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 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically Page relating to prospecting and exploration of mineral oils, exhaustively referred to .....

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company is to be assessed under Section 44BB or Section 44D of the Act. The test of pith and substance of the agreement commends to us as reasonable for acceptance. Equally important is the fact that the CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions "mining projects" or "like projects" A1 Mansoori Specialized Engineering occurring in Explanation 2 to Section 9(1) of the Act .....

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ting, extraction or production of mineral oil. Keeping in mind the above provision, we have looked into each of the contracts involved in the present group of cases and find that the brief description of the works covered under each of the said contracts as culled out by the appellants and placed before the Court is correct. The said details are set out below. S.No. Civil Appeal Work covered under the contract 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory .....

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7. 1528 Analysis of data to prepare job design, procedure for execution and details regarding monitoring. 8. 1532 Study for selection of enhanced Oil Recovery processes and conceptual design of Pilot Tests. 9. 1520 Engineering and technical support to ONGC in implementation of Cyclic Steam Stimulation in Heavy Oil Wells. 10. 2794 Assessment and processing of seismic data along with engineering and technical support in implementation of Cyclic Steam Stimulation. 11. 1524 Conducting reservoir sti .....

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al. 18. 7227 Opinion on hydrocarbon resources and foreseeable potential. 19. 7230 Opinion on hydrocarbon resources and foreseeable potential. A1 Mansoori Specialized Engineering 20. 6016 Opinion on hydrocarbon resources and foreseeable potential. 30. 2012 Inspection of generator. 21. 6008 Evaluation of ultimate resource potential and presentations outside India in connection with promotional activities for Joint Venture Exploration program. 22. 1531 Review of sub-surface well data, provide repai .....

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ting control system and deputing engineer to attend to any problem arising in the machines. 32. 1529 Inspection of drilling rig and verification of reliability of control systems in the drilling rig. 33. 2008 Expert advice on the device to clean insides of a pipeline. 34. 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 35. 925 Engineering analysis of rig. A1 Mansoori Specialized Engineering 36. 1519 Imparting training on cased hold produ .....

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n of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 44. 1523 Supply, installation and familiarization of software for processing seismic data. The above facts would 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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t passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal." 9. We, therefore, by keeping in view the ratio laid down by the Hon'ble Apex Court in the aforesaid referred to case of Oil & Natural Gas Ltd. Vs CIT & Anr., set aside the impugned order and direct the AO to accept the claim of the assessee that its Revenue is chargeable to tax u/s 44BB of the Act and not u/s 115A of the Act. 10. It is .....

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