ADIT, Dehradun V. Oil & Natural Gas Corporation Ltd. as representative assessee of M/s. GX Technology EAME Ltd., UK, Dehradun

ITA 1195/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6805 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KAVISH SYAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI C.M. GARG , JUDICIAL MEMBER ITA NO. 1195 /DEL/201 2 AY: 20 08 - 09 ADIT, INTERNATIONAL TAXATION VS. ONGC AS REPRESENTATIVE ASSESSEE 13 A, SUBASH ROAD OF M/S GX TECHNOLOGY EAME LTD., UK AAYAKAR BHAWAN CORPORATE TAX DIVN. DEHRADUN 248 001 ROOM NO.244, TEL BHAVAN DEHRADUN PAN: AAACO 1598 A CROSS OBJECTION NO. 192 /DEL/12 (IN ITA NO. 1195 /DEL/201 2) AY: 20 08 - 09 ONGC LTD. VS. ADIT (INTERNATIONAL TAXATION) DEHRADUN DEHRADUN (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AN UJ ARORA, CIT, D.R (INTERNATIONAL TAXATION) RESPONDENT BY : SH. KAVISH SYAL , ADV. ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - II, DEHRADUN DT. 27.12.2011 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2008 - 09. THE CROSS OBJECTION I.E. C.O.NO.192/DEL/12 IS FILED BY THE ASSESSEE. 2. FACTS OF THE CASE: - OI L AND NATURAL GAS CORPORATION HAD ENGAGED GX TECHNOLOGY EAME LTD. UK (NON RESIDENT) VIDE PURCHASE ORDER NO.5010032478 DATED 29.8.2007 TO CARRY OUT 3D SEISMIC SPECIAL PROCESSING. 2 NON - RESIDENT HAD PROCESSED 3D (THREE DIMENSIONAL SEISMIC) DATA AT UK. THE W ORK WAS CARRIED OUT AT UK AND PAYMENT FOR THE SAME WAS ALSO MADE TO THE NON RESIDENT OUTSIDE INDIA. NO PART OF PAYMENTS AGAINST THIS WORK ORDER CONSTITUTES BEING RECEIVED IN INDIA OR ACCURED IN INDIA . THE ASSESSEE WAS OF THE VIEW THAT THE INCOME ACCRUED BY WAY OF BUSINESS PROFITS TO A UK RESIDENT IS TAXABLE ONLY IN UK , AS PER ARTICLE 7 & 13, DEALING WITH BUSINESS PROFITS & ROYALTIES AND FEES FOR TECHNICAL SERVICES, OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA & UK. ONGC HAD FILED A RETURN OF IN COME OF THE NON RESIDENT ON 24.9.2008 CLAIMING THE RECEIPTS OF THE NON RESIDENT NOT TAXABLE IN INDIA AS PER DTAA BETWEEN INDIA AND UK. 3. THE ASSESSING OFFICER (A.O.) COMPLETED ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT ) R.W.S. 144C(3)(B) OF THE ACT ON 24.4.2011 HOLDING THAT THE INCOME OF THE ASSESSEE HAS TO BE BROUGHT TO TAX AS ROYALTY AND FEE FOR INCLUDED SERVICES. 4. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY AT T PARA 4.2 OF HIS ORDER HELD THAT THE ASSESSEE IS DEEMED TO HAVE A PERMANENT ESTABLISHMENT (P.E.) IN INDIA UNDER ARTICLE 5 OF THE INDO U K DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). HE FUR THER HELD THAT THE INCOME IS TAX ABLE U/S 44( BB ) OF THE ACT. 5 A GGRIEVED THE REVENUE IS IN A PPEAL BEFORE US. 6. THE ASSESSEE HAS FILED A CROSS OBJECTION. 7. WE HAVE HEARD SHRI KAVISH SYAL, THE LD.COUNSEL FOR THE ASSESSEE AND SHRI ANUJ AROA, LD.CIT, D.R. (INTERNATIONAL TAXATION) ON BEHALF OF THE REVENUE. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF MATERIAL ON RECORD, ORDERS OF LOWER AUTHORITIES, CASE LAWS CITED, WE HOLD AS FOLLOWS. 3 8. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT THE ISSUE IS NO MORE RES INTEGRA. THE HON BLE SUPREME COURT IN THE CASE OF ONG C LTD. VS. CIT, 376 ITR 306 (S.C.) HELD AS FOLLOWS. A CAREFUL READING OF THE PROVISIONS OF SECTION 44BB(1) SHOWS THAT IN CASE OF A NON - RESIDENT PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH OR SUPPLYING PLANT AND MACHINERY USED OR TO BE USED IN PROS PECTING, EXTRACTION OR PRODUCTION OF MINERAL OILS, THE PROFIT AND GAINS FROM SUCH BUSINESS CHARGEABLE TO TAX IS TO BE CALCULATED AT A SUM EQUAL TO 10 PER CENT OF THE AGGREGATE OF THE AMOUNTS PAID OR PAYABLE TO SUCH NON - RESIDENT ASSESSEE AS MENTIONED IN SUB - SECTION (2). ON THE OTHER HAND, SECTION 44D CONTEMPLATES THAT IF THE INCOME OF A FOREIGN COMPANY WITH WHICH THE GOVERNMENT OR AN INDIAN CONCERN HAD AN AGREEMENT EXECUTED BEFORE 1 - 4 - 1976 OR ON ANY DATE THEREAFTER THE COMPUTATION OF INCOME WOULD BE MADE AS CONTEMPLATED UNDER THE AFORESAID SECTION 44D. EXPLANATION (A) TO SECTION 44D, HOWEVER, SPECIFIES THAT 'FEES FOR TECHNICAL SERVICES' AS MENTIONED IN SECTION 44D WOULD HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SECTION 9(1), THE SAID EXPLAN ATION AS QUOTED ABOVE DEFINES 'FEES FOR TECHNICAL SERVICES' TO MEAN CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES. HOWEVER, THE LATER PART OF THE EXPLANATION EXCLUDES FROM CONSIDERATION FOR THE PURPOSES OF THE EXPRESSION, I.E., 'FEES FOR TECHNICAL SERVICES' ANY PAYMENT RECEIVED FOR CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE CHARGEABLE UNDER THE HEAD 'SALARIES'. FEES FOR TECHNICAL SERVICES, THEREFORE, BY VIRTUE OF THE AFORESAID EXPLANATION WILL NOT INCLUDE PAYMENTS MADE IN CONNECTION WITH A MINING PROJECT. [PARA 8] THE INCOME - TAX ACT DOES NOT DEFINE THE EXPRESSIONS 'MINES' OR 'MINERALS'. THE SAID EXPRESSIONS ARE FOUND DEFINED AND EXPLAINED IN THE MINES ACT, 19 52 AND THE OIL FIELDS (DEVELOPMENT AND REGULATION) ACT, 1948. WHILE CONSTRUING THE SOMEWHAT PARI MATERIA E XPRESSIONS APPEARING IN THE MINES AND MINERALS (DEVELOPMENT AND REGULATION) ACT, 1957 REGARD MUST BE HAD TO THE PROVISIONS OF ENTRIES 53 AND 54 OF LIS T I AND ENTRY 22 OF LIST II OF THE 7 SCHEDULE TO THE CONSTITUTION TO UNDERSTAND THE EXCLUSION OF MINERAL OILS FROM THE DEFINITION OF MINERALS IN SECTION 3(A) OF THE 1957 ACT. REGARD MUST ALSO BE HAD TO THE FACT THAT MINERAL OILS IS SEPARATELY DEFINED IN SE CTION 3(B) OF THE 1957 ACT TO INCLUDE NATURAL GAS AND PETROLEUM IN RESPECT OF WHICH THE PARLIAMENT HAS EXCLUSIVE JURISDICTION UNDER ENTRY 53 OF LIST I OF THE 7TH SCHEDULE AND HAD ENACTED AN EARLIER LEGISLATION, I.E., OIL FIELDS (REGULATION AND DEVELOPMENT) ACT, 1948. READING SECTION 2 (/) AND 2(JJ) OF THE MINES ACT, 1952 WHICH DEFINE MINES AND MINERALS AND THE PROVISIONS OF THE OIL FIELDS (REGULATION AND DEVELOPMENT) ACT, 1948 SPECIFICALLY RELATING TO PROSPECTING AND EXPLORATION OF MINERAL OILS, EXHAUSTIVEL Y REFERRED TO EARLIER, IT IS 4 ABUNDANTLY CLEAR THAT DRILLING OPERATIONS FOR THE PURPOSE OF PRODUCTION OF PETROLEUM WOULD CLEARLY AMOUNT TO A MINING ACTIVITY OR A MINING OPERATION. THE FACTS INDICATE THAT THE PITH AND SUBSTANCE OF EACH OF THE CONTRACTS/AGR EEMENTS IS INEXTRICABLY CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OIL. THE DOMINANT PURPOSE OF EACH OF SUCH AGREEMENT IS FOR PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OILS THOUGH THERE MAY BE CERTAIN ANCILLARY WORKS CONTEMPLATE D THEREUNDER. IF THAT BE SO, WE WILL HAVE NO HESITATION IN HOLDING THAT THE PAYMENTS MADE BY ONGC AND RECEIVED BY THE NON - RESIDENT ASSESSEES OR FOREIGN COMPANIES UNDER THE SAID CONTRACTS IS MORE APPROPRIATELY ASSESSABLE UNDER THE PROVISIONS OF SECTION 44BB AND NOT SECTION 44D. [PARA 13] 9. RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE APPEAL OF THE REVENUE. 10. THE CROSS OBJECTION IS FILED IN SUPPORT OF THE REVENUE S APPEAL. SINCE WE HAVE DISMISSED THE REVENUE S APPEAL THE C.O. IS DISMISSED AS NOT PRESSED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY, 2016 . SD/ - SD/ - ( C.M.GARG ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 26 TH JULY, 2016 M ANGA 5 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR