TMI Blog2017 (10) TMI 1426X X X X Extracts X X X X X X X X Extracts X X X X ..... prospecting for or extraction or production of mineral oil is not to be treated as technical services for the purpose of Explanation 2 of Sec. 9(1)(vii), therefore, it can safely be concluded that the payments received by the assessee from rendering of Fracturing Flow Back Services for extraction or production of mineral oil would not fall within the realm of 'fees for technical services'. We thus, are of the considered view that as the precondition for invoking of Sec. 115A is in itself found to be missing, therefore, the same would not be attracted to the case of the assessee. We set aside the order of the A.O assessing the amount received by the assessee from B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services at the oil rigs to tax as per the provisions of Sec. 115A - thus in agreement with the A.R that now when Sec. 44BB contemplates special and specific provisions for computing 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 hire used or to be used in the prospecting for or extraction or production of mineral oils, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout prejudice to the above Appellant submits that Appellant is a non resident company and provides services to another non resident company. Hence, provisions of sec. 115A are not applicable to the facts instead sec. 44BB is applicable in the Appellants case. Appellant therefore prays that order deserves to be set aside. 5. Without prejudice to the above, Assessing officer overlooked that sec. 115A is applicable only when income for technical fees is received from Government or an Indian concern. In the Appellant companys case, income is not received from an Indian concern nor from the Government. Appellant assessee therefore prays that provisions of Section 115A are not applicable. 6. Appellant company submits that the Assessing Officer has not construed the law and judicial pronouncements on the subject. Hence, the Appellant company prays that assessment be made u/s 44BB of the Income-tax act, 1961. 7. Appellant craves leave to add, alter, amend, modify or omit any of the aforesaid grounds as the occasion may arise or demand. 2. Briefly stated, the facts of the case are that the assessee, viz. Production Testing Services Inc., Texas, USA is a Foreign compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e East) Ltd may not be treated as fees for technical services and brought to tax as per the provisions of Sec. 115A of the 'Act'. The assessee submitted at length before the A.O that as per Sec. 90(2) of the 'Act', the provisions of Double Taxation Avoidance Agreement ('DTAA ) or the provisions of the Income-tax act, 1961, whichever was more beneficial to the assessee would be taken as its income. The assessee thereafter referring to Article 7 of the DTAA, therein submitted that the provisions of Sec. 44BB would be applicable in its case as they were more beneficial to the assessee. The assessee submitted before the A.O that the provisions of Sec. 44BB were clearly applicable in its case. However, the A.O after deliberating on the explanation of the assessee did not find favour with the same. The A.O primarily driven by the facts, viz. (i). that as B.J Services Company (Middle East) Ltd was carrying out Fracturing Flow Back Services and various operations at the Oil rigs pursuant to the contract with ONGC, therefore, the assessee who was sub-contracted the said work by B.J Services Company (Middle East) Ltd was indirectly performing the services for ONGC; (ii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for tax by the assessee. 6. The DRP after deliberating on the contentions of the assessee was however not persuaded to accept the same. The DRP referring to the nature of services involved in Fracturing Flow Back Services provided by the assessee, therein observed that the same were highly technical services. That after examining at length the process involved in extraction or production of mineral oil, the DRP concluded that the payments received by the assessee for rendering of the Fracturing Flow Back Services to the oil companies could safely be characterized as fees for technical services. The DRP further agreed with the view of the A.O that as the certificates under Sec. 197(1), as well as the TDS certificates furnished during the course of the assessment proceedings were for deduction of tax at source fees for technical services under Sec. 194J, which had consistently been accepted by the assessee, therefore, his aforesaid view that the amounts received by the assessee were in the nature of fees for technical services stood fortified. The DRP further being of the view that as the assessee had carried out services on behalf of B.J Services Company (Middle East) Ltd, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 44BB contemplates special and specific provisions for computing profits and gains of a non-resident as regards 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, therefore, the Fracturing Flow Back Services rendered by the assessee in connection with extraction or production of mineral oil would squarely be covered by the provisions of Sec. 44BB. The ld. A.R submitted that as Sec. 115A presupposes the rendering of 'technical services' by the assessee, therefore, now when the Hon'ble Apex Court had held that prospecting for extraction or production of mineral oil is not to be treated as technical services, the provisions of Sec. 115A thus would not be applicable to the case of the assessee. The ld. A.R further took us through the contract executed between ONGC and B.J Services. The ld. A.R drew our attention to Page 23-24 - Para 35 of the aforesaid contract, and therein referring to the contents submitted that it was clearly stated that the contractor, viz. B.J Services Company (Middle East) Ltd shall be solely responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces Company (Middle East) Ltd. had rendered Fracturing Flow Back Services and various operations at the Oil rigs. We have deliberated on the terms of the contract between ONGC and B.J Services Company (Middle East) Ltd., and after perusing Page 23-24 - Para 35 of the said contract find that the contractor, viz. B.J Services Company (Middle East) Ltd. was solely responsible for the manner in which the work assigned to it was performed. We are persuaded to be in agreement with the ld. A.R that as the contents of the aforesaid contract clearly stated that if any Sub-contractor was engaged by the contractor for performing the contract, then he shall be under the complete control of the contractor and there shall be no contractual relationship between any such Sub-contractor and the company, viz. ONGC. We thus, are of the considered view that in the backdrop of the aforesaid clear terms of the contract, now when the assessee who was engaged as a Sub-contractor by B.J Services Company (Middle East) Ltd had nothing to do with the company, viz. ONGC, therefore, the A.O/DRP were wrong in concluding that the amount received by the assessee from B.J Services Company (Middle East) Ltd for rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the considered view that as observed by us hereinabove, the assessee had received the amount from B.J Services Company (Middle East) Ltd. and not from ONGC, therefore, the aforesaid contention of the ld. A.R carries substantial force. We thus, also on the said count that the assessee had not received the amount for rendering of services of Fracturing Flow Back Services in extraction or production of mineral oil from the Government or an Indian concern, therefore, hold that the applicability of the provisions of Sec. 115A and Sec. 44DA to the facts of the case of the present assessee would stand excluded. 11. We thus, in the backdrop of our aforesaid observations set aside the order of the A.O assessing the amount of ₹ 2,65,46,753/- received by the assessee from B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services at the oil rigs to tax as per the provisions of Sec. 115A of the 'Act'. We are persuaded to be in agreement with the ld. A.R that now when Sec. 44BB contemplates special and specific provisions for computing profits and gains of a non-resident in connection with the business of providing services or facilities in connecti ..... 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