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TMI Blog2023 (6) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in holding that the revenue received by the assessee, including amounts alleged to be in the nature of 'reimbursements' from various entities (other than revenue from M/s. BHP Billiton covered by the hon'ble Authority for Advance Rulings) on account of the provision of facilities and services of seismic data acquisition, planning and carrying out of presurvey studies, taking marine data and confirming prospects, maintenance/upgradation/support of software licences, etc. ('services') was taxable under section 44BB of the Income-tax Act, 1961 ('the Act') as opposed to section 44DA read with section 9(1)(vii) of the Act. 2. Whether on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in ignoring the effects of the amendment brought in vide Finance Act, 2010 with effect from April 1, 2011, in terms of which income covered by section 44DA has been specially excluded from the scope of section 44BB for the assessment year 2011-12 (the year under consideration) onwards. 2.1 Whether on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in not appreciating the fact that the provisions of section 44BB are a self-contained code providing for computation of profits at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from income are deemed to have been allowed to the assessee. (b) Whether the learned Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that once the receipts held as taxable under section 44BB of the Act, there is no scope for computing or recomputing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits under section 44BB of the Act and obviating the need for accounting for individual receipts and payments, etc. (c) Whether the learned Commissioner of Income-tax (Appeals) has erred in ignoring the ratio of the judgment in the case of Chow ringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) ; [1973] 31 STC 254 (SC) wherein the hon'ble apex court has held that the sales tax collected by an assessee in the ordinary course of its business forms part of its business receipts. Ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the role of the assessees/payee/deductee in short-deduction or non-deduction of tax needs to be ascertained before claim regarding non-liability to interest under section 234B of the Act is accepted a proposition affirmed subsequently in the case of DIT (International Taxation) v. Alcatel Lucent USA Inc. [2014] 2 ITR-OL 276 (Delhi) (judgment of the Delhi High Court dated November 7, 2013 in I. T. A. No. 327 of 2012). 8. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal." I. T. A. No. 6436/Delhi/2014 "Ground No. 1-Taxability of reimbursement of expenses The learned Commissioner of Income-tax (Appeals) has erred on facts and in law in holding that receipts on account of reimbursement of various expenses amounting to Rs. 9,30,10,042 are to be included in computing the gross receipts for the purpose of the estimation of income under section 44BB of the Act as opposed to the appellant's claim for non-taxability of such receipts. The appellant craves leave to add, amend, vary, omit or substitute the aforesaid ground of appeal at any time before or at the time of hearing of the appeal so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7. Calm Energy Sangu Field Ltd. 5684 20-12-2009 Provision of 3D transition zone and land seismic data processing services 8. Oil and Natural Gas Corporation Ltd. MR/WOB/MM/MM/DW/S/C/60/2009/EB-2156 11-3-2010 To take the defined Q-marine data through a designed workflow of interpretation and confirm prospects through risking/ranking and culminating in drilling recommendations 9. Oil and Natural Gas Corporation Ltd. MR/WOB/MM/Q-Vessel/SC/50/2006/EB-2132 13-7-2007 Planning and carrying out pre-survey studies and executing the acquisition and processing of 3D seismic data using Q-marine technology in different survey areas of western and eastern offshore 10. Oil and Natural Gas Corporation Ltd. MAT/IMP/E-11/2(2739)/AMC-WG/2008-09 4-2-2009 Annual maintenance contract for upgraduation maintenance and support of Omega software licences 11. Hardy Exploration and Production (India) Inc. CY-OS-2/045-1/3D Seismic data processing 16-9-2005 3D seismic data processing inclusive of full 3D Kirchhoff PSTM (appendix A-page 18) 12. Adani Welspun Exploration Ltd. AWEL/MB-OSN-2005/2/2009/CC002 18-11-2009 Provision for 3D Q-marine seismic data acquisition services 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee. Explanation.-For the purposes of this section,- (i) 'plant' includes ships, aircrafts, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business ; (ii) 'mineral oil' includes petroleum and natural gas." 2.2 During the assessment proceedings, the Assessing Officer noted as under : "4. Most of the above contracts are continuing since earlier years. In respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tending that revenues received from the contracts may be covered under section 44BB and not under fees for technical services or royalty. The reply has been considered. The assessee has contended that activities of the assessee are covered by the term mining as defined in section 9(1)(vii) and has referred to Instruction No. 1862 of Central Board of Direct Taxes. It has been contended that, data processing activities are essential part of seismic survey activities and are connected to exploration of mineral oils and for any oil and gas exploration activity, seismic sur vey is the first step and perhaps the most critical part of the activity. Hence, such services are directly related and in fact are a part of the exploration/prospecting activities for mineral oil (petroleum and natural gas). Therefore, acquisition of seismic data clearly falls under the ambit of section 44BB of the Act. It was further submitted that the provisions of section 44BB(1) of the Act are special provisions governing taxability of non-residents who are engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used, or to be used in the prospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that when a presumptive section is introduced, it will start with a non obstante clause with respect to sections 28 to 41 which are the computation sections. In this regard, it is important to analyse the following provisions of the Income-tax Act : Section 44BB of the Income-tax Act, 1961 '44BB. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils.-(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee being a non-resident, engaged in 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, a sum equal to ten per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 44DA or section 115A or section 293A apply for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. (iv) Instruction No. 1862, dated October 22, 1990 dealing with the interpretation of the term 'mining or like project' is issued in an entirely different context as can be seen from the statement of the case referred for the opinion of the learned Attorney General and the opinion of the learned Advocate-General. From the context of this instruction, it can be seen that the same would not be applicable to the facts of the case of those applicants who are engaged in carrying out seismic surveys as the instruction would apply only to those who are engages in the drilling operations. The services provided by such applicants would not come within the exclusionary part of Explanation 2 to section 9(1)(vii) of the Act as no mining or like project is undertaken by such applicants. (v) Board's Circular No. 649, dated March 31, 1993 ([1993] 200 ITR (St.) 230 ) also clarifies what situation would govern the aspect of taxability of fees for technical services where there is a treaty existent and where there is none. 4.4 The above referred proviso to section 44BB(1) thus clearly stipulates that this section does not apply in cases where section 115A or section 44D is appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to exploration activity which are not in the nature of technical services. However, owing to judicial pronouncements, doubts have been raised regarding the scope of section 44BB vis-a-vis section 44DA as to whether fees for technical services relating to the exploration sector would also be covered under the presumptive taxation provisions of section 44BB. In order to remove doubts and clarify the distinct scheme of taxation of income by way of fee for technical services, it is proposed to amend the proviso to section 44BB so as to exclude the applicability of section 44BB to the income which is covered under section 44DA. Similarly, section 44DA is also proposed to be amended to provide that provisions of section 44BB shall not apply to the income covered under section 44DA. These amendments are proposed to take effect from 1st April 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years. (clauses 16, 17)' 4.5 It is clear from the perusal of the above that the intention of the Legislature was to exclude income in the nature of fees for technical services or royalties from the purview of section 44BB and it was on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trademark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government : Provided further that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning) any income from any source in India : Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976 and approved by the Central Government. Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.-For the purposes of this clause, 'fees for technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase show the assessee's sales/services/rental receipts to be in the nature of mining or like project. Section 9(1)(vii)(b) of the Income-tax Act embodies the 'source rule' introduced from April 1, 1976, implying the taxation of the receipts at the place obtained, which is India in this case. Further, the amount received by the assessee does not fall within excluded area, viz., 'consideration for any construction, assembly, mining or like project undertaken by the recipient'. The assessee procured the techniques/technicians for just facilitating, and is not doing, the primary activity of prospecting, exploration and production of mineral oil in India. Where such receipts of the assessee cannot be brought under 'royalty' then those receipts will have to be assessed under the domestic law as 'fees for technical services' under subclause (b) of clause (vii) of sub-section (1) of section 9 of the Income-tax Act, 1961. 4.12 The relevant extract of the Rulings in No. P/6 of 1995, In re [1998] 234 ITR 371 (AAR), which has clearly held that technical services are outside the purview of section 44BB of the Income-tax Act, 1961 given by the hon'ble Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced in the case of the assessee, they are inapplicable to the facts of the assessee's case. The ruling of Geofizyka likewise is not applicable in this case and is distinguishable on facts, because in the case of Geofizyka the assessee was carrying out the activity of acquisition and processing of seismic data through equipment and personals whereas the assessee is providing personals and equipment, engineering services to various assessees. 4.16 The activity of the assessee is completely different from decisions cited by the assessee and the assessee is squarely covered by the facts of the case of Foramer France. The case of Scan Drilling Company quoted by the assessee is completely different on facts. The Scan Drilling Company has provided drill ship to ONGC. In this case no drilling operation has been undertaken by the assessee. The case law relied upon by the assessee is not applicable as the assessee is not engaged in drilling activity. The Attorney General's opinion with reference to the Central Board of Direct Taxes instructions, does not help the assessee for the same reason. The hon'ble High Court, Uttarakhand has clearly laid down in the case of Foramer Franc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT v. ONGC as agent of Foramer France in favour of the Revenue. From the discussion above thus it is clear that rendering of services through personnel which at best provide assistance of technology and technical expertise, are nothing but fees for technical services is covered in provisions of section 9(1)(vii) of the Income-tax Act, 1961. In view of the above decisions of the hon'ble courts and the reasons mentioned above and respectfully following the decision of the jurisdictional High Court of Uttarakhand, the income of the assessee is treated as fees for technical services as defined under section 9(1)(vii) of the Act and not under section 44BB of the Act. The revenues from the contracts are squarely covered under section 9(1)(vii) read with section 115A of the Act. The assessee has however contended that the assessee has a permanent establishment in India and that the services rendered by the assessee fall within the purview of the terms of section 44BB of the Income-tax Act and as such the services rendered cannot be termed as technical or royalty nor can they be treated as falling within the provisions of section 44DA of the Income-tax Act. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 93,66,05,253) not covered by AAR (c) BP Exploration 16,90,939 (d) Calm India 43,55,536 (e) Calm Sanghu 89,25,850 (f) Hardy Exploration 3,64,640 (g) Adani Welspun Exploration 36,21,65,593 The above payments are not covered under section 44BB of the Income-tax Act since the receipts are from non-resident companies and nature of activities is fees for technical services as defined in section 9(1)(vii) of the Income-tax Act. Hence, they are taxable as fees for technical services under section 9(1)(vii). The Dispute Resolution Panel for the assessment year 2009-10 has held that fees for technical services received from non-resident companies will be taxed under section 9(1)(vii)(c) subject to the conditions laid down therein. The Dispute Resolution Panel for the assessment year 2009-10 has observed as follows : 'Therefore the provisions of section 9(1)(vii)(c) would apply to the income received by the assessee from these three non-resident companies. Here, it may be also be pointed out that section 44DA and section 115A only lay down, respectively, the manner of computation of income of various types including fees for technical services. If such income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enues pertaining to these three contracts, i. e., 8100003801 ; 8100003844 and 81000026440 amounting to Rs. 93,25,36,651 are considered taxable under section 44BB of the Income-tax Act and income thereon is computed at DPR of 10 per cent. which comes to Rs. 9,32,53,665. Contractual revenues in respect of contract No. 8100003940 amounting to Rs. 1,21,003 are considered taxable as fees for technical services receipts as it is in respect of different contract with different nature of activities and ruling of the hon'ble Authority for Advance Rulings is not applicable to this contract." 2.4 The Assessing Officer also noticed that the assessee had received reimbursement totalling Rs. 9,30,10,042 which were not shown as part of gross receipt and had been excluded by the assessee. The Assessing Officer further noticed that the assessee had also not offered to tax the service tax receipts totalling Rs. 13,98,69,523. The Assessing Officer also noticed that the assessee was in receipts of service tax reimbursement on services contracts amounting to Rs. 14,50,67,928. Relevant portion of the assessment order is reproduced as under : "7. Reimbursements : During the year the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is to be brought to tax is the total cost burden of the subcontract given to the assessee plus its profit margin. Since in this case the revenues are being assessed under section 44BB, in view of the said judgment, reimbursement of service tax receipts of the assessee shall also be included in revenue taxable as per section 44BB, at deemed profit rate of 10 per cent. of gross receipts. This proposition is supported by several judgments of jurisdictional hon'ble High Court, some of which are mentioned below and the cases cited by the assessee are distinguished on facts accordingly : 1. CIT v. Atwood Oceanics Pacific Ltd. [2011] 338 ITR 156 (Uttarakhand) ; [2010-TH-12-HC-Ukhand-Intl] dated May 19, 2010. 2. CIT v. R and B Falcon Drilling Co. [2011] 338 ITR 152 (Uttarakhand) ; [2009-TII-20-HC-Ukhand-Intl] dated April 24, 2009. 3. CIT v. Sundowner Offshore International (Burmuda) Ltd. [2011] 338 ITR 147 (Uttarakhand) ; [2009-TII-07-Ukhand-Intl] dated February 16, 2009. 4. CIT v. B. J. Services Co. [2008] 300 ITR 392 (Uttarakhand) ; [2007-TII-05-HC-Ukhand-Intl] dated October 8, 2007. 5. CIT v. Trans Ocean Offshore Inc. [2008] 299 ITR 248 (Uttarakhand) ; [2007-TII-13-H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profit for purposes of taxation, however, taxpay erstend to do just the reverse so as to save on tax. Such arrangements are sometimes legal, sometimes illegal and sometimes they fall in a grey area. As far as law is concerned it is settled that the onus to establish that there was a receipt is on the Revenue and the onus to establish that the receipt was not taxable or that deduction should be allowed against the same is on the assessee. In this case the fact that the receipt was there is not disputed. Hence, the onus of the Revenue stands discharged. It is for the assessee to establish that the receipt was not of revenue nature and should not be considered for purposes of taxation. The assessee has sought to exclude the amount of service tax received by it from GSPC from its gross receipts. The logic is that this amount was received not under a contractual obligation but under a statutory provision. First of all the argument is based on a factual inaccuracy. As per the law of service tax, a service provider has to pay service tax to the Central Government with reference to the gross value of services provided by him. Hence, the service tax paid by him to the Government is a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India as early as October 10, 1972 in the case of Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 (SC) ; AIR 1973 SC 376. That decision was rendered in the context of sales tax but is also applicable in the context of service tax because by nature both the taxes are same. They are levied on the provider of goods/services who collects the corresponding amount from his customers. In that case, the Assessing Officer had held that the tax thus collected by the assessees was a portion of the sales itself because the tax was not the liability of the purchaser, it was the liability of the seller. The assessee had not accounted for the tax as part of its receipt. According to the assessee the quantum of service tax collected by it should not be treated as part of its gross receipt because there no element of profit in it. This argument may have a theoretical appeal but is flawed in reality. In course of its business the assessee enters into various transactions, some of these result in profit and some do not. In fact some even result in loss. By the assessee's logic it should be compensated by the Government in the transaction where it incurs loss. The fact is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit. The assessee during the course of hearing has vide written submission dated May 16, 2012 also submitted a judgment and relied upon in the case of Sedco Forex International Drilling Inc. v. Addl. DIT (International Taxation) (I. T. A. No. 5284/Delhi/2011, dated June 29, 2012) wherein it was held that reimbursement of service tax is not to be included in the revenue chargeable to tax under section 44BB. On a close perusal of the judgment, it is observed that the hon'ble Income-tax Appellate Tribunal has relied on the case of Islamic Republic of Iran Shipping Lines v. Dy. CIT (I. T. A. No. 8845/Mum/2010, dated April 20, 2011). In turn the Income-tax Appellate Tribunal in the case of Islamic Republic decided the issue in favour of the assessee by relying on the decision of the hon'ble Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 (Bom). In that case the issue was whether sales tax and excise duty was to be included in the total turnover for the purpose of computing deduction under section 80HHC. It was observed by the hon'ble court that no excise duty and sales tax were leviable in respect of exports. The detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the denominator was to include the above two items and if the numerator excluded the above two items then the formula would become unworkable. On the other hand service tax is leviable on the assessee in course of its business. Hence, the ratio of this judgment does not apply in this case. Thus in my humble opinion, the reliance placed by the hon'ble Income-tax Appellate Tribunal (Islamic Republic of Iran Shipping Lines v. DIT) on the case of Sudarshan Chemicals (Bombay High Court) and consequently the reliance placed by the Income-tax Appellate Tribunal (Sedco Forex International Drilling Inc.) on the decision of Islamic Republic of Iran Shipping Lines v. DIT appears to be misplaced. It has distinguished the decision of the co-ordinate Bench in the case of Dy. DIT (International Taxation) v. Technip Off shore Contracting BV [2009] 29 SOT 33 (Delhi) which is directly on the issue. In Technip the hon'ble Income-tax Appellate Tribunal has arrived of the decision of taxing service tax by relying on the decision of the jurisdictional High Court in the case of CIT v. Halliburton Off shore Services Inc. [2008] 300 ITR 265 (Uttarakhand). The foregoing discussion leads to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2010-11 : Ground raised in AY 2011-12 Brief ground Ground raised in AY 2010-11 Held/comments G. No. 1 Revenue received on account of services is erroneously held to be in the nature of FTS G. Nos. 1 & 2 Overturned the assessment completed. Placed reliance on decision of the hon'ble Uttarakhand High Court in the case of B. J. Services. The assessee had a permanent establishment (PE) in India and placing reliance on the decision of the Income-tax Appellate Tribunal, Delhi in the case of CGG Veritas Services, SA v. Addl. DIT (International Taxation) [2012] 50 SOT 335 (Delhi) held the revenue to be taxed under section 44BB. G. No. 2 Determination of income G. Nos. 1 & 2 Please see comment to ground No. 1 G. No. 3 Reimbursement of expenses not chargeable to tax G. No. 6 G. No. 4 Reimbursement of expenses not chargeable to tax G. No. 6 Disallowed However, subsequent in the order of Baker Hughes Asia Pacific Ltd., issued by your goodself, your goodself placing -reliance on the decision of the Income-tax Appellate Tribunal, New Delhi in the case of Precision Energy Services Ltd. (I. T. A. No. 5609/Delhi/2012) held service tax r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the services rendered by the appellant are directly connected with oil extraction as under : With reference to the appeal filed with your office and in continuation to our submission filed on August 21, 2014, we would like to submit as under. The appellant requests that the below mentioned submissions may please be read in conjunction with the submissions filed on August 21, 2014. The below mentioned submissions are independent to each other and without prejudice to the submissions filed earlier. 1. Without prejudice to the claim of the appellant that the receipts are not in the nature of 'fees for technical services' the appellant claims that specific provision (section 44BB) overrides general provisions (section 44DA). 1.1 The assessee wishes to place reliance on the decision of the hon'ble Delhi High Court in the case of DIT v. OHM Ltd. wherein the hon'ble court upheld the ruling of the AAR that specific provision (section 44BB) overrides general provision (section 44DA). 1.2 The interplay between section 44BB and section 44DA has been examined in detail by the hon'ble Delhi High Court in the case of OHM Ltd. (supra). The hon'ble court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, the assessee was engaged in the business of providing geophysical services including acquisition and processing of seismic data. In the appeal, the taxpayer did not agitate that the scope of work executed by it was not fees for technical services as defined in section 9(1)(vii) of the Act. Under these circumstances, the court proceeded on the basis that the income of the assessees was within the definition of fees for technical services. The question as to whether or not the services were specific and essential for the oil and gas E and P operations or were general fees for technical services was never considered by the court. In view of the above facts, the High Court ruled that- * The court upheld its earlier ruling in the case of OHM Ltd. (supra) ; and * Accordingly it went on to hold that even though the income was in the nature of fees for technical services falling within section 44DA, the provisions of section 44BB would nevertheless apply because the taxpayer was engaged in the business of providing services in connection with prospecting for mineral oil. A harmonious construction of the Delhi High Court's decision in the case of OHM Ltd. and PG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that revenues deserve to be taxed under section 44BB of the Act. These two grounds are accordingly allowed. 4. Ground No. 3 challenges the inclusion of certain allegedly reimbursable items in the turnover for the purposes of computing income. The learned authorised representatives have averred at length that that portion of receipt in which the element of income is not embedded, has to be excluded from computation of income altogether. However, on this issue the hon'ble jurisdictional High Court is against the appellant and the case law cited by the learned Assessing Officer on pages 11, 12 and 13 of the impugned order, would squarely place this issue against the appellant. This ground is accordingly dismissed. 6. Ground No. 4 challenges the inclusion of service tax in the turn over for consideration for computing income. While it is a fact that for the assessment year 2010-11 this ground has been held against this appellant, but a subsequent decision of the hon'ble Income-tax Appellate Tribunal in the case of Precision Energy Services Ltd. (I. T. A. No. 5609/Delhi/2012) places this matter squarely in favour of the appellant. This ground is thus allowed." 3. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sently is with respect to the assessment year 2011-12 and in that view the amended provisions are to be duly considered. In particular, he highlighted that the proviso to section 44BB(1) was amended with effect from April 1, 2011 to the effect that special provision under section 44BB of the Income-tax Act for computing profits and gains in connection with the business of exploration, etc., of mineral oils ; shall not apply in a case where provision of section 44DA apply. He also highlighted that, simultaneously, the second proviso was inserted to section 44DA(1) of the Income-tax Act with effect from April 1, 2011 to the effect that the provisions of section 44BB shall not apply in respect of the income referred to in section 44DA(1) of the Income-tax Act. After these amendments, the learned Commissioner of Income-tax (Departmental representative) contended, with effect from April 1, 2011, i. e., with effect from assessment year 2011-12 ; income by way of royalty or fees for technical services (FTS) is to be assessed under section 44DA of the Income-tax Act, as done by the Assessing Officer ; and not under section 44BB of the Income-tax Act, as claimed by the assessee. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition and processed, which were closely and intrinsically related to exploration and production of mineral oil as seismic survey activities are one of the most critical parts of exploration activities. He further submitted that services provided by the assessee were specifically covered under the provisions of section 44BB and, therefore, the general provision of section 44DA could not be applied as held by the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT [2015] 376 ITR 306 (SC) ; [2015] 59 taxmann.com 1 (SC). He placed reliance on DIT v. OHM Ltd. (supra), ONGC Ltd. v. CIT (supra). He further placed reliance on order dated May 13, 2016 of co-ordinate Bench of the Income-tax Appellate Tribunal, Delhi, in the assessee's own case for the assessment year 2010-11, in I. T. A. Nos. 5602 and 5400/Delhi/2013 wherein, under similar facts it was held that the services carried on by the assessee are in connection with prospecting for mineral oils and must be taxed under section 44BB of the Act in lines of decision of the Supreme Court in the case of ONGC Ltd. v. CIT (supra). The learned counsel for the assessee also placed reliance on the following cases : * Order of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act, the same was liable to be taxed under section 44BB(1) of the Act." 4.1 On perusal of the amended provisions of section 44BB and section 44DA of the Income-tax Act with effect from April 1, 2011, we find that income of an assessee by way of royalty or fees for technical services referred to in section 44DA(1) of the Income-tax Act is not to be assessed under section 44BB of the Income-tax Act. The resultant effect of aforesaid amendments to sections 44BB and 44DA with effect from April 1, 2011 is that income by way of royalty and fees for technical services referred to in section 44DA(1) of the Income-tax Act is not to be assessed under section 44BB of the Income-tax Act, even if it has nexus with a non-resident asses see's 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. This interpretation is consistent with the order of the hon'ble Delhi High Court in PGS Geophysical AS v. Addl. DIT (supra), as referred to in foregoing paragraph 4 of this order. 4.2 In the case before us, the learned Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the hon'ble Delhi High Court in the case of DIT (I.T.) v. GE Packaged Power Inc. (supra) and also the decision of the hon'ble Uttarakhand High Court in the case of DIT v. Maersk Co. Ltd. (supra). Respectfully following these precedents of the hon'ble High Courts, this issue is decided against the Revenue and in favour of the assessee. 6. In the assessee's appeal, the only disputed issue is regarding taxability of reimbursement of various expenses amounting to Rs. 9,30,10,042 ; as to whether, this amount is to be included in computing gross receipts of the assessee, for the purpose of estimation of the assessee's income. At the time of hearing before us, the learned counsel for the assessee submitted that the assessee did not offer amount received as reimbursement of service tax and some other expenses, e. g., fuel charges, hotel charges, storage charges, etc., to tax as they were in the nature of pure reimbursement and did not have any element of profit ; that these other expenses were incurred by the assessee on behalf of clients in connection with providing services to the client and would have alternatively been borne by the client directly ; th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act. 6.1 We have heard both sides and we have also perused materials on records. We find that the Assessing Officer has decided this issue on the basis of case law pertaining to reimbursement of service tax, although, these case law do not have any application for reimbursement of expenses. We also find that the learned Commissioner of Income-tax (Appeals) has also decided this issue under the erroneous impression that the disputed issue related entirely to inclusion of the service tax in the turnover, ignoring the element of reimbursement of expenses. Thus, we find that both the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) have failed to consider this issue properly. Therefore, we are of the view that this issue requires fresh consideration at the level of the Commissioner of Income-tax (Appeals). In any case, we have already remanded the issue regarding applicability of section 44BB/section 44DA of the Income-tax Act to the file of the learned Commissioner of Income-tax (Appeals) in foregoing paragraph No. 4.2 of this order. In the fitness of things, therefore, in view of the foregoing, the order of the learned Commissioner of Income-tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided similar issue by following the judgment of the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT (supra), is no longer applicable post amendment. * Lastly, on the issue of reimbursement of service tax also, which issue now stands covered in favour of the assessee by the judgment of the hon'ble Delhi High Court in the case of DIT v. Mitchell Drilling International P. Ltd. [2016] 380 ITR 130 (Delhi), and followed by the Tribunal in the earlier years, would not be applicable. However, my esteemed Brother has expressed that all these judgments have no relevance after the amendment brought in sections 44BB and 44DA by the Finance Act, 2010, with effect from assessment year 2011-12. Since I am unable to persuade myself with his view and concur with his finding in the proposed draft order ; therefore, I am passing my separate order, giving my reasons for dissent. 3. The controversy involved in the cross-appeals as raised in the grounds of appeal by the Revenue as well as by the assessee for the sake of brevity, were as under : * Firstly, whether revenue received by the assessee including the amounts in the nature of reimbursement is taxable under section 44BB or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of work of the contracts, RIL, GSPCL and ONGC, shown against each contract, by and large includes processing of 2D/3D marine seismic data, survey, long-term lease of marine technology, hiring of Q-marine vessel with the help of its personnel and equipment. Seismic data acquisition and processing, hiring of vessel and technology, in contracts with RIL, GSPCL and ONGC. 7.1 The Assessing Officer has also analysed the scope of work of ONGC, GSPCL and RIL, which has been summarised by him in the following manner : "The scope of work for ONGC to take the defined Q-marine data through a designed workflow of interpretation and confirm prospects through risking/ranking and culmination in drilling recommendations. Planning and carrying out pre-survey studies and executing the acquisition and processing of 3D seismic data using Q-marine technology in different survey areas of Western and Eastern Offshore. Gross revenues of Rs. 198,92,34,667 have been reported from ONGC. The scope of work for GSPCL is planning and carrying out presurvey studies and executing the acquisition and processing of 3D seismic data using Q-Marine Technology in KG-OSN-2001/3 Block. Gross revenues of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to those persons who are directly engaged in the business for prospecting, etc., for mineral oils. However, any foreign company who received fees for technical services from an Indian concern, then it was taxable under earlier section 44D read with section 115A, which now been amended as section 44DA. Thus, after detailed discussion and analysis, he held that the provisions of section 44BB(1) do not apply in the cases where section 115A or section 44D or amended section 44DA is applicable. He also referred to the Finance Bill, 2010 introducing the amendments brought in section 44BB and section 44DA with effect from April 1, 2011 and observed that the intention of the Legislature was to exclude incomes, which are in the nature of fees for technical services or royalty from the purview of section 44BB. Thereafter, he also rejected the assessee's contention that the services provided by the assessee are covered under the exclusionary clause of Explanation 2 to section 9(1)(vii) on the ground that the benefit is only available to those assessees who are directly undertaking construction, assembly or mining project. Here, in this case, the assessee has neither taken any constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the hon'ble Delhi High Court in the case of DIT v. OHM Ltd. [2013] 352 ITR 406 (Delhi) and held that the hon'ble High Court has clarified the issue of section 44BB vis-a-vis section 44DA, taking into consideration the amendments brought in these two sections with effect from April 1, 2011. He has incorporated the assessee's submission as to how the services rendered by the assessee were directly connected with the extraction and prospecting of mineral oil which has been incorporated from pages 5 to 7 of his order including the judgments of the hon'ble Delhi High Court in the case of OHM Ltd. (supra) and PGS Geophysical AS (supra). After considering the submissions of the assessee and findings of the Assessing Officer, he categorically held that it cannot be doubted that all the services rendered by the assessee are ultimately connected with oil extraction and the submissions of the assessee give an insight into the nature of contracts executed. Once the nexus of business activity with oil extraction is proved, there can be no hesitation in holding that revenue deserves to be taxed under section 44BB. Accordingly, he allowed the assessee's ground on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes any consideration received for any construction, assembly, mining or like project undertaken by the recipient, which, inter alia, means, such services have not been treated as "fees for technical services". Now, this issue, whether payment for such kind of various services which are in connection with prospecting, extraction or production of mineral oils would be treated as fees for technical services or not or would be assessed under section 44BB or not, has been set at rest by the hon'ble Supreme Court in the case of ONGC Ltd. v. CIT (supra) vide order and judgment dated July 1, 2015, which has been rendered much after the passing of the impugned orders. In this judgment, the hon'ble Supreme Court has reversed the judgment of the hon'ble Uttarakhand High Court in the case of CIT v. ONGC which has been strongly referred to and relied upon by the learned Assessing Officer. In the case before the hon'ble Supreme Court, ONGC who was a representative assessee to many non-resident companies for providing various services in connection with prospecting for, extraction or production of mineral oils. Their Lordships had to decide, as to whether, amounts paid by the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, will be income chargeable to tax under the provisions of section 44BB of the Income-tax Act, 1961 and not under the special provision for the taxation of fees for technical services contained in section 115A read with section 44D of the Income-tax Act, 1961." 11.2 Further, the hon'ble Supreme Court has accepted the contention raised by the parties that the test of "pith and substance" of the agreement, namely, whether the works contemplated for services to be rendered under the agreement is connected or inextricably linked with the prospecting for, extraction, or production of mineral oils or not. The agreement in question has to satisfy the said test and some of the categories of the contracts were classified into the following eight heads : 1. Carrying out seismic surveys and drilling for oil and gas. 2. Services starting/re-starting/enhancing production of oil and gas from wells. 3. Services for prospecting for exploration of oil and or gas. 4. Planning and supervision of repair of wells. 5. Repair, inspection or equipment used in the exploration, extraction or production of oil and gas. 6. Imparting training. 7. Consultancy training. 8. Supply, install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-res ident/foreign company would be chargeable to tax under the provisions of section 44BB and not section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oils. 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 : Sl. No. Civil Appeal No. Work covered under the contract 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. 740 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 3. 731 Drilling, furnishing personn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 36. 1519 Imparting training on cased hold production log evaluation and analysis. 37. 1533 Training on well control. 38. 1518 Training on implementation of six sigma concepts. 39. 156 Training on implementation of six sigma concepts. 40. 6023 Training on drilling project management. 41. 2796 Training in safety rating system and assistance in development and audit of safety management system. 42. 1239 To develop technical specification for 3D seismic API modules of work and to prepare bid packages. 43. 1527 Supply supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 44. 1523 Supply, installation arid familiarization of software for processing seismic data. The above facts would indicate that the pith and subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) as the same fall within the exclusion of Explanation 2. If the said law propounded by the hon'ble Supreme Court is applied, then, here, in this case, the learned Assessing Officer himself has stated that all these contracts for providing services to ONGC, GSPCL and RIL are connected with prospecting for and extraction of mineral oil carried out by Indian companies. His interpretation was there is no concept of 'connected with' in Explanation 2, hence the same does not fall in exclusion. Even the learned Commissioner of Income-tax (Appeals) have examined the assessee's services as enumerated by the assessee which has been incorporated in paragraph 4.1 and has given a categorical finding that all these services are intimately connected with oil extraction. These facts remain unrebutted all throughout. 13. Not only that, precisely the same issue was involved in the immediately preceding assessment year, i. e., 2010-11, wherein the Tribunal following the judgment of the hon'ble Supreme Court in the case of ONGC have clearly held that this controversy has been set at rest that provision of various services in connection with prospecting for or extraction or produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar amount or receipt is taxable under section 44BB or under section 44DA has been explained in detail by the hon'ble jurisdictional High Court in the case of DIT v. OHM Ltd. (supra). In that case, the controversy involved was, whether the receipts of the assessee is to be assessed under section 44BB or section 44DA. The assessee-company was engaged a providing geo physical services to oil and natural gas and conducted electric magnetic survey, processing and interpretation of data and the data so collected for the survey was used for the off-shore oil industries. The Revenue's case was that the assessee was not entitled for benefit of lower tax under presumptive rate provided under section 44BB, albeit these services were in the nature of technical services and hence was taxable under section 44DA read with section 9(1)(vii). After noting down the legislative history of section 44BB and section 44DA and referring to various judgments of Authority for Advance Rulings, the conclusion and observation of the hon'ble High Court are as under (page 416 of 352 ITR) : "11. We do not think that there is any error in the view taken by Authority for Advance Rulings. Basically th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciled with each other, they should be so inter preted that, if possible, effect should be given to both. This was stated to be the 'rule of harmonious construction' by the Supreme Court in Venkataramana Devaru v. State of Mysore, AIR 1958 SC 255. If as contended by the Revenue, section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction. In South India Corporation P. Ltd. v. Secretary, Board of Revenue, AIR 1964 SC 207, it was held that a familiar approach in such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. 12. The second proviso to sub-section (1) of section 44DA inserted by the Finance Act, 2010, with effect from April 1, 2011, makes the position clear. Simultaneously, a reference to section 44DA was inserted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resident or the foreign company sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis that 10 per cent. of the revenues will be deemed to be the profits as provided in section 44BB. In other words, the amendment made by the Finance Act, 2010, with effect from April 1, 2011, in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned senior standing counsel. We, therefore, agree with the Authority for Advance Rulings that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA." (emphasis added in bold is mine) 15.1 The hon'ble High Court has clearly held that section 44BB is a special provision for computing the profits and gains of non-resident in connection with business of providing services or facilities in connection with, or supply plant and machinery on hire, used or to be used, in prospecting for, or extraction or production of mineral oil, including petroleum and natural gas. Section 44DA is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if a non-resident is carrying out or has rendered services through its permanent establishment which are in the nature of royalty or fees for technical services then the same has to be computed under section 44DA. Section 44BB, on the other hand, is a special provision for giving a benefit of lesser tax rate to the non-resident which is engaged in providing services or facilities as mentioned therein, including, prospecting for, or extraction or production of mineral oils. The first proviso to section 44BB again clearly states that this sub-section shall not apply where provisions of section 44DA and other sections are applicable. Thus, this section deals with special provision for certain kinds of services, whereas section 44DA is purely a general provision dealing with the provision of royalty and fees for technical services connected with permanent establishment. It is well-settled law, expressed in the maxim generalia specialibus non derogant, which means the provision of a general statute must yield to those which are special. It is also a rule of implied exception. Thus, when two provisions are in conflict and one of them deals with the matter in question while the other is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the hon'ble Delhi High Court this stands settled in favour of the assessee and accordingly, is decided in favour of the assessee. 19. As stated above, on other two issues, I concur with the findings of my learned Brother. 20. In the result, the appeal of the assessee is partly allowed. ORDER P. M. JAGTAP (VICE-PRESIDENT) (THIRD MEMBER) JULY 30, 2022 1. On account of difference of opinion between the learned Accountant Member and the learned Judicial Member of the Income-tax Appellate Tribunal, "C" Bench, New Delhi, this matter has been referred to me by the hon'ble President, the Income-tax Appellate Tribunal for consideration and disposal under section 255(4) of the Income-tax Act, 1961. 2. While referring the matter to the Third Member, separate two questions each were framed by both the differing Members. In order to settle and finalise the questions that are required to be considered and decided by the Third Member, the learned representatives of both sides were required to propose draft questions in such a manner that the same shall project the exact controversy involved in the point of reference. They were directed to confine themselves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the said contracts as earned during the year under consideration was offered to tax by the assessee at the presumptive rate of 10 per cent. under section 44BB of the Income-tax Act, 1961 ("the Act" in short). As noted by the Assessing Officer, the scope of work of the contracts with RIL, GSPCL and ONGC by and large included processing of 2D/3D marine seismic data, survey, long-term lease of marine technology, hiring of Q-marine vessel with the help of its personnel and equipment, seismic data acquisition and processing, hiring of vessel and technology, etc. According to the Assessing Officer, these services were in the nature of technical services as covered under section 9(1)(vii) of the Act and the same, therefore, were chargeable to tax as fees for technical services under section 9(1)(vii) read with section 44DA of the Act and not under section 44BB of the Act as claimed by the assessee. In this regard, it was submitted on behalf of the assessee before the Assessing Officer that the services rendered by it under the relevant contracts were connected with oil prospecting and drilling covered under section 44BB of the Act and the same were not in the nature of fees for technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and) and held that the income of the assessee-company was liable to be computed under section 44DA of the Act and not under section 44BB of the Act. He also relied on the amendments made in sections 44BB and 44DA of the Act by the Finance Act, 2010 with effect from April 1, 2011 and observed that the intention of the Legislature was clear to exclude income which is in the nature of fees for technical services or royalty from the purview of section 44BB of the Act. Since no books of account were regularly maintained by the assessee, the Assessing Officer determined the income of the assessee for the year under consideration at 25 per cent. in terms of section 44DA of the Act. While doing so, he also included the amount received by the assessee on account of reimbursement of service tax to determine the income of the assessee for the year under consideration by applying a profit rate of 25 per cent. 6. The order of the Assessing Officer determining its tax liability for the year under consideration in terms of section 44DA of the Act by applying the rate of 25 per cent. on the receipts including the reimbursement of service tax was challenged by the assessee in the appeal filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from April 1, 2011 to the effect that the provisions of section 44BB shall not apply in respect of the income referred to in section 44DA(1) of the Act. Relying on these amendments, it was contended on behalf of the Revenue that income by way of royalty or fees for technical services (FTS) is to be assessed under section 44DA of the Act with effect from April 1, 2011 as held by the Assessing Officer and not under section 44BB of the Act as claimed by the assessee. It was submitted on behalf of the Revenue that a categorical finding was recorded by the Assessing Officer in the assessment order that the contractual receipts of the assessee were in the nature of fees for technical services and while allowing the claim of the assessee for applicability of section 44BB in its case, the learned Commissioner of Incometax (Appeals) failed to adjudicate upon whether the contractual receipts of the assessee were in the nature of fees for technical services and also failed to take into account the amendments made in sections 44BB and 44DA of the Act with effect from April 1, 2011 in the light of the judgment of the hon'ble Delhi High Court in the case of PGS Geophysical AS v. Addl. DI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44DA(1) of the Act would be excluded from the scope of section 44BB of the Act with effect from April 1, 2011. He held that the claim of the assessee regarding the applicability of section 44BB in its case was granted by the learned Commissioner of Income-tax (Appeals) merely on the basis of the nexus of business activities with oil extraction without giving any finding on the issue as to whether the income of the assessee, in respect of which applicability of section 44BB was claimed, is royalty or fees for technical services or not. He held that section 44BB of the Act has no application with effect from assessment year 2011-12 to the extent to which the assessee's income is royalty or fees for technical services and such income is to be assessed under section 44DA of the Act as held by the hon'ble Delhi High Court in the case of PGS Geo Physical AS (supra). According to the learned Accountant Member, the issue thus was not considered properly by the learned Commissioner of Income-tax (Appeals) and it required fresh consideration at the level of the learned Commissioner of Income-tax (Appeals). 10. The learned Judicial Member did not agree with the view expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9(1)(vii) of the Act as the same fall within the exclusion of Explanation 2. The learned Judicial Member referred to Explanation 2 to section 9(1)(vii) of the Act and noted that the said Explanation clearly excludes any consideration received for any construction, assembly, mining or like project undertaken by the recipient which, inter alia, means such services have not been treated as "fees for technical services". He noted that the services provided by the assessee in the year under consideration are similar in nature as most of the relevant contracts were continuing from earlier years as noted by the Assessing Officer himself in the assessment order. He held that the issue thus was squarely covered by the decision of the hon'ble Supreme Court in the case of ONGC Ltd. (supra) which was followed by the Tribunal in the assessee's own case for the immediately preceding year. He accordingly held that the revenue received by the assessee-company from various contracts were clearly in connection with prospecting, extraction or production of mineral oils and did not fall in the category of royalty or fees for technical services (FTS). He held the same would thus be subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al provision for giving a benefit of lesser tax rate to the non-resident which is engaged in providing services or facilities as mentioned therein, including prospecting for, or extraction or production of mineral oils. He then referred to the maxim "generalia specialibus non derogant", which means the provisions of a general statute must yield to those which are special and held that when any non-resident assessee is carrying out specific work which falls in the services provided in the special provision, i. e., section 44BB, then the special provision will apply and not the general provision contained in section 44DA of the Act. He accordingly held that the revenue generated by the assessee-company from the services rendered on the relevant contracts in the year under consideration is taxable under section 44BB of the Act as claimed by the assessee and not under section 44DA of the Act as held by the Assessing Officer. 12. The learned Departmental representative submitted that the nature of services provided by the assessee-company under the relevant contracts during the year under consideration was examined by the Assessing Officer ; and, on such examination, he found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be excluded from the scope of section 44BB of the Act and if the income of a non-resident is in the nature of fees for technical services or royalty, it shall be taxable under the provisions of either section 44DA or section 115A of the Act. 14. As regards the decision of the hon'ble Supreme Court in the case of ONGC Ltd. (supra) cited on behalf of the assessee and strongly relied upon by the learned Judicial Member, the learned Departmental representative submitted that the said decision was given in the context of the interplay and applicability of the provisions of section 44BB vis-a-vis section 44D of the Act and there was thus no occasion for the hon'ble Supreme Court to consider and examine the applicability of the provisions of section 44DA of the Act, more specifically the interplay between the provisions of section 44BB and section 44DA of the Act as amended with effect from April 1, 2011. He contended that the case law and the Board's circular relied upon by the learned Judicial Member thus were applicable before the amendments made to section 44BB and section 44DA of the Act with effect from April 1, 2011 and keeping in view the specific purpose for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4BB of the Act. He submitted that an appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal for the assessment year 2010-11 and the same has already been dismissed by the hon'ble Uttarakhand High Court on September 2, 2020. He submitted that most of the contracts executed in the year under consideration are continuing since earlier years as admitted by the Assessing Officer himself in the assessment order and the scope of services is similar to those provided in the earlier years. He contended that this issue thus is squarely covered by the judgment of the hon'ble Supreme Court in the case of ONGC Ltd. (supra) as held by the Income-tax Appellate Tribunal in its order passed in the assessee's own case for the assessment year 2010-11 which has been upheld by the hon'ble Uttarakhand High Court and the facts involved in the year under consideration being similar to those of the assessment year 2010-11, the ruling of the hon'ble Supreme Court in the case of ONGC Ltd. (supra) is applicable even in the year under consideration as rightly held by the learned Judicial Member since the services provided are not in the nature of technical se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has been relied upon heavily by the learned Judicial Member, thus has been further reiterated by the hon'ble Delhi High Court in its recent decision rendered in the case of Paradigm Geophysical Pty Ltd. (supra). He contended that the learned Accountant Member has not considered the effect of the hon'ble Supreme Court decision in the case of ONGC Ltd. (supra), the decision of the hon'ble Delhi High Court in the case of OHM Ltd. (supra) as well as the Central Board of Direct Taxes Instruction and the definition of fees for technical services and the exclusion thereof as provided in Explanation 2 to section 9(1)(vii) of the Act. He contended that a clear finding was recorded by the learned Commissioner of Income-tax (Appeals) in his impugned order on the nature and scope of services provided by the assessee during the year under consideration but the learned Accountant Member failed to appreciate the same. He invited our attention to the exhaustive list of services provided by the assessee in the case of ONGC Ltd. (supra) and contended that the services rendered by the assessee being covered under the said list should be construed as "mining or like project" which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipient or consideration which would be income of the recipient chargeable under the head 'Salaries'." 21. It was claimed by the assessee-company that the services or facilities provided by it being in connection with prospecting for or extraction or production of mineral oils, the provisions of section 44BB is applicable in its case and accordingly the income from revenue generated from the said services was offered to tax at the presumptive rate of 10 per cent. The provisions of section 44BB being relevant in this context are reproduced below : "44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in 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, a sum equal to ten per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession' : Provided that this sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and exclusively incurred for the business of such permanent establishment or fixed place of profession in India ; or (ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment in its head office or to any of its other offices : Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section. (2) Every non-resident (not being a company) or a foreign company shall keep and maintain books of account and other documents in accordance with the provisions contained in section 44AA and get his accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant. Explanation.-For the purposes of this section,- (a) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ; (b) 'royalty' shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were made, the position has changed drastically with effect from April 1, 2011 as rightly observed by the learned Accountant Member. In this regard, it is relevant to refer to question which was raised in the case of ONGC (supra) for the consideration of the hon'ble Supreme Court. The said question reads as under (page 309 of 376 ITR) : "Whether the amounts paid by the ONGC to the non-resident assessees/foreign companies for providing various services in connection with prospecting for, extraction or production of mineral oil is chargeable to tax as 'fees for technical services' under section 44D read with Explanation 2 to section 9(1)(vii) of the Income-tax Act or will such payments be taxable on a presumptive basis under section 44BB of the Act ?" 25. It is manifest from the question raised before the hon'ble Supreme Court in the case of ONGC (supra) that the issue raised for consideration was, no doubt, relating to the applicability of section 44BB vis-a-vis section 44D read with Explanation 2 to section 9(1)(vii) of the Act in the facts of the case. However, a careful perusal of the judgment passed by the hon'ble Supreme Court in the said case clearly sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dominant purpose of each of such agreement was for prospecting for, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. It was held that the payments made by ONGC and received by the non-resident assessee or foreign company under the said contracts was more appropriately assessable under the provisions of section 44BB and not section 44D of the Act. 26. At the time of hearing, the learned counsel for the assessee has pointed out that the work covered under one of the contracts, as listed by the hon'ble Supreme Court in the judgment passed in the case of ONGC, is "drilling of exploration wells and carrying out seismic surveys for exploratory drilling" and the same is of the nature which is similar to the work performed by the assessee-company in the present case. It is observed that the Tribunal while deciding a similar issue in the assessee's own case for the assessment year 2010-11 took note of the same and held that the services carried on by the assessee were in connection with the prospecting for mineral oil and the income generated from rendering of the said services was taxable on presumptive basis under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 2 to section 9(1)(vii) is also explained in Central Board of Direct Taxes's Instruction No. 1862 in the similar manner. This authority is of the view that as section 44BB is a special, specific and exclusive provision, even where the profits arising from business specified therein fall within the ambit of fees for technical services the provision should prevail for the purposes of computation. (Refer Geofizyka Torun SP. Z. O. O., In re AAR No. 813 of 2009 [2010] 320 ITR 268 (AAR). The issued raised by the Revenue have been discussed at length in the said filling. Regarding the Revenue's contention that the provisions of section 44BB would not apply in view of the insertion of section 44DA by the Finance Act, 2010 with effect from April 1, 2011, it is pointed out that section 44DA applies where royalty or fees for technical services is received by a foreign company in pursuance of an agreement with a Indian concern, whereas in the present case the parties involved are two foreign companies. This we are saying without addressing the question whether the receipts in the hands of the applicant qualifies as fees for technical services, as we find that the services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was, however, no similar proviso appearing under section 44D of the Act. The Finance Act, 2003 provided a sunset clause to the operation of section 44D with effect from April 1, 2003. Simultaneously, from the said date, a similar provisions by way of section 44DA was introduced. It is significant to note that both the provisions, i. e., section 44D as well as section 44DA pertain to the same subject matter, i. e., taxation of income by way of "royalties and fees for technical services". Keeping in view this legislative history also, I am unable to accept the contention of the learned Departmental representative that the decision of the hon'ble Supreme Court in the case of ONGC (supra) rendered in the context of applicability of provisions of section 44BB vis-a-vis section 44D cannot be applied in the present case involving the issue of applicability of section 44BB vis-a-vis section 44DA of the Act. 30. Strong reliance has been placed on behalf of the Revenue on the amendments made to section 44BB and section 44DA of the Act with effect from April 1, 2011 and the contentions raised by the learned Departmental representative is that keeping in view the specific purpose for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 44DA. Section 44BB refers specifically to 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. Revenues earned by the non-resident from rendering such specific services are covered by section 44BB. It is a well-settled rule of interpretation that if a special pro vision is made respecting a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim 'generallia specialibus non derogant'. It is again a well-settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so inter preted that, if possible, effect should be given to both. This was stated to be the 'rule of harmonious construction' by the Supreme Court in Venkataramana Devaru v. State of Mysore, AIR 1958 SC 255. If as contended by the Revenue, section 44DA covers all types of services rendered by the non-resident, that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larify the position. So understood, the proviso to sub-section (1) of section 44BB can only mean that the flat rate of 10 per cent. of the revenues cannot be deemed to be the profits of the non-resident where the services are of the type which do not fall under that section, but are more general in nature so as to fall under section 44DA. Similarly, the second proviso to sub-section (1) of section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section read with Explanation 2 to section 9(1)(vii) of the Act, then an assessee rendering such services as provided in section 44BB cannot claim the benefit of being assessed on the basis that 10 per cent. of the revenues will be deemed to be the profits as provided in section 44BB. In other words, the amendment made by the Finance Act, 2010 with effect from April 1, 2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of section 44BB." 31. The hon'ble Delhi High Court thus held, after analysing and considering the nature of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9(1)(vi)/9(1)(vii), it cannot be considered for treatment under section 44BB and has to be taxed under section 115A/44DA of the Act. That being said, there are several judgments of this court, wherein it has been held that section 44BB is a specific provision and in case the income falls within the ambit of section 44DA(1) of the Act, it would be liable to be taxed under section 44BB(1) of the Act, provided it was in connection with extraction or production of mineral oils. This conflict or inconsistency now stands resolved by virtue of the amendments introduced under the Finance Act, 2010. Though the insertions are stated to be clarificatory, however the rationale behind the intro duction of the amendments has to be examined to appreciate the legislative intent envisioned under the Finance Act, 2010. 13. Section 44BB is a special provision for computing profits and gains of a non-resident from 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, including petroleum and natural gas. Section 44DA is broader and more general in nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cability of section 44BB to cases that were covered by section 44D. However, it is pertinent to note that there was no similar proviso appearing under section 44D. The Finance Act, 2003 provided a sunset clause to the operation of section 44D with effect from April 1, 2003. Simultaneously, from the said date, a similar provision by way of section 44DA was introduced. It is significant to note that both the provisions, i. e., section 44D as well as section 44DA pertain to the same subject matter, i. e., taxation of income by way of royalties and 'fees for technical services'. 15. The aforesaid provisions further underwent change by way of amendments introduced by the Finance Act, 2010 with effect from April 1, 2011. By way of the said Act, a reference to section 44DA was inserted in the proviso to sub-section (1) of section 44BB. Simultaneously, a second proviso to sub-section (1) of section 44DA was inserted to the following effect : 'Provided further that provisions of section 44BB shall not apply in respect of the income referred to in this section.' 16. Keeping in mind the legislative history of amendments in the two provisions, the aforesaid amendments are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income referred to in section 44DA, i. e., income in the nature of royalty and fee for technical services which is not connected with the permanent establishment of the non-resident. Combined effect of the provisions of sections 44BB, 44DA and 115A is that if the income of a non-resident is in the nature of fees for technical services, it shall be taxable under the provisions of either section 44DA or section 115A irrespective off the business to which it relates. Section 44BB applies only in a case where consideration is for services and other facilities relating to exploration activity which are not in the nature of technical services. However, owing to judicial pronouncements, doubts have been raised regarding the scope of section 44BB vis-a-vis section 44DA as to whether fee for technical services, relating to the exploration sector would also be covered under the presumptive taxation provisions of section 44BB. In order to remove doubts and clarify the distinct scheme of taxation of income by way of fee for technical services, it is proposed to amend the proviso to section 44BB so as to exclude the applicability of section 44BB to the income which is covered under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which as held by the hon'ble Supreme Court, are inextricably connected with the prospecting for or extraction or production of mineral oils, and the same being covered by the exclusion provided in Explanation 2 to section 9(1)(vii) of the Act, are not in the nature of fees for technical services (FTS). Provision of section 44BB of the Act thus applies in the case of the assessee and not section 44DA of the Act as held by the hon'ble Delhi High Court in the case of Paradigm Geophysical Pty. Ltd. (supra) after taking into consideration, inter alia, the amendments made to section 44BB and section 44DA of the Act by Finance Act, 2010 with effect from April 1, 2011. 34. In support of the Revenue's case, reliance has been strongly placed on the decision of the hon'ble Delhi High Court in the case of PGS Geophysical AS (supra). It is observed that the assessee-company in the said case was engaged in providing geophysical services to oil and natural gas and conducted electric magnetic survey, processing and interpretation of data. The data so collected for the survey was used for the off-shore oil industries and the nature of the said services being fees for technical ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted October 22, 1990 since it is excluded from the definition of "fees for technical services" under Explanation 2 to section 9(1)(vii) of the Act being covered under the exception relating to "mining" and "like activities" provided in the definition of fees for technical services. 35. Having regard to all the facts of the case and keeping in view the legal position emanating from the judicial pronouncements as discussed above, I am of the view that the revenue received by the assessee-company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation/support of software licences, etc., is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation 2 to section 9(1)(vii) of the Act being consideration received for "mining or like projects" and the same, therefore, is not taxable under section 44DA of the Act. The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asuddin Ansari, CIT DR For the Respondent : Sh. Salil Kapoor, Advocate ORDER PER N. K. BILLAIYA, AM: - 31-05-2023 ITA No.6436/Del/2014 and 6536/Del/2014 are cross appeals by the assessee and the revenue preferred against the order of the CIT(A)-2, Dehradun dated 23.09.2014 pertaining to A.Y.2011-12. 2. On account of difference of opinion between the Learned AM and Learned JM of ITAT, C Bench, New Delhi this matter was referred to the learned third member of ITAT for consideration and disposal u/s. 255(4) of the Act by the Hon'ble President ITAT. 3. The Learned third member ITAT vide order dated 30.09.2022 considered the following questions arising from the difference of opinion between two differing members in this case :- "1. Whether, in view of the facts and circumstances of the case and in law, the revenue received by the assessee on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgrading/support of software licenses etc, is taxable as FTS u/s. 44DA r.w.s. 9 (1)(vii) or is taxable under Section 44B of the Income Tax Act, 1961 ('the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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