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

ITA 35/DEL/2012

• Counselvise Citation: 3520114 RSA 2012
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEV JYOTI DASS
• Assessee Lawyers: KAVEESH SYAL DR MANAGER
• Keywords: Double taxation relief
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NOS. 32, 33, 34 & 35/DEL/2012 ASSTT. YRS: 2005-06, 06-07, 07-08 & 2008-09 ASSTT. DIRECTOR OF INCOME-TAX, VS. M/S OIL & NATUR AL GAS CORPN. INTERNATIONAL TAXATION, LTD., AS REPRESENTATIVE ASSESSEE OF DEHRADUN. M/S GAFFNEY CLINE & ASSOCIATES, U.K. ( ONGC LD., CORPORATE TAX DIV. ROOM NO. 244, TEL BHAWAN, DEHRADUN) PAN/GIR NO. AAACO1598A (APPELLANT) ( RESPONDENT ) APPELLANT BY: SH. DEV JYOTI DASS CIT (DR) RESPONDENT BY : SH. KAVEESH SYAL DR. MANAGER. O R D E R PER R.P. TOLANI, J.M : THESE ARE FOUR REVENUES APPEALS AGAINST SEPARATE E ORDERS RELATING TO A.Y. 2005-06, 2006-07, 2007-08 & 2008-09. SINCE COM MON GROUNDS ARE RAISED, ALL THESE APPEALS ARE HEARD TOGETHER AND B EING DISPOSED OF BY THIS CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE. 2. COMMON GROUNDS RAISED ARE AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE AS A CONSULTANT W ERE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SEC. 9(1)(VII) OF THE ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE WAS NOT TAXABLE UNDER THE PROVISIONS OF SC . ITA 32 TO 35/DEL/12 M/S OIL & NATURAL GAS CORPN. LTD. 2 44DA, R.W.S. 115A EVEN THOUGH THE NATURE OF SERVICE S RENDERED BY THE ASSESSEE WERE TECHNICAL IN NATURE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE WAS TAXABLE UNDER THE PRESUMPTIVE PROVISIO NS OF SEC. 44BB AND IGNORING THE FACTS THAT TAXABILITY U/ S 44BB SHALL NOT APPLY IN RESPECT OF INCOME REFERRED TO IN SECTION 44DA IN VIEW OF THE CLARIFICATORY PROVISO TO SEC. 4 4BB AND SEC. 44DA. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT T HAT PROVISO TO SECTION 44DA BROUGHT ABOUT THE FINANCE A CT 2011 WAS ONLY CLARIFICATORY IN NATURE AND ITS APPLI CATION HAS TO BE READ IN TO THE MAIN PROVISIONS WITH EFFEC T FROM THE TIME THE MAIN PROVISION CAME IN TO EFFECT IN VI EW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF SEDCO FOREX INTERNATIONAL DRILLING VS. CIT. 3. LD. DR RELIES ON THE ORDER OF AO AND CONTENDS TH AT THE ISSUE ABOUT THE NATURE OF RECEIPTS OFFERED BY THE ASSESSEE IN RESP ECT OF SEISMIC SURVEY SERVICES HAS BEEN DECIDED BY THE ITAT DELHI BENCH O RDER DATED 15-1-2012 RENDERED IN ITA 4653/DEL/10 IN THE CASE OF M/S CGG VERITAS SERVICES SA, HOLDING AS UNDER: THE WORDS 'ANY CONSTRUCTION. ASSEMBLY, MINING OR LIKE PROJECT ' IN EXCLUSIONARY CLAUSE OF EXPLANATION? TO SECTION 9 ( I )(VII). WHICH DEFINES THE 'FEES FOR TECHNICAL SERVICES', ARE QUAL IFIED BY THE WORDS 'UNDERTAKEN BY THE RECIPIENT'. THEREFORE. THE ACTIV ITIES OF ANY CONSTRUCTION. ASSEMBLY. MINING OR LIKE PROJECT SHOULD BE CARRIED OUT BY THE RECIPIENT ASSESSEE HIMSELF. THEREFORE. IN A CASE WHERE AN ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH FOR PROSPECTING FOR O R EXTRACTION OR PRODUCTION OF MINERAL OIL, SUCH SERVICES OR FACILIT IES CANNOT BE EQUATED TO 'MINING OR LIKE PROJECTS' UNDERTAKEN BY THE ASSESSEE HIMSELF. SIMPLY BECAUSE THE ASSESSEE HAD PROVIDED SERVICES OR FACILITIES BY WAY OF ACQUISITION AND PROCESSING OF 3D SEISMIC DAT A ONBOARD. IT ITA 32 TO 35/DEL/12 M/S OIL & NATURAL GAS CORPN. LTD. 3 CANNOT BE SAID TO BE ENGAGED IN MINING PROJECT OR P ROJECT SIMILAR TO MINING. AS REGARDS CBDT INSTRUCTION NO 1862 ISSUED ON 22.1 0.1990. TRIBUNAL OBSERVED AS UNDER 'CLARIFIES THAT THE EXPRESSIONS 'MINING PROJECT' OR 'LIKE PROJECT' WOULD COVER RENDERING OF SERVICES LIKE IMPARTING OF TRAINING AND CARRYING OUT DRILLING OPERATIONS FOR EXPLORATION OR EXPLOITATION OF OIL A ND NATURAL GAS. THE INSTRUCTION IN PARAGRAPH 3 REFERS TO SECTIONS 44D AND 115A THE PROVISIONS OF SECTION 44D ARE NOT APPLICABLE IN RESPECT OF AN AGREEMENT MADE AFTER 31.3.2003. SECTION 440DA WAS INSERTED INTO STATUTE BY THE FINANCE ACT 2003 APPLICABLE W.E.F 1.4.2004 AND FROM THIS DATE THE CONSIDERATION FOR F EE FOR TECHNICAL SERVICES COVERED BY PROVISIONS OF SEC TION 44DA IS EXCLUDED FROM SECTION 115A . SECONDLY THE INSTRUCTION IS SILENT ABOUT THE EXPRESSION 'UNDERTAKEN BY THE RECIPIENT'. THEREFORE, IN OUR CONSIDERED OPI NION THE INSTRUCTION CANNOT BE APPLIED TO TAKE OUT A CAS E FROM AMBIT OF SECTION 115A AND PUT THE SAME IN SECT ION 44BB(1) . SINCE THE STATUTORY PROVISIONS AS DISCUSSED ABOVE ARE CLEAR. CBDT INSTRUCTION NO 1862 IS OF NO HELP TO THE ASSESSEE.' TECHNICAL SERVICES RENDERED BY THE ASSESSEE ARE I N CONNECTION WITH THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF MINERAL OILS. WITH EFFECT FROM ASSESSMENT YEAR 2011-12, FEE FOR TECHNICAL SERVICES WHETHER RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OIL OR OTHERWISE WILL BE ASSE SSABLE EITHER U/S 44DA OR SECTION 115A OF THE ACT DEPENDING ON FACT W HETHER SUCH RECEIPTS ARE EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE OF PROFESSION, OR NOT. HOWEVER, FOR ASSESSMENT YEAR 20 04-05 TO 2010-11 THE CONSIDERATION RECEIVED FOR FEE FOR TECHNICAL SE RVICES RENDERED IN CONNECTION WITH PROSPECTING FOR OR EXTRACTION OR PR ODUCTION OF MINERAL OIL THOUGH EFFECTIVELY CONNECTED WITH PE OR FIXED PLACE OF PROFESSION WILL FALL OUTSIDE THE SCOPE OF SECTION 4 4DA AND WILL BE ASSESSABLE UNDER SECTION 44BB(1) OF THE ACT FOR THE SIMPLE REASON THAT PROVISO TO SECTION 44BB(1) DOES NOT CONTAIN SE CTION 44DA FOR THESE YEARS. ITA 32 TO 35/DEL/12 M/S OIL & NATURAL GAS CORPN. LTD. 4 3.1. THUS IT HAS BEEN HELD THAT THE NATURE OF SERVI CES PROVIDED BY THE ASSESSEE ARE IN THE NATURE OF FEE FOR TECHNICAL SER VICES (FTS). THEREFORE, THE AO WAS RIGHT IN HOLDING AS UNDER: 10. THE SCOPE OF THE WORK INVOLVES THE MAKING AVAI LABILITY OF TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES TO ONGC. THE ASSESSEE IS LIABLE TO BE TAXED AS PER THE PROVISIONS OF INCOME TAX ACT AND AS PER THE PROVISI ONS OF THE DTAA UNDER THE HEAD FEES FOR TECHNICAL SERVICES IN VIEW OF THE ASSESSEE. ACCORDINGLY, TOTAL RECEIPTS OF RS. 11,78, 09,037/- INCLUDING REIMBURSEMENTS OF RS. 11,64,920/- ON ACCO UNT OF EXPENSES ARE BROUGHT TO TAX UNDER THE HEAD FEES FO R TECHNICAL SERVICES IN VIEW OF THE DTAA @ 15% IN VIEW OF THE PROVISION CONTAINED IN ARTICLE 13(2) OF THE DTAA AS THE ASSES SEE HAS OPTED TO BE ASSESSED UNDER DTAA. 4. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDS THAT SINCE THE ASSESSEE WAS UNDER THE BELIEF THAT IT IS COVERED U/ S 44BB, THEREFORE, THE ALTERNATE CLAIM ABOUT PE AND APPLICABILITY OF SEC. 44DA HAS NOT BEEN EXAMINED EITHER BY AO OR BY THE CIT(A). RELIANCE IS PLACED ON SEC. 90(2), REPRODUCED BELOW, FOR THE PROPOSITION THAT THE PROV ISIONS OF DOMESTIC LAW OR DTAA WHICH ARE BENEFICIAL TO THE ASSESSEE SHALL BE APPLIED: 90(2) WHERE THE CENTRAL GOVERNMENT HAS ENTERED IN TO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSID E INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, AS THE CASE MAY BE, UNDER SUB- SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS THE C ASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THA T ASSESSEE. 4.1. SINCE THE ISSUE ABOUT EXISTENCE OF PE AND CONS EQUENT APPLICABILITY OF SEC. 115A ALONG WITH SEC. 44DA WILL BE NECESSARY TO DETERMINE THE TAXABILITY OF THE ASSESSEE, REVENUES APPEALS MAY B E SET ASIDE, RESTORED BACK TO THE FILE OF AO TO READJUDICATE THE ISSUE IN ACCO RDANCE WITH LAW. ITA 32 TO 35/DEL/12 M/S OIL & NATURAL GAS CORPN. LTD. 5 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ITAT JUDGMENT IN THE CASE OF M/S CGG VERIT AS SERVICES SA (SUPRA), RELEVANT PART OF WHICH IS REPRODUCED HEREI N ABOVE, HAS HELD THAT THE RECEIPTS FROM SEISMIC SERVICES RENDERED BY THE ASSE SSEE ARE IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND LIABLE FOR TAX U/S 1 15A AND IN CASE OF PE U/S 44DA. THE ASSESSEE FILED ITS RETURN OF INCOME TAXAB LE UNDER THE PROVISIONS OF SEC. 44BB. THE ISSUE ABOUT PE AND CONSEQUENT APP LICATION OF PROVISIONS OF SEC. 44DA READ WITH SEC. 115A AND THE APPLICABIL ITY OF PROVISION BENEFICIAL TO THE ASSESSEE U/S 90(2) REMAIN TO BE E XAMINED. IN VIEW THEREOF, WE ARE INCLINED TO SET ASIDE THE ISSUES RAISED BY T HE REVENUE TO THE FILE OF AO. AO SHALL DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AND KEEPING IN VIEW ABOVE OBSERVATION. 6. IN THE RESULT, REVENUES APPEALS STAND ALLOWED F OR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 06-03-2012. SD/- SD/- ( K.D. RANJAN) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 06-03-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 32 TO 35/DEL/12 M/S OIL & NATURAL GAS CORPN. LTD. 6