ITO, Dehradun V. Oil & Natural Gas Corporation Ltd. as representative assessee of M/s. Gaffney Cline & Associates, UK, Dehradun

ITA 1597/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7624 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANUJ ARORA CIT DR X
• Section: 206AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS: 1596, 1597/DEL/2012 AY : - 2011-12 ITO VS. OIL AND NATURAL GAS CORPORATION LIMITED INTERNATIONAL TAXATION AS REPRESENTATIVE ASSESSEE O F M/S. GAFFNEY CLINE & ASSOCIATES, UK 13-A, SUBHASH ROAD, ONGC LTD., CORPORATE TAX AAYAKAR BHAWAN, DIVISION, ROOM NO. 244, TEL BHAWA N, DEHRADUN. DEHRADUN PAN AAACO1598A (APPELLANT) (RESPONDENT) ITA NO: 1598/DEL/2012 AY : - 2011-12 ITO VS. OIL AND NATURAL GAS CORPORATION LIMITED INTERNATIONAL TAXATION AS REPRESENTATIVE ASSESSEE O F M/S. OCEANEERING INTERNATIONAL SERVICES LTD., UK 13-A, SUBHASH ROAD, ONGC LTD., CORPORATE TAX AAYAKAR BHAWAN, DIVISION, ROOM NO. 244, TEL BHAWA N, DEHRADUN. DEHRADUN PAN AAACO1598A (APPELLANT) (RESPONDENT) ITA NO: 1599/DEL/2012 AY : - 2011-12 ITO VS. OIL AND NATURAL GAS CORPORATION LIMITED INTERNATIONAL TAXATION AS REPRESENTATIVE ASSESSEE O F M/S. DR. OCTAVIAN CATINEANU, CANADA, 13-A, SUBHASH ROAD, ONGC LTD., CORPORATE TAX AAYAKAR BHAWAN, DIVISION, ROOM NO. 244, TEL BHAWA N, DEHRADUN. DEHRADUN PAN AAACO1598A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GAURAV JAIN, ADVOCATE , RESPONDENT BY : SHRI ANUJ ARORA, CIT DR 2 20X5 O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER ALL THESE APPEALS ARE FILED BY THE REVENUE DIRECTED AGAINST SEPARATE BUT IDENTICAL ORDER OF THE COMMISSIONER OF INCOME TAX ( A)-II, DEHRADUN DATED 16.1.2012 AS THE ISSUES ARISING FOR OUR CONSIDERAT ION ARE IDENTICAL IN ALL THESE CASES, FOR THE SAKE OF CONVENIENCE THEY ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORDER. 2. FACTS OF THE CASE :- OIL AND NATURAL GAS CORPOR ATION LIMITED (ONGC) HAD, AGAINST CONTRACT NO. MR/MM/MH/JRB/ULTIMATE RESERVES /2010/Y16RS 10001/PB-7007 DATED 22.11.2010 MADE PAYMENTS OF USD 6,50,000/- TO GAFFNEY CLINE & ASSOCIATES LTD. UK (NON-RESIDENT) FOR CERTIFICATION OF ULTIMAT E RESERVES AND RESERVES OF MUMBAI HIGH FIELD OF ONGC. THE NON-RESIDENT IS A TAX RESID ENT OF UNITED KINGDOM (UK) IN ITA NO. 1596/DEL/12 AND 1597/DEL/12, 1598/DEL/12 AND OF CANADA IN ITA NO. 1599/DEL/12. 2.1. THE SCOPE OF WORK OF THE CONTRACT IN ITA NO . 1596/DEL/12 AND 1597/DEL/12 INCLUDES CERTIFICATION OF PROVED, PROVED + PROBABLE AND PROVED + PROBABLE AND POSSIBLE ULTIMATE RESERVES AND RESERVES OF OIL, CON DENSATE, ASSOCIATED GAS AND FREE GAS. 2.2. ONGC APPLIED FOR AN ORDER UNDER SECTION 1 95(2) OF THE INCOME TAX ACT, 1961 (ACT) VIDE APPLICATION DATED 21.1.2011 TO THE INCOME TAX OFFICER (INTERNATIONAL TAXATION), DEHRA DUN (ITO). THE ITO, VIDE ORDER DATED 17.2.2011, DIRECTED INGC TO DEDUCT TAX @ 10% PLUS SURCHARGE AN D EDUCATION CESS ON THE GROSS 3 20X5 CONTRACTUAL PAYMENTS INCLUDING THE PAYMENTS ARISING ON ACCOUNT OF ALL TYPE OF EXPENDITURE TO BE MADE TO THE NON-RESIDENT, CONSIDE RING THE PAYMENTS TO BE MADE UNDER THE CONTRACT AS FEES FOR TECHNICAL SERVICES . 2.3. IN ITA NO. 1599/DEL/2012, THE NON-RESIDE NT WAS ENGAGED TO REVIEW 3 D SEISMIC DATA AND IDENTIFIED PROSPECTS IN MAHANADI D EEP WATER BLOCKS NAMELY MN- DWN-98/3 (5884 SQ KM 3D SEISMIC DATA IN 6 VOLUMES) AND NEC-DWN-2002/2 (6314 SQ. KM 3D SEISMIC DATA ACQUIRED IN 6 VOLUMES). THE SCOPE OF WORK ALSO INCLUDES THE ASSESSMENT OF PLAY PERCEPTION BASED ON REGIONAL SET TING AS REVEALED BY GXT-2D SEISMIC DATA AND WITHIN FRAMEWORK OF CONCEPTS OF SE QUENCE STRATIGRAPHY. IT ALSO INCLUDES THE IDENTIFICATION OF LOW STAND SYSTEM TRA CTS, GEOMETRY OF ASSOCIATED PLAY SYSTEM, IDENTIFICATION OF POSSIBLE PLAY TYPES AND A SSOCIATED DRILLABLE PROSPECTS. 2.4. ONGC APPLIED FOR AN ORDER UNDER SECTION 195(2) OF THE INCOME TAX ACT, 1961 (ACT) VIDE APPLICATION DATED 27.1.2011 TO THE INCOME TAX OFFICER (INTERNATIONAL TAXATION), DEHRADUN (ITO). THE ITO, VIDE ORDER DATE D 18.2.2011, DIRECTED ONGC TO DEDUCT TAX @ 10% PLUS SURCHARGE AND EDUCATION CESS ON THE GROSS CONTRACTUAL PAYMENTS INCLUDING THE PAYMENTS ARISING ON ACCOUNT OF ALL TYPE OF EXPENDITURE TO BE MADE TO THE NON-RESIDENT , CONSIDERING THE PAYMENTS TO BE MADE UNDER THE CONTRACT AS FEES FOR TECHNICAL SERVICES. HE FURTHER DIREC TED THAT IF THE ASSESSEE DOES NOT HAVE A PERMANENT ACCOUNT NUMBER (PAN) IN INDIA, TDS SHOULD BE DEDUCTED AS PER THE PROVISIONS OF SECTION 206AA OF THE ACT. 3. LD. CIT(A) IN HIS ORDER HAS HELD THAT, THE SERVI CES PROVIDED BY NRCS (NON RESIDENT COMPANY) TO ONGC ARE FOR THE PURPOSE OF P ROSPECTING FOR OR EXPLORATION OF MINERAL OILS AND THUS SECTION 44BB OF THE ACT SQUAR ELY APPLIES TO THE FACTS OF THIS 4 20X5 CASE. HE HELD THAT SINCE THE ACTIVITY PERTAINS TO M INING, IT IS OUT OF THE PURVIEW OF SECTION 9(1)(VII) OF THE ACT. HE RELIED ON THE JUDG MENT IN THE CASE OF R & B FALCON DRILLING CO. REPORTED IN 181 TAXMAN 62 (UK) AND HEL D THAT THE ENTIRE PAYMENT BY ONGC TO THE NRC MAY BE SUBJECTED TO TAX @ 10% OF TH E GROSS PROFIT U/S 44BB OF THE ACT. 4. THE REVENUE IS IN APPEAL ON THE FOLLOWIN G GROUNDS :- L. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE SERVICES RENDERE D BY THE ASSESSEE WERE IN THE NATURE OF A TECHNICAL SERVICES COVERED UNDER TH E PROVISIONS OF SECTION 9( I )(VII) AND TAXABLE UNDER THE PROVISIONS OF SEC. I I SA READ WITH SECTION 44 D OF THE ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT (A) HAS ERRED IN HOLDING THAT THE SERVICES RENDERED BY THE ASSESS EE, AS A CONTRACTOR FOR ONGC TOWARDS CERTIFICATION OF ULTIMATE RESERVES AN D RESERVES OF MUMBAI HIGH FIELD OF ONGC WERE EXCLUDED FROM THE DEFINITIO N OF FEES FOR TECHNICAL SERVICES ON THE BASIS OF INSTRUCTION O. 1862 WITHOU T APPRECIATING THAT THE SAID CIRCULAR HAD NOT CONSIDERED SECOND LIMB IN THE EXCL USION IN EXPLANATION 2 TO SECTION 9( I )(VII) OF THE ACT, I.E. THE WORDS 'ANY CONSTRUCTION. ASSEMBLY. MINING OR LIKE PROJECT' IN EXCLUSIONARY CLAUSE ARE QUALIFIED IN WORDS 'UNDERTAKEN BY THE RECIPIENT'. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT (A) HAD ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE WAS TAXA BLE UNDER THE PRESUMPTIVE PROVISIONS OF SEC. 44BB, IGNORING THE FACT THAT THE SEC. 44BB SHALL NOT BE APPLY IN THE CASE WHERE 44DA OR SEC. IISA, APPLIED AS CORROBORATED BY INSERTION OF CLARIFICATORY PROVISO TO SEC. 44BB AND SEC. 44DA TO THIS EFFECT IN THE ACT. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT (A) HAS ERRED IN NOT APPRECIATING THE FACT THAT PROVISO TO SEC. 4 4DA BROUGHT ABOUT THE FINANCE ACT TO 2011 BEING CLARIFICATORY IN NATURE, ITS APPLICATION HAS TO BE READ INTO THE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVISION CAME INTO EFFECT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING V/S CIT. 5 20X5 5. THE ISSUE IS NO MORE RES INTEGRA. THE HON BLE SUPREME COURT IN THE CASE OF OIL AND NATURAL GAS CORPORATION LTD. VS. CIT (CIVIL APPEAL NO. 731 OF 2007 DECIDED ON 1.7.2015) THE ASSESEES OWN CASE, HELD AS FOLL OWS :- THE ABOVE FACTS WOULD INDICATE THAT THE PITH AND S UBSTANCE OF EACH OF THE CONTRACTS/AGREEMENTS 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 MIN ERAL OILS THOUGH THERE MAY BE CERTAIN ANCILLARY WORKS CONTEMPLATED THEREUNDER. IF THAT BE SO, WE WILL HAVE NO HESITATION IN HOLDING THAT THE PAYMENTS MAD E BY ONGC AND RECEIVED BY THE NON-RESIDENT ASSESSES OR FOREIGN COMPANIES U NDER THE SAID CONTRACTS IS MORE APPROPRIATELY ASSESSABLE UNDER THE PROVISIONS OF SECTION 44BB AND NOT SECTION 44D OF THE ACT. ON THE BASIS OF THE SAID CO NCLUSION REACHED BY US, WE ALLOW THE APPEALS UNDER CONSIDERATION BY SETTING AS IDE THE ORDERS OF THE HIGH COURT PASSED IN EACH OF THE CASES BEFORE IT AND RES TORING THE VIEW TAKEN BY THE LEARNED APPELLATE COMMISSIONER AS AFFIRMED BY T HE LEARNED TRIBUNAL. 6. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS ALL THE APPEALS OF THE REVENU E. ORDER PRONOUNCED IN THE OPEN COURT ON 16.5.2016. SD/- SD/- (SUCHITRA KAMBLE) (J. SUDHAKAR REDDY) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: THE 16.5.2016 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSTT. REGISTRAR