TMI Blog2021 (10) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in case of ONGC [ 2015 (7) TMI 91 - SUPREME COURT] wherein the Hon ble Supreme Court has held that where the pith and substance of an agreement is providing services for prospecting, extraction or production of mineral oils, payments made to non-resident companies are assessable under the provisions of section 44BB of the Act and not u/s 44D. From the perusal of the services and the nature of scope of work, we find that duties carried out by the appellant on contract with ONGC in fact has mining activity which was excluded from the definition of FTS u/s 9(1)(vii) as they are essential to the development and exploration of the oil and gas fields of ONGC. These services ostensibly is to be regarded as exclusion to FTS under section 9(1)(vii) and such activities need not itself be of mining or like nature so long as they are related to mining or like project as has been clarified in the Circular No. 1862 dated 22.10.1990, that 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 ( the Act ). 2. On the facts and in the circumstance of the case and in law, the Ld. AO and the Ld. CIT(A) erred in concluding that the receipts in connection with services provided by the Appellant to Leighton India Private Limited ( Leighton India ) as listed at SI. No. 23 and 24 of the scope of work in the contract are in the nature of fees for technical services. 3. On the facts and in the circumstance of the case and in law, the Ld. AO and the Ld. CIT(A) erred in not appreciating that the receipts referred in Ground No. 1 and 2 above should be taxed as per the provisions of section 44BB of the Act and not under section 44DA of the Act. 2. The facts in brief are that Intecsea Asia Pacific Sdn Bhd ('Intecsea AP' the Appellant') is a company incorporated under the laws of Malaysia and is engaged in the business of providing engineering services to companies engaged in the business of prospecting/ extraction/ mining of mineral oils, natural gas etc. During the AY 2015-16, the Appellant had provided engineering consultancy services to its two Indian clients i.e. Oil and Natural Gas Corporation Limited ( ONGC ) and Leighton India Contractors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re pipeline crossing design 7. Pipeline cathodic protection design 8. Pipe lay feasibility study 9. Pipeline segment head insulation design 10. Pipeline purchase specification, material requisitions/RFQ for PS items. 5. As per the scope of work of contract the assessee is engaged in the work of progress reporting, preparation for project completion schedule, preparation of specifications, review and approval of detailed design, supervision, review of additional engineering, design and engineering of submarine pipeline, pre-engineering survey, review survey data and provide design, appraisal of data and stability design, etc. For pipeline design, pro control optimization flows modeling, etc., software are used and work is done using computer simulators like PIPESIM/OLGA. Based upon this information, models are created which are further given as input to the execution partner/developer/depaihnent. In present contract the assessee has been hired to provide pipeline related data services and creating data models using non embedded off the shelf software , unlike a SCADA (Supervisory control and data acquisition) system. 6. Ld. AO in his draft assessment order has con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation contractor for the remaining offshore work and the total project completion cost including drilling and well completion; 8. Preparing the bid document defining the scope and responsibilities for appointing an installation contractor for the deep water works; 9. Review of the bid document prepared by Technip KTI for appointing an installation contractor for the deep water works; 10.Evaluation of offers received from the installation contractors for shallow and deep water works; 11. Provide offshore construction supervision during installation commissioning of the shallow and deep water facilities works; 12. Attend meetings related to project issues including interface issues. 13.Balance engineering, if any, related to pipelines. 14.Review of additional engineering required to comply with requirement of r Flare Tower, DPDU/Glycol dehydration unit its associated power requirement, IW/PW system etc. done by Technip KT1. 15. Project close out. 5.10 The appellant itself submits that it had provided Project Management Consultancy Services in the case of ONGC. On bare perusal of the nature of PMC services, it is evident th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any construction, assembly, mining or like projects. Hence, I find no infirmity in the order of the AO in treating these receipts from ONGC under section 44DA of the Act. 5.18 Further, on examination of the scope of work in the agreement between the appellant and M/s Leighton India, it is found that the scope of work in the case of Leighton India is as under: The Consultant scope of work shall include the entire Design Engineering of submarine pipeline (rigid, coiled and flexible) responsibility for both the Season (I II) related but not limited to the following - 1. Providing inputs for pre-engineering survey 2. Review Survey Data and Design Brief Preparation 3. Appraisal of Data Design Brief Preparation 4. Pipeline Steady State Hydraulic Analysis 5. Pipeline Wall Thickness Selection/Confirmation 6. Pipeline On-Bottom Stability, Thermal Expansion and In- Place Stress Analysis 7. Pipeline Protection/Stability Design 8.Pipeline Free Span Analysis 9. Offshore Pipeline Crossing Design 10.Pipeline Cathodic Protection Design 11.Pipelay feasibility study 12.Pipeline Segment heat insulation Desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f work) are in respect of the Design and Engineering of submarine pipeline and, therefore, taxable under section 44 BB of the Act. Remaining receipts, on account of services provided as per SI No. 23 24 of the scope of work, are to be taxed u/s 44 DA of the Act. 5.22 In view of the above discussion, it is held that the entire receipts of the Appellant in the case of ONGC are taxable under section 44DA the Act. Receipts from M/s Leighton India is taxable under section 44BB and section 44DA of the Act, as per the discussions between Para 5.21 above. The Grounds of Appeal No. 1, 2 3, are therefore, partly allowed. 8. We have heard both the parties and also perused the relevant finding of the impugned order as well as material preferred to before us. During the relevant assessment year the appellant assessee has received consideration from ONGC and Leighton India for providing engineering consultancy services. During the course of assessment proceeding the AO had asked the Appellant to show cause why the receipts from ONGC (and Leighton) should not be treated as FTS. The Appellant explained that the consideration received by it from ONGC and Leighton India were in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Board of Direct Taxes No 1862 dated 22 October 1990, wherein the question whether prospecting for, or extraction or production of, mineral oil can be termed as 'mining operations, was referred to the Attorney General of India for his opinion. The Attorney General has opined that such operations are mining operations and the expressions 'mining project' or 'like projects' occurring in Explanation 2 to Section 9(1) (ii) of the Income Tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. 10. Further, relying on the provisions of section 44BB of the Act, he submitted that the services or facilities provided to ONGC and Leighton India were in connection with prospecting for, or extraction or production of mineral oils. Accordingly, the amount payable by ONGC and Leighton India to the Company should be covered by the provisions of section 44BB of the Act. Also, the Hon'ble Supreme Court in the case of ONGC (supra), held that any payments made by ONGC towards services in connection with extraction and mining of mineral oil and received by the non-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment vide Finance Act 2010 and the decision of Hon ble Delhi High Court in the case of Paradigm Geophysical Pty Limited cannot be treated as same. 15. From the perusal of the services and the nature of scope of work, we find that duties carried out by the appellant on contract with ONGC in fact has mining activity which was excluded from the definition of FTS u/s 9(1)(vii) as they are essential to the development and exploration of the oil and gas fields of ONGC. These services ostensibly is to be regarded as exclusion to FTS under section 9(1)(vii) and such activities need not itself be of mining or like nature so long as they are related to mining or like project as has been clarified in the Circular No. 1862 dated 22.10.1990, that 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. 16. Thus in parting of training is a part of mining activity only carried out by his appellant in his contract to the aforesaid parties. In so far as the reliance plac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
