ASST DIT (IT) 4(2), MUMBAI V. OIL AND NATURAL GAS CORPORATION LTD, MUMBAI

ITA 4989/MUM/2012

• Counselvise Citation: 498919914 RSA 2012
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 07-04-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KAVEESH SYAL
• Keywords: Permanent establishment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI , . , . . BEFORE SHRI R C SHARMA, AM & SHRI SANJAY GARG, JM ITA NO.4989/MUM/2012 ! ' / ASSESSMENT YEAR : 2012- 13 DY. DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION 4(2), MUMBAI VS M/S. OIL AND NATURAL GAS CORPORATION LTD., 526, VASUNDHARA BHAVAN BANDRA (EAST) MUMBAI 400 004 PAN AAACO1598A ( #$ /APPELLANT) ( %&#$ /RESPONDENT) APPELLANT BY : SHRI PANKAJ KUMAR RESPONDENT BY : SHRI KAVEESH SYAL ! ' () / DATE OF HEARING :09.07.2015. ' ' () / DATE OF PRONOUNCEMENT : 09.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-11, MUMBAI, DATED 18.05.2012, P ERTAINING TO A.Y. 2012-13. 2. THE SOLE ISSUE RAISED BY THE REVENUE IN THIS APP EAL IS AS TO WHETHER THE PAYMENT MADE BY THE ASSESSES ONGC TO FOREIGN COMPANY M/S GAFFNEY CLINE & ASSOCIATES, UK FOR AUDI T OF RESERVES FOR 2 ITA 4989/MUM/12 OIL & NATURAL GAS CORPORATION LTD. MUMBAI HIGH FIELD IS TAXABLE AS FEES FOR TECHNICAL SERVICE U/S 44D OF THE ACT OR AS SERVICES OR FACILITIES IN THE PROS PECTING FOR OR EXTRACTING OR PRODUCTION OF MINERAL OILS UNDER SECT ION 44BB OF THE ACT. 3. THE ASSESSEE ONGC MADE PAYMENT TO M/S GAFFNEY CL INE AND ASSOCIATES LTD., UK OF US DOLLARS 2,00,000/- FOR AU DIT OF ITS RESOURCES OF MUMBAI HIGH FIELD, AS PER THE AGREEMENT SIGNED W ITH THEM . THE SAID M/S GAFFNEY CLINE & ASSOCIATES IS A TAX RESIDE NT OF UK AND DOES NOT HAVE A PERMANENT ESTABLISHMENT (PE) IN INDIA IN TERMS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN UK AND INDIA. ASSESSEE ONGC APPLIED FOR AN ORDER UNDER SECTION 195(2) OF THE INCOME TAX ACT 1961 TO THE ADDL. DIRECTOR OF INCOME TAX MUMBAI (HEREAFTER REFERRED TO AS AD). THE AD, HOWEVER, DIRECTED THE A SSESSEE ONGC TO DEDUCT TAX @10.506%, HOLDING THAT THE PAYMENTS WERE COVERED UNDER FEES FOR TECHNICAL SERVICES U/S 44D OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED APPEAL B EFORE THE CIT (A). THE LEARNED CIT (A) AFTER CONSIDERING THE CLAU SES OF THE AGREEMENT IN QUESTION, EXAMINING THE NATURE OF SERV ICES PROVIDED AND FURTHER RELYING UPON VARIOUS CASE LAWS OF HIGHE R JUDICIAL AUTHORITIES HELD THAT THE PAYMENT MADE FOR THE WORK OF AUDIT OR 3 ITA 4989/MUM/12 OIL & NATURAL GAS CORPORATION LTD. ASSESSMENT OF RESERVES OF ONGC BY THE FOREIGN COMPA NY CANNOT BE TAXED AS FEES FOR TECHNICAL SERVICES. THE ASSESSEE HAD NOT BEEN ENABLED TO USE THE TECHNICAL KNOWLEDGE EMPLOYED BY THE FOREIGN COMPANY FOR THE SAID WORK AND THAT THE BENEFITS DER IVED BY THE ASSESSEE WERE NOT ENDURING IN NATURE. THE LEARNED C IT(A) FURTHER RELYING UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DE BEERS INDIA MINERALS PVT. LTD. (2012) 2 1 TAXMAN.COM 214 (KAR) HELD THAT THE NATURE OF SERVICES RENDERED BY THE FOREIGN COMPANY DID NOT SATISFY THE TESTS LAID DOWN BY THE HIGH COURT OF MAKE AVAILABLE CLAUSE. THE SERVICES RENDERED BY T HE FOREIGN COMPANY WERE IN CONNECTION WITH THE BUSINESS OF EXP LORATION AND EXTRACTION OF MINERAL OIL, THEREFORE THE PAYMENTS W AS TAXABLE U/S 44 BB OF THE ACT. 5. BEING AGGRIEVED BY THE ABOVE FINDINGS OF THE CIT (A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LEARNED AR OF THE ASSESSEE AT THE OUTSET HAS INVITED OUR ATTENTION TO THE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE OWN CAS E OF THE ASSESSEE STYLED AS OIL & NATURAL GAS CORPORATION L TD. VS. CIT(2015) 59 TAXMAN.COM 1(SC), WHEREIN THE HONBLE SUPREME CO URT HAS HELD 4 ITA 4989/MUM/12 OIL & NATURAL GAS CORPORATION LTD. THAT IF THE PITH AND SUBSTANCE OF THE CONTRACTS/ AG REEMENTS IS INEXTRICABLY CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OIL, THE PAYMENTS MADE BY ONGC AND RECEIVED BY NON- RESIDENT ASSESSEE OR FOREIGN COMPANIES UNDER THE SA ID CONTRACTS IS MORE APPROPRIATELY ASSESSABLE UNDER THE SPECIFIC PR OVISIONS OF SECTION 44 BB AND NOT UNDER THE GENERAL PROVISIONS OF SECTI ON 44D OF THE ACT. 7. IN THE CASE IN HAND, THE SCOPE OF WORK OF THE CONTRACT INCLUDED AUDIT OF ONGCS CURRENT PROVED, PROVED +PROBABLE AN D PROVED +PROBABLE + POSSIBLE ULTIMATE RESERVES AND RESERVES OF OIL CONDENSATE, ASSOCIATED GAS AND FREE GAS. THE ABOVE SERVICES WERE THUS RELATED TO THE ACTIVITY OF PROSPECTING FOR OR EXPLORATION OF MINERAL OILS, WHICH ARE COVERED UNDER THE PROVISION S OF SECTION 44 BB OF THE ACT. MOREOVER, THE TEST OF MAKE AVAILABLE IS NOT SATISFIED AS THE ASSESSEE COULD NOT DERIVE AN ENDURING BENEFIT A ND UTILIZE THE KNOWLEDGE OR KNOW HOW ON HIS OWN IN FUTURE WITHOUT THE AID OF THE SERVICE PROVIDER FOR CARRYING OUT IDENTICAL ACTIVIT IES. THERE IS NO TRANSFER OF TECHNICAL KNOWLEDGE AND SKILL ENABLING THE ASSESSEE TO PERFORM SIMILAR ACTIVITIES IN FUTURE AT ITS OWN. HE NCE, THE PAYMENT CANNOT BE TAXED AS FEES FOR TECHNICAL SERVICES EVEN OTHERWISE IN THE 5 ITA 4989/MUM/12 OIL & NATURAL GAS CORPORATION LTD. LIGHT OF THE PROPOSITION OF LAW LAID DOWN BY THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF DE BEERS INDIA MINERALS PVT. LTD. (SUPRA). 8. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPE AL OF THE REVENUE AND THE SAME IS THEREFORE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.07.2015. SD/- SD/- (R C SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; ,-! DATED : 20 TH OCTOBER, 2015. SA - ' % (./ 0/'( /COPY OF THE ORDER FORWARDED TO : 1. #$ /THE APPELLANT. 2. %&#$ / THE RESPONDENT. 3. 1( ( ) / THE CIT(A), MUMBAI. 4. 1( / CIT 5. /2 % ( ! , , / DR, L BENCH, ITAT, MUMBAI -! / BY ORDER, &/( % ( //TRUE COPY// (ASSTT. REGISTRAR) , / ITAT, MUMBAI