9911796707
TMI Blog2019 (7) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and in the facts and circumstances of the case in not holding that the receipts of Dewey & LeBeouf International Company LLC, USA, were not taxable in India as per the India-USA Double Taxation Avoidance Agreement." ITA No. 3526/DEL/2016 (A.Y. 2012-13) 1. "The Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in holding that the receipts of University of New South Wales, Australia, from ONGC were taxable u/s. 44DA of the Income-tax Act, 1961, and in not holding that the same were taxable u/s. 44BB of the Income-tax Act, 1961. 2. Without prejudice to the preceding ground, the Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in applying a deemed profit rate of 25% for computing taxable income u/s 44DA of the Income-tax Act, 1961. 3. Without prejudice to the preceding grounds, the Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in upholding the Assessing Officer's action of charging surcharge and education cess on the amount of tax payable computed as per the maximum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer issued notices under Sections 142(1) and 143(2) of the Act. The Assessing Officer asked the assessee to explain as to why the income of the non-resident should not be treated as "fees for technical services". In response, ONGC's authorized representatives appeared before the Assessing Officer and filed written submissions furnishing all requisite information and contended that the receipts of the non-resident were not taxable in India and, alternatively, the same could only be taxed u/s 44BB of the Act. The Assessing Officer brought the receipts of the non-resident to tax as "fees for technical services" under Section 115A of the Act and round off the tax thereon @ 15% as per India-Australia Double Taxation Avoidance Agreement. The Assessing Officer further applied surcharge @ 2% and education cess @ 3% both for the purpose of grossing up of the actual receipts and for computing the total tax payable on the grossed-up amount. 4. Being aggrieved by the assessment orders, the respective assessees filed appeals before the CIT(A). The CIT(A) dismissed the appeals of the assessees. 5. The Ld. AR submitted that the Tribunal in both the assessee's own case for Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erable : USD 7,46,000 Total Price : USD 43,68,000 9. As per the terms of the agreement, no title or ownership of data is transferred by GX, USA to ONGC. ONGC was granted a non-exclusive right to use the data for internal purpose only and unless authorized by GX, USA, ONGC had no right to copy or transfer the data. Further on termination of the licence, ONGC had to return or destroy the data. During the relevant year, GX, USA had received USD 39,32,600 (including payment of USD 1,05,000 received towards training) equivalent to Rs. 17,55,57,305 under the said agreement which was claimed as not taxable in India under the provisions of DTAA between India and USA. The AO had brought the same to tax as "Royalties" as per the provisions of section 9(l) (vi) of the Act. The CIT (A), although, did not give any finding as regards to the taxability of the said receipts as 'royalty', however, following the order of the Delhi Tribunal in the case of CGG Veritas Services SA v. ADIT in ITA No.: 4653/Del/2010, held the same is to be treated as "fees for technical services" under section 9(1) (vii) of the Act. The ITAT in the first round, vide order dated 22.02.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgment of Hon'ble Supreme Court in the case of ONGC vs. CIT (supra), such payments are in the nature of mining or like project and therefore, it will not fall within the ambit and scope of fee for technical services, as contemplated in Explanation 2 of Section 9(1)(vii). The relevant observations given in the said judgment for the sake of ready reference is reproduced hereunder:- Under section 44BB (1) of the Income-tax Act, 1961, in the case of a nonresident providing services or facilities in connection with or supplying plant and machinery used or to be used in prospecting, extraction or production of mineral oils, the profits and gains from such business chargeable to tax are to be calculated at a sum equal to 10 per cent, of the aggregate of the amounts paid or payable to such non-resident assessee as mentioned in sub-section (2). On the other hand, section 44D contemplates that if the income of a foreign company with which the Government or an Indian concern had an agreement executed before April 1, 1976, or on any date thereafter the computation of income would be made as contemplated under section 44D. Explanation (a) to section 44D specifies that "fees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 44BB or section 44D of the Act. The test of pith and substance of the agreement is applicable and the Central Board of Direct Taxes had accepted the test and had in fact issued a circular as far back as October 22, 1990, to the effect that mining operations and the expressions "mining projects" or "like projects" occurring in Explanation 2 to section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident would be chargeable to tax under the provisions of section 44BB and not section 44D of the Act. No other view can be taken if the works or services mentioned under a particular agreement are directly associated or inextricably connected with prospecting, extraction or production of mineral oil. The appellant, the Oil and Natural Gas Corporation (ONGC), was assessed in a representative capacity on behalf of foreign companies with whom it had executed separate agreements by which the non-resident companies agreed to make available supervisory staff and personnel having experience and expertise f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 12. Accordingly, respectfully following the judgment of Hon'ble Supreme Court we decide this issue in favour of the assessee. B. ONGC Ltd. as representative assessee of GX Technology Corporation, USA, 2485/Del/2016, A.Y. 2010-11. 13. Here, in this case, also the facts are exactly similar to appeal for the Assessment Year 2007-08 and in this ear the relevant letter of commitment is dated 22.03.2007 which was executed between ONGC and the aforesaid non-resident for participation in non-resident's regional seismic and geological studies for India Span program. ONGC had also placed Purchase Order no. 4050004364 dated 25-05-2007 for procurement of 4088 line kilometres of seismic data acquired by the GX, USA under the India Span program. During the relevant previous year, GX, USA had received payments of USD 5,00,371.20 equivalent to Rs. 2,55,13,928 from ONGC under the aforesaid contract, which were claimed as not taxable in India under the provisions of DTAA between India and USA. The AO had brought to tax as "Royalty" as per the provisions of section 9(1)(vi) of the Act. The CIT (A) had, however, held the same to be "fees for technical services" under section 9(1)(vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts therefrom ostensibly would falls within the ambit of consideration for 'any mining or like project' which is to excluded from the definition of FTS as defined under Explanation 2 to Section 9(1)(vii) and same would be taxable u/s.44BB. It has been pointed out by the learned counsel that this Tribunal in assessee's own case for the Assessment Years 2010-11 and 2009-10 in ITA No.4469/Del/2013 order dated 03.12.2015 and ITA No.4269/Del/2012, vide order dated 16.11.2016, on identical facts and similar receipts has held that the receipts is taxable u/s.44BB following the Hon'ble Supreme Court's judgment of ONGC Ltd. (supra). Thus, in view of the precedence in assessee's own case, we hold that the said receipts cannot be taxed as FTS under 9(1) (vii), albeit would be taxable u/s.44BB. D. ONGC Ltd. as representative assessee of Dewey & LeBoeuf International Company L.L.C., USA, ITA No.1329/Del/2016 Assessment Year 2011-12. 18. The aforesaid non-resident entity was engaged for representing ONGC before Russian courts with regard to the litigation between ONGC and Amur Shipbuilding Yard. The services were rendered and utilized in Russia and payment was also received outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessment Year 2009-10, the Tribunal in the context of legal services rendered by the same party with regard to litigation between ONGC and Amur Shipbuilding Yard was held not taxable as FTS u/s.9(1)(vii). Accordingly, we hold that such payment cannot be brought to tax u/s. 9(1)(vii). Hence, the appeal of the assessee is allowed. E. ONGC Ltd. as representative assessee of University of New South Wales, Australia, ITA No.1335/Del;/2016, Assessment Year 2011- 12. 21. The non-resident assessee ('UNSW, Australia') had entered into a contract dated 11.01.2005 with ONGC for construction, installation and maintenance of High Resolution CT Scanning Facility at the in-house R&D facility of ONGC viz., Institute of Reservoir Studies ('IRS'), Ahmedabad, which was primarily engaged in carrying out R&D work related to enhancement of recovery of oil/hydrocarbons through improved/enhanced recovery studies. The services covered under the said contract are as under:- * Supply of hardware (High Resolution CT Scanner) including commissioning and testing; * Supply of software including installation and testing; * Software maintenance and assistance with hardware maintenance; * Trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments received by UNSW, Australia during the relevant previous year were that annual maintenance charges for maintenances of the High Resolution CT Scanner. Since high resolution CT-scanner is used for conduction petrography studies in reservoir rock description which contributes in prospecting / enhancing the recovery of oil, therefore, such services relating to maintenance of high resolution CT-Scanner can be said to be directly associate and inextricably connected with the extraction and production of mineral oil. The receipts therefrom would fall within the ambit of consideration for any mining or like project which is excluded from the definition of term FTS as defined in Explanation 2 to Section 9(1)(vii) and same would be taxable u/s.44BB. The judgment of Hon'ble Supreme Court in the case of ONGC relating to repairing of various equipment used directly and indirectly in connection with exploration or production of mineral oils will squarely apply. The other allegations of the authorities below that the agreement envisages a long term collaboration, participation, training, maintenance and service of High Resolution CT Scanner and UNSW, Australia would provide hands on tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
