CAMERON AUSTRALASIA PTY . LTD, MUMBAI V. DCIT (IT) 2(1)(1), MUMBAI

CO 315/MUM/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3994 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: ARVIND SONDE
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

P A G E | 1 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, M UMBAI BEFORE SHRI G.S.PANNU , AM AND SHRI RAVISH SOOD, JM ITA NO. 3711 /MUM/2016 ( / ASSESSMENT YEAR: 201 1 - 12 ) DCIT (IT ) - 2(1(1), 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M.ROAD, MUMBAI 400038 / VS. M/S CAMERON AUSTRAL AS IA PTY. LTD. C/O PRICEWATER COOPER PVT. LTD. PLOT NO. 18A, PWC HOUSE, GURUNANAK ROAD, BANDRA (W) MUMBAI 400050 ./ ./ PAN NO. AAECC0202H ( / APPELLANT ) : ( / RESPONDENT ) C.O NO. 315/MUM/2017 ( / ASSESSMENT YEAR: 2011 - 12) DCIT (IT) - 2(1(1), 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, N.M.ROAD, MUMBAI 400038 / VS. M/S CAMERON AUSTRALASIA PTY. LTD. C/O PRICEWATERCOOPER PVT. LTD. PLOT NO. 18A, PWC HOUSE, GURUNANAK ROAD, BANDRA (W) MUMBAI 400050 ./ ./ PAN NO. AAECC0202H ( / APPELLANT) : ( / RESPONDENT) / A S S E S S E E BY : SHRI ARVIND S O NDE, A.R / R E V E N U E BY : SHRI M.V. RAJGURU, SR. D.R. / DATE OF HEARING : 25.05 .2018 / DATE OF PRONOUNCEMENT : 1 3 . 0 7 .2018 P A G E | 2 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 56, MUMBAI, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W. SEC. 144C(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT) , DATED 26.05.2014 FOR A . Y 2011 - 12. ON THE OTHER HAND , THE ASSESSEE IS BEFORE US AS A CROSS - OBJECTOR . THE REVENUE ASSAILING THE ORDER OF THE CIT(A) HA S RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON T HE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE A . O TO INDEPENDENTLY DETERMINE THE TAXABILITY OF REVENUES FROM SEPARATE, INDEPENDENT AND DIVISIBLE SCOPE OF WORK UNDER THE CONTRACT AND ALLOWED RELIEF TO THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT INCOME FROM SALE OF PRODUCTS CANNOT BE CONSTRUED TO BE FEES FOR TECHNICAL SERVICES OR ROYALTY AS IT IS OUTRIGHT TRANSFER OF TITLE IN THE P RODUCTS BY THE ASSESSEE TO ONGC. 3. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING HELD THAT SINCE SUCH REPAIR WORK IS UNDERTAKEN AT THE OVERSEAS WORKSTATION THE QUESTION OF TAXABILITY OF SUCH RECEIPTS F ROM REPAIR WORK AS ATTRIBUTABLE TO PE DOES NOT ARISE AND DIRECTED THE A . O TO DELETE THE ADDITION MADE FOR THE REVENUES EARNED BY THE ASSESSEE FROM REPAIRS ACTIVITY UNDER ONGC CONTRACT. 4. THE APPELLAN T PRAYS THAT THE ORDER OF THE L D. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 . BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS INCORPORATED UNDER THE LAWS OF AUSTRALIA IS ENGAGED IN THE BUSINESS OF SUPPLY OF PRODUCTS, PROVISION OF SERVICE S AND UNDERTAKING ACTIVITIES RELATING TO DRILLING AND PRODUCTION SYSTEMS ETC . TO VARIOUS OIL AND GAS PRODUCERS ACROSS THE GLOBE. THE ASSESSEE P A G E | 3 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. WHICH IS A TAX RESIDENT OF AUSTRALIA HAD FILED ITS R ETURN OF INCOME FOR A.Y 2011 - 12 ON 04.03.2013, DECLARING A TOTAL INCOME OF RS.62,01,500/ - . THE CASE OF THE ASSESSEE WAS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT 143(2) OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEED INGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD RECEIVED REVENUE FROM TWO CONTRACTS IN INDIA VIZ. (I) NORTHERN OFFSHORE DRILLING PTE LTD; AND (II) OIL AND NATURAL GAS CORPORATION LTD (FOR SHORT ONGC). THE REVENUE FROM THE AFORESAID CONTRACTS WAS OF FERED BY THE ASSESSEE IN ITS RETURN OF INCOME, AS UNDER: SR. NO. NAME OF THE CONTRACTING PARTY SCOPE OF SERVICES TAXABILITY 1. NORTHERN OFFSHORE DRILLING PTE. LTD. ASSISTANCE IN WELL INTERVENTION, RETRIEVAL AND TIE - IN IN RELATION TO SPECIFIC OIL WELL TA XABLE U/S 44BB 2. ONGC OFFSHORE SUPPLY OF PRODUCTS/ EQUIPMENT NOT TAXABLE IN INDIA REPAIRS ACTIVITIES NOT TAXABLE IN INDIA EQUIPMENT RENTALS TAXABLE U/S 44BB PROJECT MANAGEMENT SERVICES TAXABLE U/S 44BB 4. HOWEVER, THE A.O WAS NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE AS REGARDS INDEPENDENT TAXABILITY OF THE SEPARATE, INDEPENDENT AND DIVISIBLE WORKS UNDER THE ONGC CONTRACT. STILL FURTHER, THE A.O RULED OUT THE APPLICABILITY OF SEC. 44BB TO THE REVENUE STREAMS IN INDIA AND WAS OF TH E VIEW THAT THE AGGREGATE REVENUE OF THE ASSESSEE FROM THE ONGC CONTRACT WAS TAXABLE ON NET INCOME BASIS UNDER SEC.44DA . IN THE ABSENCE OF SEPARATE BOOKS OF ACCOUNT HAVING BEEN MAINTAINED BY THE ASSESSEE FOR ITS ONGC CONTRACT , THE A.O ASSESSED ITS INCOME F ROM THE SAME BY APPLYING THE PROFITABILITY MARGIN P A G E | 4 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. OF 13.27% THAT WAS ARRIVED AT AFTER MAKING CERTAIN ADJUSTMENTS TO ITS GLOBAL FINANCIAL STATEMENTS. THE A.O ON THE BASIS OF HIS AFORESAID DELIBERATIONS ASSESSED THE INCOME UNDER SEC. 143(3) R.W.S 144C(3) AT RS. 1,45,70,950/ - . 5 . AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE ORDER PASSED BY THE A.O WAS ASSAILED ON FOUR GROUNDS VIZ. (I) COMPOSITE TAXABILITY OF THE AGGREGATE REVENUE FROM ONGC CONTRACT; (II) TAX ABILITY OF REVENUE FROM OFFSHORE SUPPLIE S UNDER THE CONTRACT WITH ONGC; (III) TAXABILITY OF REVENUE FROM REPAIRS (AND RELATED ACTIVITIES) UNDER THE CONTRACT WITH ONGC; AND (IV) TAXABILITY OF REVENUE FROM EQUIPMENT RENTAL AND PROJECT MANAGEMENT SERVICES UND ER THE CONTRACT WITH THE ONGC. THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANCED BY THE ASSESSEE IN CONTEXT OF THE AFORESAID ISSUE S , DEALT WITH THE SAME AS UNDER: (A) COMPOSITE TAXABILITY OF AGGREGATE REVENUE FROM ONGC CONTRAT: IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION VIZ. A . Y 2011 - 12 HAD ENTERED INTO A CONTRACT WITH ONGC FOR INSPECTION AND REFURBISHMENT OF SUBSEA EQUIPMENT, SUPPL Y OF WELL COMPLETION TOOLS AND TECHNICIANS FOR COMPLETION OF BALA NCE WORK ON FIELD DEVELOPMENT PROJECT . THE ASSESSEE HAD IN ITS RETURN OF INCOME OFFERED REVENUE OF RS. 5,39,47,447/ - IN RESPECT OF ONGC CONTRACT FOR TAXATION UNDER SEC. 44BB OF THE ACT. IT WAS OBSERVED BY THE CIT(A) THAT THE SAID REVENUE COMPRISED OF VIZ. (I) P ROJECT MANAGEMENT FEES: RS.2 , 96 , 17 , 267/ - ; AND E QUIPMENT RENTAL: RS.2,43,30,180/ - . STILL FURTHER , A PERUSAL OF THE NOTES FORMING PART OF THE COMPUTATION OF INCOME OF THE ASSES S EE REVEALED THAT THE ASSESSEE HAD ALSO RECEIVED AN AMOUNT AGGREGATING TO RS. 4,97,76,660/ - TOWARDS OFFSHORE SUPPLY OF SPARE TOOLS AND FEES FOR REPAIR OF EQUIPMENT S CARRIED OUTSIDE INDIA. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD DURING THE COURSE OF THE P A G E | 5 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. ASSESSMENT PROCEEDINGS SUBMITTED BEFORE THE A.O THAT SINCE BOTH THE SUPPLY/SALE OF SPARE TOOLS AND THE REPAIR WORK S WERE CARRIED OUT SIDE INDIA , THUS , THE SAME WERE NOT TAXABLE IN INDIA . H OWEVER, THE A.O DECLINED TO ACCEPT THE SAID CLAIM OF THE ASSESSEE. IT WAS NOTICED BY THE A.O THAT THERE WAS ONLY ONE CONTRACT AWARDED BY ONGC IN RES PECT OF ALL THE ACTIVIT IES UNDERTAKEN BY THE ASSESSEE AND THE SAME DID NOT SPECIFY THE SCOPE OF WORK ACCORDING TO THE NATURE OF ACTIVITY . IT WAS OBSERVED BY THE A.O THAT THE ONGC CONTRACT DID NOT SPECIFY THE SCOPE OF WORK ACCORDING TO THE NATURE OF ACTIVIT Y LIKE PRODUCT SUPPLY, REPAIR WORK ETC., BUT ACCORDING TO THE REQUIREMENT OF A PARTICULAR WORK. THE CIT(A) OBSERVED THAT T HE A.O WAS OF THE VIEW THAT ALL THE ACTIVITIES PROVIDED IN THE ONGC CONTRACT WERE INEXTRICABLY INTERLINKED AND INTERWOVEN. IT WAS FURT HER OBSERVED BY HIM THAT THE ASSESSEE HAD A PERMANENT ESTABLISHMENT (FOR SHORT PE) IN INDIA. T HE CIT(A) FURTHER NOTICED THAT THE A.O ON THE BASIS OF THE AFORESAID OBSERVATIONS, BEING OF THE VIEW THAT THE REVENUE RECEIVED BY THE ASSESSEE FOR EXECUTING THE WORK AS PER THE ONGC CONTRACT WAS IN THE NATURE OF R OYALTY AND FEES FOR TECHNICAL SERVICES (FOR SHORT FTS) , HAD THUS BROUGHT THE SAME TO TAX UNDER SEC. 44DA OF THE ACT , OBSERVING AS UNDER: 6.1 TAXABILITY OF AGGREGATE INCOME I) THERE IS ONLY ONE CONTRACT AWARDED BY ONGC IN RESPECT OF ALL THE ABOVE ACTIVITIES. II) THE CONTRACT DOES NOT PROVIDE FOR SPECIFIC ITEMS OF EQUIPMENT LIST TO BE SUPPLIED, BUT WHAT IS TO BE SUPPLIED IS THE ITEMS WHICH ARE REQUIRED TO EXECUTE THE WORKS ENTRUSTED TO THE ASSESSEE. SIMILAR IS THE CASE WITH REPAIRS. III) THIS IS EVIDENT FROM THE 3RD PARA OF CONTRACT WHICH IS AS UNDER - WHERE AS CORPORATI ON IS DESIROUS OF SERVICES FOR INSPECTION AND REFUR BISHMENT OF SUB SEA EQUIPMENT, SUPPLY OF WELL COMPLETION TOOLS AND TECHNICIANS FOR COMPLETION OF BALANCE WORK OF THE G - 1 AND G - 15 FIELDS DEVELOPMENT PROJECTS FOR CARRYING OUT CORPORATION'S OPERATIONS CONFORMING TO SPECIFICATION AS SET FORTH IN THE SCOPE OF WORK AT ANNEXURE - II OF THIS AGREEMENT. P A G E | 6 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. IV) THE CONTRACT DOES NOT CLASSIFY THE SCOPE OF WORK ACCORDING TO THE NATURE OF ACTIVITY, LIKE PRODUCT SUPPLY, REPAIR WORK ETC., BUT ACCORDING TO REQUIREM ENT OF A PARTICULAR WORK, LIKE REFURBISHMENT OF HXT RETRIEVED FROM WELL G - 1 DB , 'TESTING OF OTHER 4 HXTS (INCLUDES EFAT/SIT) AND ENTIRE SUBSEA SYSTEM' ETC. V) ALL THE ACTIVITIES AS CLASSIFIED BY ASSESSEE ARE RELATED WITH EACH OTHER. FOR EXAMPLE ITEM NO.1.1 OF SCOPE OF WORK WHICH IS IN RESPECT OF REFURBISHMENT OF HXT RETRIEVED FROM WELL G - 1 DB . THE ACTIVITIES TO BE PERFORMED BY ASSESSEE ARE GIVEN AS UNDER: THIS REQUIRES COMPLETE STRIPPING OF THE TREE, QA/QC CHECK OF ALL COMPONENTS, REPLACEMENT OF DAMAGED COMPONENTS, ASSEMBLY AND TESTING TO MAKE IT INSTALLATION WORTHY AND PROPOSED TO BE TAKEN UP IN CAMERON'S WORKS IN MELBOURNE. THIS WORK CAN BE FURTHER DIVIDED INTO: I) FIXED SCOPE A) CLEANING, DISMANTLING OF TREE INTO COMPONENTS, CARRY OUT QA/QC CHECKS ON THE COMPONENTS AND FIRM UP THE REQUIREMENT OF REPAI R/ REPLACEMENT OF COMPONENTS, IF ANY. B) REASSEMBLING AND TESTING OF TREE. II) VARIABLE SCOPE: REPLACEMENT/ REFURBISHMENT OF COMPONENTS BASED ON QA / QC CHECKS AND JOINT LY DECIDED BY CAMERON, ONG, DNV PERUSAL OF ABOVE SCOPE SHOWS THAT THIS SCOPE OF WORK INCLUDES PRODUCTS SUPPLY, REPAIRS, EQUIPMENT, RENTAL, INSTALLATION AND COMMISSIONING ACTIVITIES AND ALSO PROJECT MANAGEMENT ACTIVITIES . FURTHER, THE FACT THAT PARA 1.7 PROVIDES FOR CO - ORDINATI ON AND SERVICE SUPPORT PERSONNEL MANDATES PROVIDING OF PROJECT MANAGER AND PROJECT TEAM FOR ALL THE ACTIVITIES UNDER THE SUBJECT CONTRACT, SHOWS THAT THE CON TRACT IS ONE ONLY. EVEN, THE TRAINING TO BE PROVIDED BY ASSESSEE, SUPPLY OF INSTALLATION AND COMMISSIONING SPARES IS IN RESPECT OF ALL THE ITEMS OF SCOPE OF WORK AND INDIVISIBLE. VI) MERELY BECAUSE ASSESSEE HAS SEGMENTED THESE ACTIVITIES ARTIFICIALLY TO SUIT ITS OWN OBJECTIVES, WHEN THE FACTS TELL OTHERWISE CANNOT BE ACCEPTED. VII) AS ALREADY STATED SUPRA, THE ACTIVITIES PERFORMED BY ASSESSEE ARE NOT SEPARATE AND INDEPENDENT BUT RATHER RELATED, INTERDEPENDENT AN D CONNECTED WITH EACH OTHER. THE CONTRACT BEING ONE, THE PROJECT BEING ' ONE, THE SCOPE OF WORK BEING ONE (THOUGH BIFURCATED), THE ACTIVITIES BEING RELATED TO EACH OTHER, INTERDEPENDENT AND FORMING PART OF ONE W HOLE ACTIVITY, IS TO BE CONSTRUED AS ONE ACTIVITY. 6.2. AS IT IS THE AGGREG ATE INCOME WHICH IS CHARGEABLE TO TAX, WHAT IS TO BE SEEN IS WHETHER THE WHOLE OF ACTIVITY IS TAXABLE AND NOT THE INDIVIDUAL LEG OF THE ACTIVITY. IN THIS LIGHT, THE INCOME IS FOUND TO BE TAXABLE AS UNDER: P A G E | 7 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. I) UNDER PARA 3 OF ARTICLE 12 OF DTAA THE AMOUNTS CONSIST OF ROYALTY UNDER FOLLOWING SUB CLAUSES OF SAID PARA 3 A) THE USE OF, OR RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT B) THE SUPPLY OF SCIENTIFIC, TECHNICAL, INDUSTRIAL OR COMMERCIAL KNOWLEDGE OR INFORMATION C) THE RENDERING OF ANY SERVICE (INCLUDING THOSE OF TECHNICAL OR OTHER PERSONNEL) WHICH MAKE A VAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER O F A TECHNICAL PLAN OR DESIGN II) EVEN UNDER I.T. ACT THE SERVICES INVOLVE D GET COVERED UNDER CLAUSE ( IV), (IVA) AND (VI) OF 9(1)(VI) AND ALSO UNDER EXPLANATION 2 TO SECTION 9(1)('VII). III) THERE IS A PE OF ASSESSEE IN INDIA. AS ALL OF THE ACTIVITY IS ONE ONLY IT CANNOT BE SAID THAT IT IS NOT EFFECTIVELY CONNECTED WI TH P E. IV) THOUGH CLAUSE (IVA) OF SECTION 9(1) PROVIDES EXCLUSION OF AMOUNT REFERRED TO IN SECTION 44BB, SECTION 44BB PROVIDES FOR EXCLUSION OF AMOUNTS RELATING TO 44DA. SINCE, THE SUBJECT AMOUNTS FALL UNDER 44DA, THIS EXCLUSION IN (IVA) DOES NOT TAKE THE CASE OUT OF PURVIEW OF ROYALTY. V) ALL ABOVE FACTS SHOW THAT ASSESSE'S CASE FALLS UNDER 44DA.' 6. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE DIFFEREN T ACTIVITIES REFERRED UNDER THE CONTRACT BETWEEN THE ASSESSEE AND ONGC WERE SEPARATE, DIVISIBLE AND INDEPEN DENT OF EACH OTHER, AS UNDER: A. OFFSHORE PRODUCTS/ EQUIPMENT SUPPLY; B. OFFSHORE REPAIR WORK (INCLUDING RELATED WAREHOUSING COSTS; INCLUDING REIMBURSEMENT FOR TRANSPORT AND LOGISTIC SUPPORT); C. EQUIPMENT RENTAL; AND D. PROJECT MANAGEMENT SERVICES. IT WAS THE CLAIM OF THE ASSESSEE THAT BASED ON COMMERCIAL NEGOTIATIONS BETWEEN THE PARTIES AND FOR ADMINISTRATIVE CONVENIENCE A SINGLE CONTRACT WAS EXECUTED WITH ONGC FOR DIFFERENT INDEPENDENT ACTIVITIES, INSTEAD OF EXECUTING MULTIPLE CONTRACTS FOR SUCH INDEPENDENT ACTIVITY BETWEEN THEM. THE ASSESSEE IN ORDER TO BUTTRESS HIS CONTENTION THAT THE ONGC CONTRACT P A G E | 8 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. CONTEMPLATED SEPARATE, DIVISIBLE AND INDEPENDENT SCOPE OF WORK, SUBMITTED BEFORE THE CIT(A), AS UNDER: 2 .6 THE APPELLANT WISHES TO MENTION THAT THE SCOPE OF WORK UNDER THE CONTRACT CLEARLY IDENTIFIES FOLLOWING BROAD SEPARATE INDEPENDENT AND DISTINCT ACTIVITIES; PRODUCTS SUPPLY: - SUPPLY OF ISOLATION SLEEVE (REFER PARA 1.5 O F SCOPE OF WORK) - SUPPLY OF PRESSURES CAP AND PROTECTIVE COVERS (REFER PARA 1.9 OF SCOPE OF WORK) - SUPPLY OF INSURANCE ITEMS (REFER PARA 1.10 OF SCOPE OF WORK) - SUPPLY OF SPOOL TREE (REFER PARA 1.11 OF SCOPE OF WORK) REPAIRS SERVICES - REFURBISHMENT OF HXT (REFER PARA 1.1 OF SCOPE OF WORK) - TESTING OF OTHER FOUR HXTS (REFER PARA 1.2 OF SCOPE OF WORK) - STORAGE AND TRANSPORTATION III RELATION TO SAME (REFER PARA 1.3 OF SCOPE OF WORK) - REMOVING AND RE - TORQUE OF PUP JOINTS (REFER PARA 1.6 OF SCOPE OF W ORK) EQUIPMENT RENTALS (REFER PARA 1.4(B) OF SCOPE OF WORK) PROJECT MANAGEMENT SERVICES (REFER PARA 1.7 OF SCOPE OF WORK) INSTALLATION COMMISSIONING ACTIVITIES (NOT RENDERED DURING THE YEAR UNDER / CONSIDERATION) - PERSONNEL/TECHNICIAN SUPPORT (REFER PARA 1.4(A) OF SCOPE OF WORK) - TRAINING (REFER PAR 1.8 OF SCOPE OF WORK) THE APPELLANT WISHES TO MENTION THAT, AS DISCUSSED ABOVE IS SEPARATELY INDENTIFIED . HOWEVER, FOR COMMERCIAL REASONS AND TO BETTER EXPLAIN THE BROAD NATURE OF THE ACTIVITIES IT IS AL IGNED AND MENTIONED IN DIFFERENT CHRONOLOGICAL ORDER IN THE CONTRACT. HOWEVER, IN ESSENCE, EACH OF THE ABOVE REFERRED ACTIVITIES ARE SEPARATE, INDEPENDENT AND DISTINCT FROM EACH OTHER T H O U G H T H E Y P E R T A I N T O A S I N G L E . 2.7 THE APPELLANT FURTHER WISHES TO SUBMIT THAT SEPARATE CONSIDERATION IS ALSO IDENTIFIED FOR THE ABOVE REFERRED SEPARATE AND DISTINCT ACITIVITIES. IN RELATION TO THE SAME THE APPELLANT RAISES SEPARATE INVOICES ON ONGC FOR EACH ACTIVITY MENTIONED ABOVE AND RECEIVES SEPARATE CONSIDERATION FOR THE SAME ACCORDINGLY. THE ASSESSEE IN ORDER TO DRIVE HOME ITS CONTENTION THAT TH E REVENUE RECEIVED FROM SEPARATE, INDEPENDENT AND DIVISIBLE WORK PROVIDED UNDER THE ONGC CONTRACT WERE TO BE INDEPENDENTLY TAXED, RELIED ON A HOST OF JUDICIAL PRONOUNCEMENT S . P A G E | 9 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. 7. THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S ADVANCED BY THE ASSESSEE , OBSERVED THAT HIS INDULGENCE WAS SOUGHT FOR ADJUDICATING AS TO WHETHER THE TAXABILITY OF DIFFERENT STREAMS OF REVENUE FROM SEPARATE, INDEPENDENT AND DIVISIBLE SCOPE OF WORK UN DER THE CONTRACT WAS TO BE DETERMINED INDEPENDENTLY VIS - A - VIS EACH ACTIVITY OR WHETHER THE TAXABILITY WAS TO BE LOOKED INTO ON A COMPOSITE BASIS FOR THE AGGREGATE REVENUE RECEIVED BY THE ASSESSEE FROM THE DIFFERENT ACTIVITIES UNDERTAKEN UNDER THE ONGC CONT RACT , AS DETERMINED BY THE A.O. IT WAS OBSERVED BY THE CIT(A) THAT THOUGH ADMITTEDLY A SINGLE CONTRACT WAS AWARDED BY ONGC WITH RESPECT TO ALL THE ACTIVIT IES UNDER THE CONTRACT FOR I NSPECTION AND REFURBISHMENT OF SUB - SEA EQUIPMENT , SUPPLY OF WELL COMPLETIO N TOOLS AND TECHNICIAN S FOR COMPLETION OF BALANCE WORK OF THE G - 1 AND G - 15 FIELDS DEVELOPMENT PROJECTS , HOWEVER , THERE WERE CERTAIN ACTIVITIES PROVIDED UNDER THE CONTRACT WHICH WERE UNDERTAKEN BY THE ASSESSEE OUTSIDE INDIA AND THE OTHER ACTIVITIES WERE CAR RIED OUT IN INDIA. THE CIT(A) OBSERVED THAT IN CASE OF COMPOSITE CONTRACTS, AS PER THE SETTLED POSITION OF LAW THE TAXABILITY OF EACH SEPARATE, DIVISIBLE AND INDEPENDENT ACTIVITY WAS REQUIRED TO BE EVALUATED INDEPENDENTLY . THE CIT(A) WHILE CONCLUDING AS HE REINABOVE, RELIED ON THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA - HARIMA HEAVY INDUSTRIES L IMITED . VS. DIT (2007) 288 ITR 408 (SC) AND CIT & ANR. VS. HYUNDAI HEAVY INDUSTRIES COMPANY LTD. 291 ITR 482 (SC). STILL FURTHER, THE CIT(A) IN ORDER TO FORTIFY HIS VIEW THAT IN A CASE WHERE THE SCOPE OF WORK WAS DIVISIBLE THE TAXABILITY OF INDEPENDENT REVENUE STREAMS WOULD NEED TO BE EVALUATED SEPARATELY , REL IED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF LINDE AG , LINDE ENGINEERING D I VISION VS. DDIT ( 2014) 36 1 ITR 1 (DEL). ON THE BASIS OF HIS AFORESAID OBSERVATIONS, IT WAS CONCLUDED BY THE CIT(A) TH AT THOUGH THE CONTRACT MAY BE AN INDIVI SIBLE ONE, HOWEVER , FOR THE TAX PURPOSE, IF THE CONTRACT DID SPECIFY THE AMOUNTS THAT WERE PAYABLE WITH RESPECT TO VARIOUS ACTIVITIES CARRIED OUT BY THE PART IES , THE N THE INCOME C OULD ACCRUE OR ARISE AT VARIOUS STAGES ON ACCOUNT OF VARIED ACTIVITIES. IN THE BACKDROP OF THE AFORESAID DELIBERATIONS , THE CIT(A) OBSERVED THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE UNDER THE CONTRACT WERE P A G E | 10 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. SEPARATE, DIVISIBLE AND INDEPENDENT OF EACH OTHER VIZ. (1) SUPPLY OF OFFSHORE PRODUCTS /EQUIPMENT S ; (2) OFFSHORE REPAIR WORK (INCLUDING RELATED WAREHOUSING COSTS AND REIMBURSEMENT FOR TRANSPORT AND LOGISTIC SUPPORT); (3) EQUIPMENT RENTAL; (4) PROJECT MANAGEMENT SERVICES ; AND (5) INSTALLATION AND COMMISSIONING ACTIVITIES (WHICH THOUGH WERE NOT RENDERED DURING THE YEAR UNDER CONSIDERATION). THE CIT(A) AFTER PERUSING THE RECORDS FURTHER OBSERVED THAT THE NATURE OF ACTIVITIES UNDERTAKEN BY THE ASSESSEE UNDER THE CONTRACT WERE DISTINCT AND PERTAINED TO SEPARATE STREAMS OF WORKS. IT WAS FURTHER NOTICED BY HIM THAT THE ASSESSEE HAD RAISED SEPARATE INVOICES ON ONGC FOR THE AFOREMENTIONED DIFFERENT ACTIVITIES CARRIED OUT UNDER THE CONTRACT. THE CIT(A) WAS ALSO NOT IMPRESSED WITH THE OBSERVATION OF THE A.O THAT THE ASSESSEE HAD MERELY SEGMENTED THE ACTIVITIES ARTIFICIALLY TO SUIT ITS O WN OBJECTIONS. RATHER, THE CIT(A) WAS OF A STRONG CONVICTION THAT AS THE CONTRACT OF THE ASSESSEE WAS WITH ONGC, A GOVERNMENT OF INDIA UNDERTAKING, THEREFORE, IT WOULD NOT BE APPROPRIATE TO ALLEGE THAT THE ACTIVITIES HAD BEEN ARTIFICIALLY SEGMENTED BY THE ASSESSEE TO SUIT ITS OWN OBJECTIVES . IT WAS OBSERVED BY THE CIT(A) THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE UNDER THE ONGC CONTRACT WERE SEPARATE, DIVISIBLE AND INDEPENDENT OF EACH OTHER. RATHER, IT WAS OBSERVED BY HIM THAT THE DIFFERENT ACTIVITIES UNDER THE CONTRACT WERE NOT ONLY INDEPENDENT AND UNCONNECTED TO EACH OTHER , BUT EVEN THE INVOICES WERE SEPARATELY RAISED BY THE ASSESSEE FOR EACH OF THE ABOVE REFERRED SEPARATE, INDEPENDENT AND DISTINCT ACTIVITIES. T HE CIT(A) NOTICED THAT THE CLAIM OF THE ASSESSEE THAT THE AFOREMENTIONED ACTIVITIES WERE INDEPENDENT OF EACH OTHER COULD ALSO BE GATHERED FROM THE FACT THAT THE EMPLOYEES OF THE ASSESSEE WORKING O N ACTIVITIES CARRIED OUT IN INDIA WERE SEPARATE AND DISTINCT FROM THE EMPLOYEES WORKING FOR THE ACTI VITIES CARRIED OUTSIDE INDIA. ON THE BASIS OF THE AFORESAID OBSERVATIONS, THE CIT(A) FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA - HARIMA HEAVY INDUSTRIES LIMITED (SUPRA) AND HYUNDAI HEAVY INDUSTRIES COMPANY LT D. (SUPRA) AND THAT OF THE HIGH COURT OF DELHI IN THE CASE OF LINDE AG, LINDE ENGINEERING DIVISION (SUPRA) , CONCLUDED THAT THE CLAIM OF THE ASSESSEE THAT THE TAXABILITY OF THE DIFFERENT P A G E | 11 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. STREAMS OF REVENUES EARNED BY IT UNDER THE ONGC CONTRACT FROM EACH SEP ARATE, INDEPENDENT AND DIVISIBLE WORK WAS TO BE CONSIDERED INDEPENDENTLY, WAS FOUND IN ORDER . IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE CIT(A) DIRECTED THE A.O TO INDEPENDENTLY DETERMINE THE TAXABILITY OF REVENUE IN THE HANDS OF THE ASSESSEE FROM T HE AFOREMENTIONED SEPARATE, INDEPENDENT AND DIVISIBLE WORK S UNDER THE ONGC CONTRACT. (B) TAXABILITY OF REVENUE FROM OFFSHORE SUPPLIE S UNDER THE CONTRACT WITH ONGC: THE CIT(A) OBSERVED THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION SUPPL IED C E RTAIN PRODUCTS WHICH WERE ORDERED BY ONGC O N NEED BASIS FROM ITS FOREIGN LOCATION. THE A.O HAD HELD THAT THE INCOME FROM SUPPLY OF EQUIPMENTS WAS LIABLE TO BE BROUGHT TO TAX IN INDIA AS PER THE PROVISIONS OF SEC. 44DA OF THE ACT. THE CONTENTION ADVANCED BY THE ASSESSEE THAT SINCE SUPPLY/SALE OF PRODUCTS WERE CARRIED OUT OFFSHORE, AND THE REPAIRS ALSO CARRIED OUT OUTSIDE INDIA, THEREFORE, THE SAME COULD NOT BE TAXED IN INDIA, DID NOT FIND FAVOUR WITH THE A.O. THE A.O OBSERVING THAT THE ASSESSEE HAD A PE IN I NDIA, THUS , WAS OF THE VIEW THAT AS THE CONTRACT AWARDED BY ONGC IN RESPECT OF ALL THE ABOVE ACTIVITIES DID NOT SPECIFY THE SCOPE OF WORK ACCORDING TO THE NATURE OF ACTIVITY BUT ACCORDING TO THE REQUIREMENTS O F A PARTICULAR WORK, THEREFORE, THE RECEIPTS IN THE HANDS OF THE ASSESSEE KEEPING I N VIEW THE NATURE OF THE WORK WAS LIABLE TO BE BROUGHT TO TAX AS R OYALTY AND FTS. T HE CIT(A) OBSERVED THAT IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE A.O HAD BROUGHT THE RECEIPTS UNDER THE CONTRACT TO TAX UNDER SE C.44DA OF THE ACT. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT IT HAD AS PER THE TERMS OF THE AGREEMENT SUPPLIED CERTAIN PRODUCTS WHICH WERE ORDERED BY ONGC ON NEED BASIS FROM ITS FOREIGN LOCATION . THE ASSESSEE I N ORDER TO DRIVE HOME ITS CONTENTION THAT THE RECEIPTS FROM SUCH OFFSHORE SUPPLY OF PRODUCTS COULD NOT BE TAXED IN INDIA RELIED ON THE BROAD TERMS OF ARRANGEMENT OF SUCH OFFSHORE SUPPLY OF PRODUCTS MADE TO ONGC VIZ. (I) THE PRODUCT S SUPPL IED BY THE ASSESSEE WERE MANUFACTURED OUTSIDE INDIA; (II) THE SALE WAS EXECUTED ON FOB P A G E | 12 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. BASIS OUTSIDE INDIA; (III) THE TITLE TO THE PROPERTY IN THE PRODUCTS (I.E RISK AND OWNERSHIP) WAS TRANSFERRED TO ONGC OUTSIDE INDIA; (IV) THE CONSIDERATION FOR SUCH SALE WAS RECEIVED OUTSIDE INDIA; AND (V) ALL THE ACTIVITIES IN RELATION TO THE SUPPLY OF SPARE S WERE CARRIED ON OUTSIDE INDIA. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT ITS INDIAN PE HAD NO ROLE TO PLAY IN EFFECTUATING SUCH TRANSACTIONS EITHER PRE OR POST SUCH OFFSHORE SUPPLY. ON THE BASIS OF THE AFORESAID SUBMISSIONS, IT WAS THE CLAIM OF THE ASSESSEE THAT THE RECEIPTS FROM SUCH OFFSHORE SUPPLY OF PRODUCT S WERE NOT LIABLE TO BE BROUGHT TO TAX IN INDIA. 8. THE CIT(A) OBSERVED THAT IT WAS THE CLAIM OF THE A SSESSEE THAT SINCE OFFSHORE SUPPLY OF PRODUCT S WAS A SEPARATE AND INDEPENDENT P ART OF THE CONTRACT WITH ONGC AND THE SAME WERE SOLD TO THE LAT T ER ON FOB BASIS OUTSIDE INDIA, THUS , THE INCOME EARNED THERE FROM COULD NOT BE TAXED IN INDIA. THE CIT(A) IN THE BACKDROP OF HIS AFORESAID VIEW THAT THE TAXABILITY OF EACH ACTIVITY UNDERTAKEN BY THE ASSESSEE UNDER THE ONGC CONTRACT WAS TO BE DETERMINED INDEPENDENTLY, THUS , CONCLUDED THAT THE TAXATION OF INCOME FROM OFFSHORE SUPPLY OF PRODUCT S BY THE ASSESSEE TO ONGC WAS TO BE LOOKED INTO SEPARATELY. THE CIT(A) FOLLOWING THE PRINCIPLES LAID DOWN BY THE HONBLE A PEX COURT IN THE CASE OF ISHIKAWAJIMA - HARIMA HEAVY INDUSTRIES LIMITED (SUPRA) AND HYUNDAI HEAVY INDUSTRIES COMPANY LTD. (SUPRA) , OBSERVED THAT IN CASE OF COMPO SITE CONTRACTS INCOME FROM OFFSHORE SUPPLY OF EQUIPMENT C OULD NOT BE SUBJECTED TO TAX IN INDIA , PROVIDED NO PART OF THE ACTIVITIES OF SUCH OFFSHORE SUPPLY WAS UNDERTAKEN IN INDIA. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE CIT(A) CONCLUDED THAT AS THE PROPERTY IN THE GOODS SUPPLIED BY THE ASSESSEE WAS TRANSFERRED TO ONGC OUTSIDE INDIA AND THE ENTIRE SALE S WERE ALSO EXECUTED OUTSIDE INDIA, THEREFORE, NO PART OF THE ACTIVITIES PERTAINING TO THE OFFSHORE SUPPLY OF PRODUCT S BY THE ASSESSEE WERE CARRIED OUT IN INDIA. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT THE PE OF THE ASSESSEE IN INDIA ALSO HAD NO ROLE TO PLAY IN EFFECTUATING SUCH TRANSACTION EITHER PRE OR POST SUCH OFFSHORE SUPPLY. ON THE BASIS OF THE AFORESAID DELIBERATION S , IT WAS CONCLUDED BY THE CIT (A) THAT THE INCOME FROM OFFSHORE SALE OF PRODUCTS COULD NOT BE CONSTRUED TO BE FTS OR R OYALTY, AS IT WAS A P A G E | 13 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. CASE OF AN OUTRIGHT TRANSFER OF TITLE IN THE PRODUCT S BY THE ASSESSEE TO ONGC. THUS, IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE CIT(A) CONCLU DED THAT THE INCOME ARISING TO THE ASSESSEE FROM SUCH OFFSHORE SUPPLY OF PRODUCT S WAS NOT TAXABLE IN INDIA. (C) TAXABILITY OF REVENUE FROM REPAIRS (AND RELATED ACTIVITIES) UNDER THE CONTRACT WITH ONGC: - THE CIT(A) DELIBERATING ON THE TAXABILITY OF REVENUE FROM REPAIRS (AND RELATED ACTIVITIES) UNDER THE CONTRACT WITH ONGC, OBSERVED THAT INCOME IN RESPECT OF THE SAID ACTIVITIES WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS PER THE TERMS OF THE CONTRACT WITH ONGC. THE CIT(A) OBSER VED THAT THE A.O WAS OF THE VIEW THAT THE REPAIR ACTIVITIES CARRIED OUT BY THE ASSESSEE AMOUNTED TO FTS AND R OYALTY AND SATISF IED THE MAKE AVAILABLE CRITERIA. IT WAS NOTICED BY THE CIT(A) THAT THE A.O WAS OF THE VIEW THAT WHEN A PRODUCT IS TO BE REPAIRED , THE SAME REQUIRED DISMANTLING , WHICH INVOLVED PERSONNEL, TECHNICAL EXPERTISE AND KNOWLEDGE TO DO THE SAME. STILL FURTHER, HE HELD A CONVICTION THAT THE REPAIR OF THE PRODUCT, INSTALLATION, TESTING AND RUNNING ALSO INVOLVED TECHNICAL EXPERTISE . ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O HAD CONCLUDED THAT THE REPAIR ACTIVITIES CLEARLY FELL WITHIN THE SWEEP OF THE DEFINITION OF FTS. THE CIT(A) FURTHER OBSERVED THAT THE A.O WAS ALSO OF THE VIEW THAT WHEN A PRODUCT SUPPLIED IS USED TO REPA IR, REFURBISH, ENABL E OPERATION, ACTIVATION , MAKE FIT FOR BEING USED THROUGH PERSONNEL OR OTHERWISE , IT AMOUNTED TO FTS, ROYALTY AS NOT ONLY A RIGHT TO USE AN EQUIPMENT WAS GIVEN, BUT THE SAME ALSO INVOLVED SUPPLY OF TECHNICAL , INDUSTRIAL AND COMMERCIAL KN OWLEDGE. THE A.O HELD A CONVICTION THAT EVEN THE PLACING , INSTALLING, COMMISSIONING OF SUCH EQUIPMENT SATISFIED THE MAKE AVAILABLE CRITERIA, AS THE OPERATOR WAS ABLE TO OPERATE THE SYSTEM MUCH AFTER THE SERVICE PROVIDER HAD LEFT. THE ASSESSEE REBUTTING T HE AFORESAID OBSERVATIONS OF THE A.O SUBMITTED VIZ. (I) THAT ONGC AVAIL ED THE SERVICES OF THE ASSESSEE TO REPAIR ITS EXISTING EQUIPMENT WHICH REQUIRED OVERHAUL/MAINTENANCE; (II) THE ENTIRE REPAIR SERVICES WERE RENDERED AT THE OVERSEAS WORK STATIONS OF THE ASSESSEE (I.E OUTSIDE INDIA); (III) THE EQUIPMENT P A G E | 14 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. IDENTIFIED BY ONGC WAS TRANSPORTED TO AUSTRALIA/MALA Y SIA DEPENDING UPON THE TYPE OF EQUIPMENT AND NATURE OF SERVICES TO BE RENDERED; (IV ) THAT AFTER INITIAL INSPECTION THE SPARE S REQUIRED TO BE REPLACED WER E IDENTIFIED AND ONGC WOULD MAKE NECESSARY REQUEST S FOR THE SUPPLY OF THE SAME TO THE ASSESSEE ; (V). THE ASSESSEE WOULD REPLACE THE SPARES IN THE COURSE OF REPAIRING THE OVERALL EQUIPMENT; (V I ) THE INDIAN PE OF THE ASSESSEE HAD NO ROLE TO PLAY IN ITS AFORE SAID ACTIVITIES; (V I I) THAT SEPARATE INVOICES WERE RAISED BY THE ASSESSEE FOR THE REPAIR ACTIVIT IES AND THE CONSIDERATION FOR THE SAME WAS RECEIVED OUTSIDE INDIA; (VI I I) THAT THE ACTIVITIES OF INSTALLATION AND COMMISSIONING OF EQUIPMENT WAS SEPARATELY COVERED UNDER THE INSTALLATION AND COMMISSIONING ACTIVITIES ; AND ( IX ) THAT AS DURING THE YEAR UNDER CONSIDERATION NO INSTALLATION/COMMISSIONING ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE, THUS THE TAXABILITY OF INCOME FROM SUCH ACTIVITIES DID NOT ARISE. T HE ASSESSEE FURTHER REBUTTING THE OBSERVATIONS OF THE A.O THAT AS THE REPAIRS ITSELF INVOLVED TECHNICAL EXPERTISE , THUS THE INCOME FROM SUCH ACTIVITIES WOULD FALL WITHIN THE SWEEP OF THE DEFINITION OF FTS, SUBMITTED THAT THE A.O WHILE CONCLUDING AS HEREINA BOVE HAD LOST SIGHT OF THE HOST OF J UDICIAL PRONOUNCEMENT S WHICH WERE RELIED UPON DURING THE COURSE OF THE HEARING BEFORE HIM. THE ASSESSEE FURTHER DISLODGING THE CLAIM OF THE A.O THAT THE RECEIPTS OF THE ASSESSEE FROM THE AFORESAID REPAIR ACTIVITIES WERE TO BE CONSTRUED AS R OYALTY, SUBMITTED THAT AS THE ASSESSEE DID NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL OR KNOW HOW TO ONGC, THUS , THE RECEIPTS FROM RENDERING OF THE AFORESAID ACTIVITIES COULD NOT BE BROUGHT WITHIN THE SCOPE AND GAMU T OF THE TERM R OYALTY AS DEFINED UNDER THE ARTICLE XII (3) OF THE INDIA - AUSTRALIA TAX TREATY. 9. THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE , OBSERVED THAT AS PER ARTICLE XII (3)(G) OF INDIA - AU S TRALIA DTAA, PAYMENT MADE AS CONSIDERATION FOR RENDERING OF SERVICES (INCLUDING PROVISION OF TECHNICAL OR OTHER PERSON NEL ) RESULTED IN R OYALTIES , IF SUCH SERVICES DID MAKE AVAILABLE TECHNIC AL KNOWLEDGE, EXPERTISE, SKILL, KNOW - H OW OR PROCESSES WHICH ENABLED THE PERSON ACQUIRING THE SERVICE TO APP LY SUCH TECHNOLOGY CONTAINED THEREIN. THE CIT(A) AFTER DELIBERAT ING AT LENGTH ON THE SCOPE AND GAMUT OF THE TERM P A G E | 15 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. MAKE AVAILABLE AS CONTEMPLATED IN ARTICLE XII (3)(G) OF THE INDIA - AUSTRALIA DTAA , OBSERVED THAT ONGC FOR AVAILING THE SERVICES OF THE ASSESSEE TO REPAIR ITS EXISTING EQUIPMENT WHICH REQUIRED OVERHAUL/MAINTENANCE, WOULD IDENTIFY AND TRANSPORT THE SAME TO AUSTRALIA/MALA Y SIA . AFTER INITIAL INSPECTION THE SPARE S REQUIRED TO BE REPLACED WOULD BE IDENTIFIED AND ONGC WOULD MAKE THE NECESSARY REQUESTS F OR SUPPLY OF THE SAME TO THE ASSESSEE. THE ASSESSEE WOULD THEN REPLACE THE SPARE S IN THE COURSE OF REPAIRING THE OVERALL EQUIPMENT. THE CIT(A) OBSERVED THAT THE ENTIRE REPAIR WORK WAS UNDERTAKEN BY THE ASSESSEE AT ITS OVERSEAS WORK STATIONS LOCATED OUTSIDE INDIA AND AFTER THE REPAIR WORK WOULD BE COMPLETED , THE EQUIPMENT WOULD AGAIN BE TRANSPORTED TO INDIA. THE CIT(A) REBUTTING THE OBSERVATIONS OF THE A.O THAT THE INSTALLATION AND COMMISSIONING OF EQUIPMENT WOULD INVOLVE TECHNICAL EXPERTISE, OBSERVED THAT N OT ONLY THE SAID ACTIVITIES WERE SEPARATELY COVERED UNDER THE ONGC CONTRACT, BUT EVEN OTHERWISE AS DURING THE YEAR UNDER CONSIDERATION NO INSTALLATION/COMMISSIONING ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE, HENCE THE ISSUE OF TAXABILITY OF INCOME FROM S UCH ACTIVITIES DID NOT ARISE. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT WHILE RENDERING THE REPAIR WORK, NO RIGHT TO USE THE EQUIPMENT WAS PROVIDED BY THE ASSESSEE TO ONGC AS THE SAID EQUIPMENT WAS OWN ED BY ONGC ITSELF , HENCE THE QUESTION OF CHARACTERISING THE RECEIPTS AS ROYALTY ON THE BASIS OF CONFERRING A RIGHT TO USE OF SUCH EQUIPMENT DID NOT ARISE. THE CIT(A) FURTHER DISLODGING THE CLAIM OF THE A.O THAT THE REPAIR SERVICES RENDERED BY THE ASSESSEE BROUGHT THE SAME W ITHIN THE SWEEP OF FTS OBSERVED THAT UNDOUBTEDLY THE REPAIRS CARRIED OUT BY THE ASSESSEE INVOLVED TECHNICAL EXPERTISE, HOWEVER, THE SAID REPAIR WORK (AND RELATED ACTIVITIES) UNDERTAKEN BY THE ASSESSEE UNDER THE ONGC CONTRACT DID NOT MAKE AVAILABLE ANY TE CHNICAL KNOWLEDGE, EXPERIENCE, SKILL OR PROCESSES ETC . TO ONGC . STILL FURTHER, IT WAS OBSERVED BY THE CIT(A) THAT AS THE REPAIR WORK WAS UNDERTAKEN BY THE ASSESSEE AT ITS OVERSEAS WORK STATIONS, THEREFORE, THE QUESTION OF TAXABILITY OF SUCH RECEIPTS FROM R EPAIR WORK AS ATTRIBUTABLE TO THE PE OF THE ASSESSEE WAS ALSO NOT WARRANTED . P A G E | 16 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. (C) TAXABILITY OF REVENUE FROM EQUIPMENT RENTAL UNDER THE CONTRACT WITH ONGC: - THE ASSESSEE HAD ALSO ASSAILED BEFORE THE CIT(A) THE ORDER PASSED BY THE A.O , ON THE GROUND THAT HE HAD ERRED IN HOLDING THAT THE REVENUE FROM EQUIPMENT RENTAL WAS LIABLE TO BE BROUGHT TO TAX UNDER SEC. 44DA AND AS SUCH HAD WRONGLY DECLINED THE APPLICABILITY OF SEC.44BB OF THE ACT. THE CIT(A) OBSERVED THAT THE ASSESSEE AS PER THE TERMS OF THE CO NTRACT HAD PROVIDED CERTAIN EQUIPMENT S ON HIRE BASIS TO ONGC, IN LIEU WHEREOF IT WAS IN RECEIPT OF RENTAL INCOME. SUCH EQUIPMENT S W ERE USED BY ONGC IN INSTALLATION OF CERTAIN EQUIPMENT USED IN EXTRACTION, EXPLORATION OF MINERAL OIL FROM THE EXPLORATION SIT ES. 1 0 . THE CIT(A) OBSERVED THAT THE A.O WAS OF THE VIEW THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEE FROM RENTING OF THE EQUIPMENT QUALIFIED AS R OYALTY UNDER RULE XII (3)(B) OF THE INDIA - AUSTRALIA DTAA. STILL FURTHER, THE A.O WAS OF THE VIEW THAT THE EXCLUSION PROVIDED IN THE DEFINITION OF R OYALTY WOULD NOT BE APPLICABLE, AS THE SAME WAS EFFECTIVELY CONNECTED WITH THE PE OF THE ASSESSEE IN INDIA AND AS SUCH FELL WITHIN THE S WEEP OF SEC.44DA OF THE ACT. THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S ADVANCED BY THE ASSESSEE BEFORE HIM, OBSERVED THAT IT WAS AN ADMITTED FACT THAT THE ASSESSEE HAD EARNED RENTAL INCOME BY PROVIDING CERTAIN EQUIPMENT S TO ONGC ON HIRE BASIS. THE SAID EQUIPMENT S WERE USED IN INSTALLATION OF CERTAIN EQUIPMENT USED BY ONGC IN EXTRACTION, EXPLORATION OF MINERAL OIL FROM THE EXPLORATION SITE. THE CIT(A) OBSERVED THAT AS PER SEC.44DA OF THE ACT, THE INCOME EARNED BY A NON - RESIDENT ASSESSEE BY WAY OF R OYALTY OR FEES FOR TECHNICAL SERVICES RECEIVED FROM THE GOVERNMENT OR AN INDEPEN DENT CONCERN IN PURSUANCE OF AN AGREEMENT MADE AFTER 31 ST DAY OF MARCH, 2003, IN A CASE WHERE SUCH NON - RESIDENT CARRIES O N BUSINESS IN INDIA THROUGH A PE SITUATED THEREIN OR PERFORMS PROFESSIONAL SERVICES FROM A FIXED PLACE OF PROFESSION SITUATED THEREIN, AND THE RIGHT , PROPERTY OR CONTRACT IN RESPECT OF WHICH THE R OYALTIES OR FTS ARE PAID IS EFFECTIVELY CONNECTED WITH SUCH PE OR FIXED PLACE OF PROFESSION, AS THE CASE MAY BE , SHALL BE COMPUTED UNDER THE HEAD P ROFIT P A G E | 17 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. AND GAINS OF BUSINESS OR PROFESSION IN ACCORDANCE WITH THE PROVISION S OF THE ACT. IT WAS NOTICED BY THE CIT(A) THAT FOR THE PURPOSE OF SEC.44DA THE TERM R OYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB - SECTION (1) OF SEC. 9 . ON THE BASIS OF THE AFORESAID DELIBERAT IONS AS REGARDS THE SCOPE AND GAMUT OF SEC.44DA, IT WAS OBSERVED BY THE CIT(A) THAT EXPLANATION 2 TO SEC. 9(1)(VI) , WHICH DEFINED THE TERM R OYALTY, THOUGH INCLUDED THE CONSIDERATION RECEIVED BY A NON - RESIDENT FOR USE OF ANY INDUSTRIAL, COMMERCIAL OR SCIE NTIFIC EQUIPMENT, BUT THE SAME SPECIFICALLY EXCLUDED THE AMOUNTS REFERRED TO IN SEC.44BB . THE CIT(A) FURTHER ADVERTING TO SEC.44BB WHICH CONTEMPLATE S THE SPECIAL PROVISIONS FOR COMPUTING PROFIT AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION ETC . OF MINERAL OILS, OBSERVED THAT THE SA ME PROVIDED A PRESUMPTIVE BASIS FOR TAXATION OF 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 THE EXTRACTION OR PRODUCTION OF MINERAL OILS. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS OBSERVED BY THE CIT(A) THAT SINCE THE EQUIPMENT S SUPPLIED BY THE ASSESSEE TO ONGC ON HIRE BASIS WERE USED IN THE PROSPECTING FOR, OR EXT RACTION OF, MINERAL OILS, THEREFORE, THE CONSIDERATION THEREOF WOULD BE COVERED UNDER SEC.44BB OF THE ACT. 1 1 . THE CIT(A) IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS ON THE FACTS AND THE AFORESAID STATUTORY PROVISION S VIZ. SEC.44DA, SEC. 44BB AND SEC.9(1)(VI) OF THE ACT, OBSERVED THAT THE PROVISIONS OF EXPLANATION 2 TO SEC.9(1)(VI) EXPLICITLY PROVIDED THAT IN THE CASE OF USE OF I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, THE AMOUNTS REFERRED TO IN SEC. 44BB WOULD B E EXCLUDED FROM THE DEFINITION OF R OYALTY UNDER THE ACT. THUS, THE CIT(A) WAS OF THE VIEW THAT AS THE SCOPE OF SEC. 44BB INCLUDED INCOME FR OM SUPPLY OF PLANT OR MACHINERY ON HIRE , USE D O R TO BE USED , IN THE PROSPECTING FOR OR THE EXTRACTION OR PRODUCTIO N OF MINERAL OILS, THUS, THE RENTAL INCOME EARNED BY THE ASSESSEE WOULD BE EXCLUDED FROM THE DEFINITION OF R OYALTY AS PROVIDED IN EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT. ON THE BASIS OF HIS AFORESAID OBSERVATIONS , THE CIT(A) CONCLUDED THAT AS E XPLANATI ON 2 TO SEC.9(1)(VI) OF THE ACT SPECIFICALLY EXCLUDED THE AMOUNTS REFERRED IN SEC.44BB P A G E | 18 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. OF THE ACT FROM THE DEFINITION OF R OYALTY , THUS THE RENTAL RECEIPTS IN THE HANDS OF THE ASSESSEE BY PROVIDING THE EQUIPMENT ON HIRE BASIS TO ONGC FOR PROSPECTING OR EXTRACTION OR PRODUCTION OF MINERAL OIL WOULD FALL UNDER THE EXCLUSION PROVIDED IN THE R OYALTY DEFINITION , AND AS A RESULT THEREOF THE APPLICABILITY OF THE PROVISIONS OF SEC. 44DA WOULD STAND EXCLUDED. THE CIT(A) FURTHER ADVERT ING TO THE OBSERVATIONS OF THE A.O THAT AS IT WAS NOT THE ASSESSEE WHICH WAS CARRYING ON MINING OR LIKE PROJECTS TO BE ELIGIBLE FOR EXCLUSION IN TERMS OF EXPLANATION 2 TO SEC.9(1)(VII) , AS IT WAS THE ONGC WHICH WAS CARRYING ON SUCH MINING OR LIKE PROJECTS, OBSERVED THAT IN THE BACKDROP OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF OIL AND NATURAL GAS CORPORATION (2015) (59 TAXAMAN.COM 1) , THE SAID OBSERVATIONS OF THE A.O WERE NOT TENABLE . THE CIT(A) ON THE BASIS OF HIS AFORESAID DELIBERATIONS CONCLUDED THAT THE CLAIM OF THE ASSESSEE THAT THE INCOME EARNED FROM RENTING OF EQUIPMENT WOULD BE TAXABLE AS PER THE PROVISIONS OF SEC.44BB OF THE ACT AND NOT UNDER SEC.44DA OF THE ACT, WAS FOUND TO BE IN ORDER. THUS, THE CIT(A) DIRECTED THE A.O TO DETERM INE THE TAXABILITY OF REVENUE EARNED BY THE ASSESSEE FROM EQUIPMENT RENTAL AS PER THE PROVISIONS OF THE SEC. 44BB OF THE ACT. 1 2 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATER IAL AVAILABLE ON RECORD. WE SHALL FIRST ADVERT TO THE ISSUE AS TO WHETHER THE TAXABILITY OF DIFFERENT STREAMS OF REVENUES RECEIVED BY THE ASSESSEE FROM SEPARATE, INDEPENDENT AND DIVISIBLE SCOPE OF WORK UNDER A CO MPOSITE CONTRACT WITH ONGC HAD RIGHTLY BEEN H E LD BY THE CIT(A) TO BE DETERMINED INDEPENDENTLY VIS - A - VIS EACH ACTIVITY , OR WHETHER THE TAXABILITY OF THE SAME SHOULD HAVE BEEN MADE ON A COMPOSITE BASIS FOR THE AGGREGATE REVENUE RECEIVED BY THE ASSESSEE FROM THE SAI D CONTRACT , AS DETERMINED BY THE A.O. WE FIND THAT ADMITTEDLY ONLY ONE CONTRACT WAS AWARDED BY ONGC WITH RESPECT TO ALL THE ACTIVITIES FOR INSPECTION AND REFURBISHMENT OF SUBSEA EQUIPMENT , SUPPLY OF WELL COMPLETION TOOLS AND TECHNICIANS FOR COMPLETION OF B ALANCE WORK OF FIELDS DEVELOPMENT PROJECT. AS OBSERVED BY US HEREINABOVE, SOME OF THE ACTIVITIES UNDER THE CONTRACT WERE UNDERTAKEN BY THE ASSESSEE OUTSIDE INDIA P A G E | 19 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. AND THE OTHER ACTIVITIES HAD TAKEN PLACE IN INDIA. WE FIND THAT THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE ISSUE UNDER CONSIDERATION , HAD OBSERVED THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE UNDER THE ONGC CONTRACT WERE CLEARLY SEPARATE, DIVISIBLE AND INDEPENDENT TO EACH OTHER. THE CIT(A) FURTHER IN SUPPORT OF HIS OBSERVATION THAT THE AFORE MENTIONED ACTIVITIES CARRIED OUT BY THE ASSESSEE UNDER THE ONGC CONTRACT WERE NOT INEXTRICABLY INTERWOVEN OR INTER DEPENDANT , OBSERVED THAT THE ASSESSEE HAD RAISED SEPARATE INVOICES O N ONGC IN RESPECT OF THE AFORESAID ACTIVITIES. IT WAS FURTHER O BSERVED B Y THE CIT(A) THAT THE EMPLOYEES WORKING ON THE RESPECTIVE ACTIVITIES CARRIED OUT IN INDIA WERE DISTINCT AND SEPARATE FROM THE EMPLOYEES WORKING FOR THE ACTIVITIES CARRIED OUTSIDE INDIA. WE FIND THAT ON THE BASIS OF THE AFORESAID DELIBERATIONS, THE CIT(A) H ELD A STRONG CONVICTION THAT THE TAXABILITY OF REVENUE GENERATED BY THE ASSESSEE FROM SEPARATE, INDEPENDENT AND DIVISIBLE SCOPE OF WORK CARRIED OUT IN TERMS OF THE CONTRACT WERE REQUIRED TO BE INDEPENDENTLY DETERMINED FOR THE PURPOSE OF TAXABILITY OF THE S AME. 1 3 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE OBSERVATIONS OF THE CIT(A) AND ARE PERSUADED TO BE IN AGREEMENT WITH THE SAME. WE FIND THAT THE CIT(A) WHILE ARRIVING AT THE AFORESAID VIEW HAD TAKEN SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. VS. DIT ( 2007) 288 ITR 408 (SC). THE HONBLE A PEX COURT IN ITS AFORESAID JUDGMENT HAD OBSERVED THAT WHERE DIFFERENT SEVERABLE PARTS OF A COMPOSITE CONTRACT ARE PERFORMED IN DIFFERENT PLACES, TH E PRINCIPLE OF APPORTIONMENT CAN BE APPLIED, TO DETERMINE WHICH FISCAL JURISDICTION CAN TAX THAT PARTICULAR PART OF THE TRANSACTION. THE HONBLE COURT FURTHER OBSERVED THAT THE PRINCIPLE OF APPORTIONMENT WOULD HELP DETERMINE, WHERE THE TERRITORIAL JURISDIC TION OF A PARTICULAR STATE LIES, TO DETERMINE ITS CAPACITY TO TAX AN EVENT APPLYING IT TO COMPOSITE TRANSACTIONS WHICH HAVE SOME OPERATIONS IN ONE TERRITORY AND SOME IN OTHER, IS ESSENTIAL TO DETERMINE THE TAXABILITY OF VARIOUS OPERATIONS. IT WAS THUS OBSE RVED BY THE HONBLE APEX COURT THAT THOUGH A CONTRACT MAY BE A TURNKEY CONTRACT, BUT THE SAME BY ITSELF WOULD NOT MEAN THAT EVEN FOR THE PURPOSE OF TAXABILITY THE ENTIRE CONTRACT MUST BE CONSIDERED TO BE AN IN TEGRATED ONE SO AS TO MAKE THE P A G E | 20 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. ASSESSEE TO PAY TAX IN INDIA. WE FURTHER FIND THAT THE CIT(A) IN ORDER TO FORTIFY HIS AFORESAID VIEW THAT THE TAXABILITY OF REVENUE EARNED BY THE ASSESSEE FROM EACH SEPARATE, INDEPENDENT AND DIVISIBLE WORK UNDER THE ONGC CONTRACT WAS REQUIRED TO BE EVALUATED INDEPENDENTLY , HAD ALSO TAKEN SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HYUNDAI HEAVY COMPANIES LTD. ( 2007) 291 ITR 482 (SC). IN THE AFOREMENTIONED CASE , THE ASSESSEE A KOREAN COMPANY HAD ENTERED INTO A COMPOSITE CONTRACT HAVING TWO TY PES OF OPERAT IONS VIZ. (I) ONE BEING FABRICATION IN KOR EA; AND (II) THE OTHER CONSISTING OF INSTALLATION IN INDIA . THE HONBLE A PEX COURT IN THE BACKDROP OF THE FACTS INVOLVED IN THE SAID CASE OBSERVED THAT THE PROFITS EARN ED BY THE KOREAN GE O N SUPPLIES OF FABRICATED PLATFORM COULD NOT BE MADE ATTRIBUTABLE TO ITS INDIAN PE AS THE INSTALLATION PE CAME INTO EXISTENCE ONLY ON CONCLUSION OF THE TRANSACTION GIVING RISE TO THE SUPPLY OF THE FABRICATED P L ATFORM. ON THE BASIS OF THE AFORESAID DELIBERATIONS , IT W AS OBSERVED BY THE HONBLE COURT THAT THE PROFIT ON SUCH SUPPLIES OF FABRICATED P L ATFORM CANNOT BE SAID TO BE ATTRIBUTABLE TO THE INDIAN PE OF THE ASSESSEE . RATHER, IT WAS OBSERVED THAT EVEN IF IT WAS TO BE ASSUMED THAT THE SUPPLIES OF PLATFORM WERE NECESS ARY FOR THE PURPOSE OF INSTALLATION ( ACTIVITY OF THE PE IN INDIA) AND EVEN IF IT WAS TO BE ASSUMED THAT THE SUPPLIES WERE AN INTEGRAL PART, STILL NO PART OF THE PROFITS ON SUCH SUPPLIES C OULD BE ATTRIBUTED TO THE INDEPENDENT PE , UNLESS IT WAS ESTABLISHED B Y THE DEPARTMENT THAT THE SUPPLIES WERE NOT AT ARM S LENGTH PRICE. WE FURTHER FIND THAT THE AFORESAID VIEW ARRIVED AT BY THE CIT(A) IS ALSO FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF LINDE AG, LINDE ENGINEERING DIVISION VS. DDIT ( 2014) 3 61 ITR 1(DEL). WE ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY US AT LENGTH HEREINABOVE , THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE VIZ. (I) SUPPLY OF OFFSHORE PRODUCTS/EQUIPMENT; (II) OFFSHORE REPAIR WORK (INCLUDING RELATED WAREHOUSING COSTS AND REIMBURSEMENT FOR TRANSPORT AND LOGISTIC SUPPORT); (III) EQUIPMENT RENTAL; (IV) PROJECT MANA GEMENT SERVICES; AND (V) INSTALLATION AND COMMISSIONING ACTIVITIES (THOUGH NOT RENDERED DURING THE YEAR UNDER CONSIDERATION) ARE SEPARATE, DIVISIBLE AND INDEPENDENT OF EACH OTHER, P A G E | 21 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. THEREFORE, THE CIT(A) IN THE BACKDROP OF THE SETTLED POSITION OF LAW AS LAID BY THE HONBLE SUPREME COURT IN THE AFOREMENTIONED JUDGMENTS RENDERED IN THE CASE OF ISHIKAWAJIMA - HARIMA HEAVY INDUSTRIES LIMITED (SUPRA) AND HYUNDAI HEAVY INDUSTRIES COMPANY LTD. (SUPRA) , HAD RIGHTLY CONCLUDED THAT THE TAXABILITY OF THE REVENUES RECEIVED THERE FROM BY THE ASSESSEE FROM SUCH SEPARATE, INDEPENDENT AND DIVISIBLE ACTIVITIES WERE REQUIRED TO BE UNDERTAKEN INDEPENDENTLY. WE THUS , FINDING OURSELVES TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A), UPHOLD THE SAME. THE G ROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS DISMISSED. 1 4 . WE SHALL NOW ADVERT TO THE SUSTAINABILITY OF THE VIEW OF THE CIT(A) THAT TAXABILITY OF REVENUE RECEIVED BY THE ASSESSEE FROM OFFSHORE SUPPLY OF EQUIPMENTS UNDER THE ONGC CONTRACT , BEING A CASE OF OUTRIGHT TRANSFER OF TITLE IN THE PRODUCTS BY THE ASSESSEE TO ONGC OUTSIDE INDIA, THUS, CANNOT BE CONSTRUED TO BE FTS OR ROYALTY AND BROUGHT TO TAX IN INDIA. WE FIND THAT THE CIT(A) AFTER CONCLUDING THAT THE TAXABILITY OF THE REVENUE RECEIVED BY THE ASSESSEE FROM ITS VARIOU S STREAMS OF SEPARATE, INDEPENDENT AND DIVISIBLE ACTIVITIES UNDER THE ONGC CONTRACT WERE REQUIRED TO BE UNDERTAKEN INDEPENDENTLY , HAD THUS , IN THE BACKDROP OF HIS SAID OBSERVATIONS DELIBERATED ON THE INDEPENDENT TAXABILITY OF THE REVENUE RECEIVED BY THE AS SESSEE FROM OFFSHORE SUPPLIES MADE UNDER THE ONGC CONTRACT . THE CIT(A) OBSERVED THAT AS THE PRODUCTS IDENTIFIED BY ONGC ARE REQUESTED ON NEED BASIS AS PER THEIR REQUIREMENTS, THEREFORE, THE INTERCONNECTION OF THE REVENUE RECEIVED BY THE ASSESSEE FROM OFFSH ORE SUPPLY OF GOODS WITH OTHER ACTIVITIES UNDER THE ONGC CONTRACT WAS UNWARRANTED. WE FIND THAT THE CIT(A) HAD OBSERVED THAT IN CASE OF OFFSHORE SUPPLIES MADE UNDER THE ONGC CONTRACT , THE PROPERTY IN GOODS WERE TRANSFERRED BY THE ASSESSEE TO ONGC OUTSIDE I NDIA AND THE ENTIRE SALE WAS EXECUTED OUTSIDE INDIA. THE CIT(A) HAD FURTHER OBSERVED THAT NO PART OF THE ACTIVITIES OF THE OFFSHORE SUPPLY OF EQUIPMENTS WERE CARRIED OUT IN INDIA. FURTHER, THE PE OF THE ASSESSEE IN INDIA ALSO HAD NO ROLE TO PLAY IN EFFECTU ATING SUCH TRANSACTIONS EITHER P RE OR POST SUCH OFFSHORE SUPPLY. WE FIND THAT THE CIT(A) RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. P A G E | 22 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. VS. DIT ( 2007) 288 ITR 408 (SC) AND CIT VS. HYUNDAI HEAVY INDUSTRIES COMPANY LTD. ( 2007) 291 ITR 482 (SC) , HAD OBSERVED THAT AS IN THE CASE OF THE ASSESSEE NO PART OF THE ACTIVITIES OF OFFSHORE SUPPLY OF EQUIPMENTS BY THE ASSESSEE WERE UNDERTAKEN IN INDIA, HENCE THE REVENUE RECEIVED BY THE ASSESSEE THERE FROM COULD NOT BE T AXED IN INDIA. WE HAVE DELIBERATED AT LENGTH ON THE AFORESAID OBSERVATIONS OF THE CIT(A) AND FIND OURSELVES TO BE IN AGREEMENT WITH THE VIEW ARRIVED AT BY HIM THAT THE REVENUE RECEIVED BY THE ASSESSEE FROM OFFSHORE SUPPLY OF GOODS TO ONGC COULD NOT BE TAXE D IN INDIA. WE THUS FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A) IN CONTEXT OF THE ISSUE UNDER CONSIDERATION UPHOLD THE SAME TO THE SAID EXTENT. THE G ROUND OF APPEAL NO. 2 RAISED BY THE REVENUE IS DISMISS E D. 1 5 . WE SHALL NOW ADVERT TO THE OBSERVATION S OF THE CIT(A) THAT THE REVENUE RECEIVED THE ASSESSEE FROM REPAIR WORK (AND RELATED ACTIVITIES) UNDERTAKEN BY THE ASSESSEE UNDER THE ONGC CONTRACT , NOT FALLING EITHER WITHIN THE SWEEP OF FTS AS PROVIDED IN EXPLANATION 2 TO SEC.9(1)( VII ) OR ROYALTY AS PER A RTICLE XII (3) OF THE INDIA - AUSTRALIA DTAA, THUS WOULD NOT BE TAXABLE IN INDIA. WE HAVE PERUSED THE ORDER OF THE CIT(A) AND DELIBERATED O N HIS OBSERVATIONS IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. WE ARE OF THE CONSIDERED VIEW THAT FOR ADJUDICATING THE ISSUE UNDER CONSIDERATION , IT WOULD BE RELEVANT TO HAVE AN INSIGHT O N THE NATURE OF THE REPAIR ACTIVITIES CARRIED OUT BY THE ASSESSEE. WE FIND THAT THE REPAIR WORK IS UNDERTAKEN BY THE ASSESSEE AT ITS OVERSEAS WORK STATIONS LOCATED OUTSIDE INDIA. THE EQUIP MENT WHICH IS IDENTIFIED BY ONGC REQUIRING OVERHAULING/MAINTENANCE IS TRANSPORTED AT THE LATTERS RESPONSIBILITY TO AUSTRALIA/MALA Y SIA ( DEPENDING UPON THE TYPE OF EQUIPMENT AND NATURE OF SERVICES TO BE RENDERED). AFTER INITIAL INSPECTION , THE SPARES REQUIRED TO BE REPLACED ARE IDENTIFIED AND ONGC MAKE S NECESSARY REQUESTS FOR THE SAME TO THE ASSESSEE. THE ASSESSEE REPLACES THE SPARES IN THE COURSE OF REPAIR OF THE OVERALL EQUIPMENT. AFTER THE REPAIR WORK IS COMPLETED , THE EQUIPMENT IS AGAIN TRANSPORTED TO INDIA. WE SHALL NO W, IN THE BACKDROP OF THE AFORESAID REPAIR ACTIVITIES PROVIDED BY THE ASSESSEE TO ONGC ADJUDICATE AS REGARDS THE SCOPE OF THE TAXABILITY OF THE RECEIPTS RECEIVED THERE FROM BY THE ASSESSEE . P A G E | 23 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. 1 6 . WE HAVE DELIBERATED AT LENG TH ON THE ISSUE UNDER CONSIDERATION AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW OF THE A.O THAT AS THE REPAIR ACTIVITIES INVOLVE S TECHNICAL EXPERTISE , THEREFORE, THE RECEIPTS FROM RENDERING OF SUCH SERVICES WOULD BE LIABLE TO BE BROUGHT W ITHIN THE DEFINITION OF FTS. WE FIND THAT A PERUSAL OF EXPLANATION 2 TO SEC. 9(1)(VII) OF T HE ACT , READS AS UNDER: [EXPLANATION [2] - FOR THE PURPOSE OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICE (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY , MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. IT IS CLEARLY DISCERNIBLE FROM A PERUSAL OF EXPLANATION 2 TO SEC. 9(1)(VII) , THAT WHERE THE CONSIDERATION IS RECEIVED BY THE RECIPIENT FOR ANY MINING O R LIKE PROJECT UNDERTAKEN BY HIM, THE SAME WOULD BE EXCLUDED FROM THE SWEEP OF FTS. WE ARE OF THE CONSIDERED VIEW THAT AS THE CONSIDERATION RECEIVED BY THE ASSESSEE FOR PROVIDING THE REPAIR WORK (AND RELATED ACTIVITIES) TO ONGC ARE IN CONTEXT OF THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH, OR SUPPLYING PLANT AND MACHINERY ON HIRE , USE D OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF MINERAL OILS, THUS , THE RECEIPTS IN THE HANDS OF THE ASSESSEE FROM PRO VIDING SUCH SERVICES WOULD CLEARLY FALL WITHIN THE SWEEP OF THE EXCLUSION CONTEMPLATED IN E XPLANATION 2 TO SEC. 9(1)(VII) OF THE ACT . WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE REVENUE RECEIVED BY THE ASSESSEE FROM PROVIDING REPAIR SERVICES TO ONGC WOULD NOT FALL WITHIN THE SWEEP OF FTS UNDER SEC.9(1)(VII) OF THE ACT. 1 7 . WE SHALL NOW DELIBERATE AS TO WHETHER THE REVENUE RECEIVED BY THE ASSESSEE FROM PROVIDING REPAIR SERVICES TO ONGC WOULD FAL L WITHIN THE SCOPE AND GAMUT OF THE DEFINITION OF TERM R OYALTY. WE FIND THAT THE TER M R OYALTY AS PER THE INDIA - AUSTRALIA DTAA IS DEFINED IN ARTICLE XII (3) OF THE INDIA - AUSTRALIA DTAA. ON A PERUSAL OF THE SAME , IT EMERGES THAT AS PER ARTICLE XII (3)(G) OF TH E SAID TAX TREATY, PAYMENTS MADE AS CONSIDERATION FOR RENDERING P A G E | 24 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. OF SERVICES (INCLUDING PROVISION OF TECHNICAL OR OTHER PERSONAL) WOULD RESULT IN ROYALTY , IF SUCH SERVICES MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, KNOW HOW OR PROCESS , WHICH ENAB LES THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY CONTAINED THEREIN. IN OTHER WORDS, IF THE SERVICE PROVIDER DOES NOT MAKE AVAILABLE THE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW HOW OR PROCESS ETC ., THEN THE CONSIDERATION RECEIVED FOR RENDERING OF SUCH SERVICES CANNOT BE CHARACTERISED AS ROYALTY FOR THE PURPOSE OF ARTICLE XII (3)(G) OF INDIA - AUSTRALIA DTAA. 18 . WE SHALL NOW ANALYSE AS TO WHETHER THE REPAIR ACTIVITIES PROVIDED BY THE ASSESSEE TO ONGC CAN BE BR OUGHT WITHIN THE SWEEP OF R OYALTY , AS DEFINED IN ARTICLE XII (3)(G) OF THE INDIA - AUSTRALIA TAX TREATY. WE FIND THAT AS OBSERVED BY THE CIT(A) , THOUGH THE TERM MAKE AVAILABLE HAD NOT BEEN DEFINED UNDER THE INDIA - AUSTRALIA DTAA, HOWEVER, THE MEANING OF THE SAME CAN SAFELY BE GATHERED FROM OTHER SUCH SIMILAR TREATIES . WE ARE OF THE CONSIDERED VIEW THAT MERE RENDERING OF REPAIR WORK BY THE ASSESSEE OUTSIDE INDIA WOULD NOT ENABLE THE ONGC PERSON NEL TO MAKE USE OF TECHNICAL KNOWLEDGE, EXPERIENCE ETC . IN FUTURE. WE FIND THAT THE CIT(A) HAD DELIBERATED AT LENGTH ON THE ISSUE AS TO WHETHER THE PROVIDING OF REPAIR SERVICES BY THE ASSESSEE TO ONGC DID M AK E AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR PROCESS OR CONSISTED OF THE DEVELOPMENT AND TRAN SFER OF A TECHNICAL PLAN OR DESIGN. WE FIND THAT THE CIT(A) AFTER RELYING ON A HOST OF JUDICIAL PRONOUNCEMENT S AND THE SCOPE OF THE TERM MAKE AVAILABLE AS USED IN INDIA - USA DTAA, HAD OBSERVED THAT MERE RENDERING OF THE REPAIR SERVICES BY THE ASSESSEE AT ITS OVERSEAS WORK STATION DID NOT SATISFY THE MAKE AVAILABLE CONDITION AS CONTEMPLATED UNDER ARTICLE XII (3)(G) OF THE INDIA - AUSTRALIA TAX TREATY. WE THUS , ARE PERSUADED TO SUBSCRIBE TO THE VIEW TAKEN BY THE CIT(A) THAT THE RENDERING OF THE REPAIR SERVIC ES BY THE ASSESSEE TO ONGC CANNOT BE CHARACTERISED AS ROYALTY . STILL FURTHER, WE MAY HEREIN OBSERVE THAT AS THE EQUIPMENT I S OWNED BY ONGC ITSELF, THEREFORE, WHILE RENDERING THE REPAIR SERVICES, NO RIGHT TO USE THE EQUIPMENT CAN BE SAID TO HAVE BEEN PROVID ED BY THE ASSESSEE TO ONGC. WE THUS , FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A) HOLDING THAT THE REVENUE RECEIVED BY THE ASSESSEE P A G E | 25 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. FROM RENDERING OF THE REPAIR SERVICES TO ONGC CANNOT BE BROUGHT WITHIN THE SWEEP OF FTS OR ROYALTY, U PHOLD THE SAME. BEFORE PARTING, WE MAY FURTHER OBSERVE THAT AS THE REPAIR WORK S ARE UNDERTAKEN AT THE OVERSEAS WORK STATIONS OF THE ASSESSEE, THEREFORE, THE QUESTION OF TAXABILITY OF SUCH RECEIPTS FROM RENDERING OF THE REPAIR WORK AS ATTRIBUTABLE TO PE OF THE ASSESSEE IN INDIA DOES NOT ARISE . WE THUS, IN TERMS OF OUR AFORESAID OBSERVATIONS CONCLUDE THAT THE A.O HAD ERRED IN HOLDING THAT THE REVENUE FROM REPAIR ACTIVITIES RENDERED BY THE ASSESSEE TO ONGC WAS TAXABLE IN INDIA UNDER SEC. 44DA OF THE ACT. THE G ROUND OF APPEAL NO. 3 RAISED BY THE REVENUE IS DISMISSED. 19 . THE G ROUND S OF APPEAL NOS. 4 AND 5 BEING GENERAL IN NATURE ARE DISMISSED AS NOT PRESSED. 2 0 . THE APPEAL OF THE REVENUE IS DISMISSED. C.O NO. 315/MUM/2017 A.Y. 2011 - 12 2 1 . WE SHALL NOW TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE. THE ASSESSEE HAD RAISED THE FOLLOWING GROUNDS O F CROSS OBJECTION BEFORE US: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, IF THE QUESTION NUMBERS 1, 2 AND 3 RAISED IN THE GROUNDS OF APPEAL OF THE DEPARTMENT ARE HELD IN THE AFFIRMATIVE, THEN THE INCOME, IF AN Y , OUGHT TO BE COMPUTED AS PER THE PROVISIONS OF SECTION 44BB OF THE INCOME - TAX ACT, 1961 (THE ACT ). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WITHOUT PREJUDICE TO CROSS - OBJECTION (I) AND IF INCOME IS NOT COMPUTED AS PER THE PROVISIONS OF SECTION 44BB OF THE ACT, THEN THE INCOME, IF ANY, SHALL BE COMPUTED BASED ON THE GLOBAL PROFITABILITY AFTER CONSIDERING ALL THE EXPENSES PROVIDED IN THE GLOBAL FINANCIAL STATEMENTS. 3. THE R ESPONDENT CRAVES LEAVE TO ADD TO, ALTER, AMEND, VARY, OMIT OR SUBSTITUTE THE AFORESAID GROUNDS OF CROSS OBJECTIONS. 22 . THAT AS WE HAVE ALREADY DISMISSE D THE APPEAL OF THE REVENUE, THEREFORE, THE CROSS OBJECTION RAISED BY THE ASSESSEE HAVING BEEN RENDERED AS INFRUCTUOUS ARE THUS DISMISSED. P A G E | 26 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD. 23 . THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED IN TERMS OF OUR AFORESAID OBSERVATION. 24 . THE APPEAL OF THE REVENUE IN ITA NO. 3711/MUM/2016 AND THE CROSS OBJECTION NO. 315/MUM/2017 FILED BY THE ASSESSEE , ARE BOTH DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 13. 07.2018 SD/ - SD/ - (G.S. PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .0 7 .2018 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 27 ITA NO. 3711/MUM/2016 AND C.O NO. 315/MUM/2017 A.Y 2011 - 12 DCIT (IT) - 2(1)(1) VS. M/S CAMERON AUSTRALASI A PTY. LTD.