TMI Blog2019 (7) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... lia - payment for a contract with ONGC for construction, installation and maintenance of High Resolution CT Scanner at ONGC premises - HELD THAT:- In this year also the payments received by University of New South Wales, 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 directly associate and inextricably connected with the extraction and production of mineral oil, the receipts 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) of the Act and same would be taxable u/s 44BB . Thus the receipts by the said non-resident would fall within the ambit of Section 44BB as held in the earlier Assessment Years as well. - Decided in favour of assessee. - ITA No. 3524/DEL/2016 And ITA No. 3525/DEL/2016 - - - Dated:- 12-6-2019 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. Mohd. Farid, CA For The Respondent : Sh. S. S. Rana, CIT (DR) ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident), for representing ONGC before Russian courts in regard to the litigation between ONGC and Amur Shipbuilding Yard. The non-resident is a tax resident of the United States of America (USA). ONGC filed a return of income as representative assessee of the non-resident on 28.09.2012 claiming that the receipts of the non-resident under the aforesaid letter are not taxable in India. Draft assessment order was passed by Assessing Officer u/s 143(3)/144C (1) of the Act on 21/01/2015 at a total income of ₹ 87,78,960/- against income of NIL shown by the assessee in return of income as representative assessee of the nonresident. The Assessing Officer considered gross receipts of the non taxable as Fee for technical services and brought to tax the receipts as per provisions of Section 115A of the Act to be taxed on gross basis. Since, the assessee did not file any objection before the Dispute Resolution Panel, the assessment was finalized u/s 143(3)/144C (3) (B) of the Act. 3.2 The facts of ITA No. 3526/Del/2016 are as under: ONGC had vide Agreement dated 11.01.2005 engaged University of New South Wales, Australia (non-resident) for construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR in assessee s own case for Assessment Year 2011-12. 7. We have heard both the parties and perused the material available on record. It is pertinent to note that the facts in the present assessment year i.e. for Assessment Year 2012-13 are identical to the facts emerge from the Assessment Year 2011-12 being ITA No. 1326/Del/2016. The Tribunal held as under: 8. Pursuant to the agreement between the Directorate General of Hydrocarbons ( DGH ) and the non-resident ( GX, USA ), GX, USA which was under a program titled India Span , the US Company was permitted to carry out seismic surveys and acquire, process, interpret seismic gravity and magnetic data and thereafter, assist DGH in preparing data packages for 12,000 km of seismic data acquired from Eastern and Western shore of India. In order to meet part of the funding requirements for the India Span Program, GX, USA was entitled to sell the dataset on non-exclusive basis to both national and international exploration production companies. A Letter of Commitment dated 03.11.2005 was executed between GX, USA and ONGC for participation of ONGC in the non-resident s India Span program. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing 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 22.02.2013 had restored the matter back to CIT(A) with the direction to examine the taxability of the receipts in light of the provisions of Indo-USA DTAA. Pursuant to the directions of the ITAT, the CIT (A) passed the impugned order dated 05.01.2016, holding that the amount received by GX, USA was taxable as FTS both under section 9(l)(vii) of the Act and also under Art. 12 of the India-USA DTAA. 10. Ongoing through the relevant facts, we find that the non-resident assessee has carried out seismic data services under the program titled India Span and was engaged by ONGC for providing seismic data. The aforesaid services, being in the nature of providing seismic survey data/report by GX, USA were not made available' to ONGC inasmuch as ONGC only derived the benefit of the said services and did not obtain any technical knowledge, experience or skill in respect of collection or processing of seismic data w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 technical services as mentioned in section 44D would have the same meaning as in Explanation 2 to clause (vii) of section 9(1). The Explanation defines fees for technical services to main consideration for rendering of any managerial, technical or consultancy services. However, the later part of the Explanation excludes from consideration for the purposes of the expression, fees for technical services, any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration which would be chargeable under the head Salaries . Fees for technical services, therefore, by virtue of the Explanation will not include payments made in connection with a mining project. The Income-tax Act, 1961, does not define the expression mines or minerals . The expressions are found defined and explained in the Mines Act, 1952 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 for operation and management of drilling rigs for the assessment years 1985-86 and 1986-87. The contract between the parties visualised operation of the oil rigs including drilling operations by personnel made available under the agreements. The contracts involved carrying out seismic surveys and drilling for oil and gas, services of starting, re-starting and enhancing production of oil and gas from wells, services for prospecting for exploration of oil and or gas, planning and supervision of repair of wells, repair, inspection or equipment used in the exploration, extraction or production of oil and gas, imparting training, consultancy in regard to exploration of oil and gas and supply, installation, etc., of software used for oil and gas exploration. The assessing authority took the view that the assessments should be made under section 44D of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SA had received payments of USD 5,00,371.20 equivalent to ₹ 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) of the Act and also under Article 12 of the India-USA DTAA. 14. In view of our finding given for the Assessment Year 2007-08, we hold that the same payment cannot be brought in India as Fees for included Services in terms of Article 12 of India-USA DTAA. In any case, as held above, it is squarely covered by the judgment of Hon'ble Supreme Court in the case of ONGC Ltd. (supra). C. ONGC Ltd. as representative assessee of Boots Coots International Well Control Inc., USA. 15. Boots Coots were engaged to provide the various services under the following contracts:- Contract dated 12.12.2008 for; (i) Deployment of well control specialists for blowout control operations; (ii) training of CMT (Crisis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 India. During the relevant year, Dewey LeBoeuf, USA received an amount of USD 1,20,275 equivalent to ₹ 54,51,535/- from ONGC under the said agreement. In the return of income filed for the said Assessment Year, the assessee claimed exemption of the aforesaid receipts from tax in India, thereby declaring nil income. However, the Assessing Officer, brought the aforesaid receipts to tax as Fees for technical services as per Explanation 2 to section 9(1)(vii) read with section 115A of the Act. The CIT (A) held that the receipts were taxable not only under section 9(1)(v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ralia ) 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; Training of ONGC personnel. 22. In terms of the contract, the installation, testing and commissioning of CT Scanning Facility was to be completed within 18 months from initiation of project, the maintenance of hardware, software was to continue for 5 years from the date of commissioning thereof on annual basis. The CT Scanner Facility was under maintenance contract w.e.f. 11th March 2008. During the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 training to ONGC personnel on operation of the facility and analysis of data generated during the deputation of UNSE experts, we are of the opinion that training is incidental to operational of the machine and it will still fall within the ambit of Section 44BB of the Act and ONGC s case would also apply in such case. Accordingly, we hold that the receipts by the said non-resident would fall wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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