ONGC as representative assessee of DeGolyer & MacNaughton, USA, Dehradun V. ITO, Dehradun

ITA 5583/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2679 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Assessee Lawyers: KAVEESH SYAL
• Keywords: Business income; Double taxation relief; Retrospective amendment; Question of law
• Section: 28; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5583/DEL/2012 AY: 20 09-2010 ONGC AS REPRESENTATIVE ASSESSEE OF VS INCOME TA X OFFICER, DEGOLYER & MACNAUGHTON, USA. INTERNATIONAL TAXAT ION, DGM-HEAD,CORPORATE TAX, ONGC LTD. DEHRADUN. ROOM NO. 244, OLD SECRETARIAT BUILDING, TEL BHAWAN, DEHRADUN 248 003 (APPELLANT) (RESPONDENT ) APPELLANT BY : SHRI KAVEESH SYAL, CA RESPONDENT BY : SHRI P. DAMKANUNJA, SR. DR DATE OF HEARING: 23.12.2015 DATE OF PRONOUNCEMENT: ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER DATED 29TH OF AUGUST 2012 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (A) PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE RETURN OF INCOME WAS FILED ON 29/09/2009 SHO WING INCOME AT NIL BY M/S ONGC LTD IN ITS CAPACITY AS THE REPRESENTATIVE ASSESSEE OF M/S DEGOLYER AND MANAUGHTON, USA. DURING THE RELEVANT PREVIOUS Y EAR, ONGC HAD MADE PAYMENT OF RS. 4,76,10,244/- TO M/S DEGOLYER AND M ANAUGHTON, USA AGAINST TAX PROTECTED CONTRACT DATED 12/02/2008 AND AMENDME NT NO. 1 THERETO DATED 31.03.2008. I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 2 3. THE ASSESSEE WAS REQUIRED BY THE AO TO SHOW CAUS E AS TO WHY THE REVENUES RECEIVED BY IT MAY NOT BE TREATED AS FEES FOR TECHNICAL SERVICES. THE ASSESSEE WAS OF THE VIEW THAT THE NON-RESIDENT WAS ENGAGED BY ONGC FOR AUDITING/THIRD-PARTY CERTIFICATION OF IN-PLACE AND RESERVES OF 56 FIELDS OF ONGC AND ADDITIONAL 12 FIELDS. THE WORK WAS CARRIED OUT BY THE NON-RESIDENT AT ITS WORKPLACE DALLAS, USA. ALSO THE NON-RESIDENT DID NO T HAVE ANY OFFICE IN INDIA. IT WAS THE ASSESSEES CONTENTION THAT THE SERVICES RENDERED BY THE NON-RESIDENT WOULD BE HELPFUL IN BETTER UNDERSTANDING OF THE RES ERVES OF OIL AND GAS AND THUS ALSO AID IN THEIR PRODUCTION IN AN OPTIMAL MANNER. AS SUCH, THE SERVICES RENDERED BY THE NON-RESIDENT WERE A STEP-IN-AID TO THE MININ G FOR MINERAL OIL. IT WAS SUBMITTED BEFORE THE AO THAT WHEN EVEN THE CONSIDER ATION FOR SERVICES OF IMPARTING TRAINING ARE EXCLUDED FROM THE TERM FEE S FOR TECHNICAL SERVICES, IT WOULD BE INCORRECT TO CONCLUDE THAT THE SERVICES RE NDERED BY THE NON-RESIDENT IN THE INSTANT CASE COULD BE BROUGHT TO TAX AS FEES F OR TECHNICAL SERVICES. THE ASSESSEE FURTHER REFERRED TO THE MEMORANDUM OF UNDE RSTANDING (MOU) DATED 15/05/1989 BETWEEN THE GOVERNMENTS OF INDIA AND USA AND PARAGRAPH 4(B) OF ARTICLE 12 OF THE INDIA-USA DOUBLE TAXATION AVOIDAN CE AGREEMENT (DTAA) WHEREIN A REFERENCE HAS BEEN MADE TO TECHNICAL CONS ULTANCY SERVICES. IT WAS SUBMITTED THAT IT WAS THE INDIAN GOVERNMENT'S VIEW THAT CONSIDERATION FOR A TECHNICAL OR CONSULTANCY SERVICE COULD BE CONSIDERE D AS FEES FOR INCLUDED SERVICES ONLY IF THE SAME RESULTED IN MAKING THE T ECHNOLOGY AVAILABLE TO THE PERSON ACQUIRING THE SERVICE AND THAT THE TECHNOLOG Y WOULD BE CONSIDERED MADE I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 3 AVAILABLE WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APPLY THE TECHNOLOGY. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT IT WAS THE INDIAN GOVERNMENT'S VIEW THAT THE FACT THAT THE PRO VISION OF SERVICE MAY REQUIRE TECHNICAL INPUT BY THE PERSON PROVIDING THE SERVICE DOES NOT, PER SE , MEAN THAT TECHNICAL KNOWLEDGE, SKILLS ETC. WERE MADE AVAILABL E TO THE PERSON PURCHASING THE SERVICE, WITHIN THE MEANING OF PARAGRAPH 4(B) O F INDIA USA DOUBLE TAXATION AVOIDANCE A G REEMENT. IT WAS THE ASSESSEES SUBMISSION THAT IN T HE COURSE OF RENDERING SERVICES TO THE ONGC, THE NON-R ESIDENT ITSELF MAY HAVE USED ITS TECHNICAL KNOWLEDGE SKILLS ETC. HOWEVER, S INCE ONGC HAD NOT BEEN ENABLED TO APPLY THE TECHNOLOGY IN FUTURE ON ITS OW N WITHOUT RECOURSE TO THE NON-RESIDENT AND THE KNOWLEDGE REQUIRED TO CARRY OU T SIMILAR WORK HAD NOT BEEN MADE AVAILABLE TO THE ONGC, THE PAYMENTS MADE BY ON GC TO THE NON-RESIDENT CANNOT BE TAXED AS FEES FOR INCLUDED SERVICES UND ER INDIA USA DOUBLE TAXATION AVOIDANCE AGREEMENT. THE ASSESSEE ALSO REF ERRED TO THE PROVISIONS OF SECTION 90 (2) OF THE INDIAN INCOME TAX ACT, 1961 W HEREIN IT IS PROVIDED THAT WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AG REEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA UNDER SUB-S ECTION 1 FOR GRANTING RELIEF OF TAX OR AVOIDANCE OF DOUBLE TAXATION, THEN, IN RE LATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THE ACT S HALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. HENCE, IT WAS THE ASSESSEES SUBMISSION BEFORE THE AO THAT RECEIPTS FOR THE SERVICES RENDER ED BY THE NON-RESIDENT WERE NOT CHARGEABLE TO INCOME TAX IN INDIA. I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 4 4. HOWEVER, THE AO WAS OF THE OPINION THAT THE SCOP E OF WORK MENTIONED IN THE CONTRACT MADE IT CLEAR THAT THE ASSESSEE WAS NO T RENDERING ANY SERVICES RELATING TO THE CONSTRUCTION, ASSEMBLY, MINING OR L IKE PROJECT AS MENTIONED IN THE EXCLUSION CLAUSE OF EXPLANATION 2 TO SECTION 9 (1) (VII) OF THE INCOME TAX ACT, 1961. THE AO PROCEEDED TO HOLD THAT THE ASSESSEES ACTIVITIES WERE COVERED UNDER FEES FOR TECHNICAL SERVICES AND ALL THE REC EIPTS EMANATING FROM THE CONTRACT UNDER CONSIDERATION WERE TO BE TAXED IN IN DIA. THE AO ACCORDINGLY PROPOSED TO IMPOSE TAX AT TOTAL INCOME OF RS. 5,32, 30,000/- AFTER GROSSING UP OF TAX. A DRAFT ASSESSMENT ORDER WAS, ACCORDINGLY, PAS SED ON 23/12/2011. SINCE THE ASSESSEE DID NOT REFER THE MATTER TO THE DISPUTE RE SOLUTION PANEL, THE ASSESSMENT WAS FINALISED ON 24/02/2012 AT A TOTAL INCOME OF RS . 5,32,30,000/- UNDER SECTION 143 (3) READ WITH SECTION 144C (3) (B) OF THE INCOM E TAX ACT, 1961. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE FIRST APPELLATE AUTHORITY WHEREIN THE APPEAL OF THE ASSESSEE WAS DI SMISSED FOLLOWING THE DECISION OF ITAT, DELHI BENCH RENDERED IN THE CASE OF CGG VERITAS SERVICES SA VS ADIT, DEHRADUN IN 50 S0T 335. 6. NOW THE ASSESSEE IS AN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING 4 GROUNDS OF APPEAL:- 1. LD. CIT(A)-II DEHRA DUN HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN UPHOLDING THE ORDER PA SSED BY THE ASSESSING OFFICER WHEREIN IT WAS HELD THAT THE RECE IPTS OF DEGOLYER & MACNAUGHTEN, USA, ARE TAXABLE AS 'FEES FOR TECHNI CAL SERVICES UNDER THE PROVISIONS OF THE INCOME-TAX ACT. 1961. I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 5 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II , DEHRA DUN, HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN NOT HOLDING THAT THE RECEIPTS OF DEGOLYER & MACNAUG HTEN, USA, WERE NOT TAXABLE IN INDIA AS PER THE INDIA-USA DOUB LE TAXATION AVOIDANCE AGREEMENT. 3. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II. DEHRA DUN, HAS ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN REJECTING THE ALTERNATIVE CONTENTION OF APPELLANT THAT THE RECEIP TS OF DEGOLYER & MACNAUGHTEN, USA, ARE TAXABLE U/S. 44BB OF THE INCO ME-TAX ACT, 1961. 4. THE APPELLANT CRAVES PERMISSION TO ADD, ALTER A ND/OR AMEND ANY GROUND(S) OF APPEAL BEFORE OR AT THE TIME OF HEARIN G. 7. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT T HE RECENT JUDGEMENT OF THE HON'BLE SUPREME COURT, IN ASSESSEES OWN CASE I N OIL AND NATURAL GAS CORPORATION LIMITED VS CIT 59 TAXMAN.COM 1 (SC), HA S HELD THAT IF THE PITH AND SUBSTANCE OF THE CONTRACTS/AGREEMENTS IS INEXTR ICABLY CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OI L, THE PAYMENTS MADE BY ONGC AND RECEIVED BY NON-RESIDENT ASSESSEES OR FORE IGN COMPANIES UNDER THE SAID CONTRACTS ARE MORE APPROPRIATELY ASSESSABLE UN DER THE SPECIFIC PROVISIONS OF SECTION 44 BB AND NOT UNDER THE GENERAL PROVISIONS OF SECTION 44 D OF THE ACT. THE LD. AR SUBMITTED THAT THE SCOPE OF THE WORK INC LUDED AUDIT OF ONGC'S CURRENT PROVED, PROVED AND PROBABLE AND PROVED AND PROBABLE AND POSSIBLE ULTIMATE RESERVES AND RESERVES OF OIL CONDENSATE, A SSOCIATED GAS AND FREE GAS. THE ABOVE SERVICES WERE THUS RELATED TO THE ACTIVIT Y OF PROSPECTING FOR OR I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 6 EXPLORATION OF MINERAL OILS, WHICH WERE COVERED UND ER THE PROVISIONS OF SECTION 44 BB OF THE ACT. MOREOVER, THE TEST OF MAKE AVAI LABLE WAS NOT SATISFIED AS THE ASSESSEE COULD NOT DERIVE AN ENDURING BENEFIT AND UTILISE THE KNOWLEDGE OR KNOW HOW ON HIS OWN IN FUTURE WITHOUT THE AID OF TH E SERVICE PROVIDER FOR CARRYING OUT IDENTICAL ACTIVITIES. THERE IS NO TRAN SFER OF TECHNICAL KNOWLEDGE AND SKILLS SO AS TO ENABLE THE ASSESSEE TO PERFORM SIMI LAR ACTIVITIES IN FUTURE ON ITS OWN. IT WAS SUBMITTED THAT THEREFORE THE PAYMENT CO ULD NOT BE TAXED AS FEES FOR TECHNICAL SERVICES. THE LEARNED AR PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 4989/M UM/2012 IN THE CASE OF DEPUTY DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATI ON, MUMBAI VERSUS M/S ONGC. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ONGC LTD. VERSUS COMMISSIONER OF INCOME TAX 59 TAXMAN.COM 1 (SC). 8. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AO AND THE LD. CIT (A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL ON RECORD. IT IS SEEN THAT S ECTION 44BB INSERTED BY THE FINANCE ACT, 1987 WITH RETROSPECTIVE EFFECT FROM 1-4-1983 READS AS UNDER: SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS I N CONNECTION WITH THE BUSINESS OF EXPLORATION, ETC., OF MINERAL OILS 44BB. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAI NED IN SECTIONS 28 TO 41 AND SECTIONS 43 AND 43A, IN THE C ASE OF AN ASSESSEE [BEING A NON-RESIDENT] ENGAGED IN THE BUSI NESS OF I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 7 PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH , OR SUPPLYING PLANT AND MACHINERY ON HIRE USED, OR TO BE USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MI NERAL OILS, A SUM EQUAL TO TEN PER CENT OF THE AGGREGATE OF THE A MOUNTS SPECIFIED IN SUBSECTION (2) SHALL BE DEEMED TO BE T HE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION. PROVIDED THAT THIS SUB-SECTION SHALL NOT APPLY IN A CASE WHE RE THE PROVISIONS OF SECTION 42 OR SECTION 44D OR SECT ION 115A OR SECTION 293A APPLY FOR THE PURPOSES OF COMPUTING PR OFITS OR GAINS OR ANY OTHER INCOME REFERRED TO IN THOSE SECT IONS. (2) THE AMOUNTS REFERRED TO IN SUB-SECTION (1) SHAL L BE THE FOLLOWING NAMELY:- (A) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON A CCOUNT OF THE PROVISION OF SERVICES AND FACILITIES IN CONNEC TION WITH, OR SUPPLY OF PLANT AND MACHINERY ON HIRE USED, OR TO B E USED, IN THE PROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF , MINERAL OILS IN INDIA; AND (B) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE PROV ISION OF SERVICES AND FACILITIES IN CONNECTION WITH, OR SUPP LY OF PLANT AND MACHINERY ON HIRE USED, OR TO BE USED, IN THE P ROSPECTING FOR, OR EXTRACTION OR PRODUCTION OF, MINERAL OILS O UTSIDE INDIA. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1), AN ASSESSEE MAY CLAIM LOWER PROFITS AND GAINS THAN THE PROFITS AND GAINS SPECIFIED IN THAT SUB-SECTION, IF HE KEEP S AND MAINTAINS SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED UNDER SUB-SECTION (2) OF SECTION 44AA AND GETS HIS ACCOUNTS AUDITED AND FURNISHES A REPORT OF SUCH AUD IT AS REQUIRED UNDER SECTION 44AB, AND THEREUPON THE ASSE SSING OFFICER SHALL PROCEED TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE UNDER SUBSECTION (3) OF SECTION 143 AND DETERMINE THE SUM PAYABLE BY, OR REFUNDABLE TO, THE ASSESSEE. EXPLANATION.-FOR THE PURPOSES OF THIS SECTION,- (I) 'PLANT' INCLUDES SHIPS, AIRCRAFT, VEHICLES, DRI LLING UNITS, SCIENTIFIC APPARATUS AND EQUIPMENT, USED FOR THE PU RPOSES OF I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 8 THE SAID BUSINESS; (II) MINERAL OIL' INCLUDES PETROLEUM AND NATURAL G AS. 10. THE BASIC INGREDIENTS OF THIS SECTION ARE THA T THE NON-RESIDENT ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF PROVIDING SERV ICES OR FACILITIES IN CONNECTION WITH THE PROSPECTING OR EXTRACTION OR PR ODUCTION OF MINERAL OILS. NON-RESIDENT ASSESSEE SHOULD BE ENGAGED IN THE BUSI NESS OF SUPPLY PLANT AND MACHINERY ON HIRE USED OR TO BE USED, IN PROSPECTIN G FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS. THE AMOUNT BEING 10% OF GROSS RECEIPTS WOULD BE ASSESSABLE AS 'BUSINESS INCOME. HOWEVER, A PROVISO WAS ALSO INSERTED WHICH, INTER ALIA, EXCLUDED THE ROYALTY OR FTS CONTEMPLATE D U/S 44D OR SECTION 115A. SECTION 44DA WAS INSERTED BY FINANCE ACT 2010 W.E.F . 1.4.2011. FROM THE COMBINED READING OF THESE SECTIONS IT IS EVIDENT TH AT ALL THE SECTIONS RELATING TO ROYALTY/FTS OPERATE IN DIFFERENT FIELDS AND THAT IS THE REASON FOR INSERTION OF PROVISO TO SECTIONS 44BB/44DA/115A. WHERE THE ASSE SSEE WAS IMPARTING SERVICES WHICH ENTITLED IT TO ROYALTY OR FTS SIMPLI CITER THEN THE SAME CONTINUES TO BE ASSESSED U/S 9(1)(VI)/(VII) READ WITH SECTION 115A OF THE ACT. HOWEVER, WHERE THE ASSESSEE IS IMPARTING SERVICES IN RELATIO N TO OIL EXPLORATION, THE ROYALTY/FTS WOULD BE TAXABLE U/S 44BB. SPECIFIC SE RVICES ARE CONTEMPLATED ONLY UNDER SECTION 44BB AND, THEREFORE THAT BEING S PECIAL PROVISION, THE SAME WILL PREVAIL OVER ALL OTHER PROVISIONS DEALING WITH ROYALTY/FTS. IN NO OTHER SECTION DEALING WITH ROYALTY/FTS, SPECIFIC SERVICES ARE PROVIDED. IN THIS REGARD, ONE MAY ALSO REFER TO SECTION 293A OF THE ACT WHICH EMPOWERS THE CENTRAL I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 9 GOVERNMENT TO GRANT EXEMPTIONS IN RELATION TO PARTI CIPATION IN THE BUSINESS OF PROSPECTING FOR OR EXTRACTION ETC. OF MINERAL OIL. IN FACT SEPARATE NOTIFICATIONS HAVE BEEN ISSUED BY THE GOVERNMENT IN EXERCISE OF I TS POWER CONFERRED U/S 293A TO GIVE RELIEF TO THE ASSESSEES IN CONNECTION WITH THE BUSINESS OF EXPLORATION AND EXTRACTION OF MINERAL OIL. CONSIDERING THE PRESSING REQUIREMENT OF THE OIL INDUSTRY, SECTIONS 42 AND 293 A WERE INSERTED IN TH E ACT IN VIEW OF THE HIGH EXPENDITURE INVOLVED IN THE BUSINESS OF OIL EXPLORA TION. WHEN VIEWED IN THE BACK DROP OF THIS OBJECTIVE, WE FIND THAT SECTION 4 4BB HAS BEEN COUCHED IN SUCH A MANNER SO AS TO ENCOMPASS WITHIN ITS AMBIT ALL SE RVICES CONNECTED WITH OIL EXPLORATION. THUS, IN OUR OPINION, IF A NON-RESIDEN T IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES OR FACILITIES IN CONNECTION WITH THE PROSPECTING FOR EXTRACTION OR PRODUCTION OF MINERAL OIL, THEN 10% OF THE AGGRE GATE OF THE AMOUNTS RECEIVED/ACCRUED WILL BE DEEMED TO BE THE PROFITS A ND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX IN TERMS OF PROVISIONS OF SECTION 44BB OF THE ACT. WE ALSO CONCUR WITH THE SUBMISSIONS OF THE LD. AR THAT THE TEST OF MAKE AVAILABLE WAS NOT SATISFIED AS THE ASSESSEE COULD NOT DERIVE AN ENDURING BENEFIT AND UTILISE THE KNOWLEDGE OR KNOW HOW ON HIS OWN IN FUTURE WITH OUT THE AID OF THE SERVICE PROVIDER FOR CARRYING OUT IDENTICAL ACTIVITIES. THE RE IS NO TRANSFER OF TECHNICAL KNOWLEDGE AND SKILLS SO AS TO ENABLE THE ASSESSEE T O PERFORM SIMILAR ACTIVITIES IN FUTURE ON ITS OWN. HENCE, IT IS OUR CONSIDERED VIEW THAT THE PAYMENT COULD NOT BE TAXED AS FEES FOR TECHNICAL SERVICES BUT UNDER THE SPECIFIC PROVISIONS OF SECTION 44BB. I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 10 11. A REFERENCE CAN ALSO BE MADE TO THE DECISION OF THE HONBLE APEX COURT IN ONGC VS. CIT & ANR. IN CIVIL APPEAL NO 731 OF 2007 WHEREIN THE HONBLE APEX COURT IN ITS ORDER DATED 01/07/2015 HAS ALLOWE D THE APPEAL OF ONGC ON THE SUBSTANTIAL QUESTION OF LAW FRAMED WHICH READS AS , WHETHER THE AMOUNTS PAID BY THE ONGC TO THE NON-RESIDENT ASSESSES/FOREI GN COMPANIES FOR PROVIDING VARIOUS SERVICES IN CONNECTION WITH PROSPECTING, EX TRACTION OR PRODUCTION OF MINERAL OIL IS CHARGEABLE TO TAX AS FEES FOR TECHN ICAL SERVICES UNDER SECTION 44D READ WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE INCOME TAX ACT OR WILL SUCH PAYMENTS BE TAXABLE ON A PRESUMPTIVE BASIS UND ER SECTION 44BB OF THE ACT? 12. THE HONBLE APEX COURT HAS ANSWERED THE QUEST ION AS UNDER, VIEWED THUS, IT IS THE PROXIMITY OF THE WORKS CONTEMPLATED UNDER AN AGREEMENT, EXECUTED WITH A NON-RESIDENT ASSESSEE OR A FOREIGN COMPANY, WITH MINING ACTIVITY OR MINING OPERATIONS THAT WOULD BE CRUCIAL FOR THE DET ERMINATION OF THE QUESTION WHETHER THE PAYMENTS MADE UNDER SUCH AN AGREEMENT T O THE NON-RESIDENT ASSESSEE OR THE FOREIGN COMPANY IS TO BE ASSESSED U NDER SECTION 44BB OR SECTION 44D OF THE ACT. THE TEST OF PITH AND SUBSTANCE OF T HE AGREEMENT COMMENDS TO US AS REASONABLE FOR ACCEPTANCE. EQUALLY IMPORTANT IS THE FACT THAT THE CBDT HAD ACCEPTED THE SAID TEST AND HAD IN FACT ISSUED A CIR CULAR AS FAR AS 22.10.1990 TO THE EFFECT THAT MINING OPERATIONS AND THE EXPRESSIO NS MINING PROJECTS OR LIKE PROJECTS OCCURRING IN EXPLANATION 2 TO SECTION 9(1 ) OF THE ACT WOULD COVER I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 11 RENDERING OF SERVICE LIKE IMPARTING OF TRAINING AND CARRYING OUT DRILLING OPERATIONS FOR EXPLORATION OF AND EXTRACTION OF OIL AND NATURAL GAS AND HENCE PAYMENTS MADE UNDER SUCH AGREEMENT TO A NON-RESIDEN T/FOREIGN COMPANY WOULD BE CHARGEABLE TO TAX UNDER THE PROVISIONS OF SECTIO N 44BB AND NOT SECTION 44D OF THE ACT. WE DO NOT SEE HOW ANY OTHER VIEW CAN BE TAKEN IF THE WORKS OR SERVICES MENTIONED UNDER A PARTICULAR AGREEMENT IS DIRECTLY ASSOCIATED OR INEXTRICABLY CONNECTED WITH PROSPECTING, EXTRACTION OR PRODUCTION OF MINERAL OIL. 13. THUS, ON THE FACTS OF THE CASE AND RESPECTFUL LY FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN ONGC VS. CIT & ANR. IN CIVIL APPEAL NO 731 OF 2007, IT IS OUR CONSIDERED OPINION THAT T HE REVENUES OF THE ASSESSEE SHOULD BE TAXED UNDER THE PROVISION OF SECTION 44BB OF THE ACT. HENCE, GROUND NO. 3 OF THE ASSESSEES APPEAL IS ALLOWED. 14. THE OTHER QUESTION THAT NEEDS TO BE ADDRESSE D IS THE ISSUE OF APPLICABILITY OF THE DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL RENDERED IN THE CASE OF CGG VERITAS SERVICES SA (SUPRA). IN THIS REGARD, W E AGREE WITH THE CONTENTIONS OF THE LD. AR THAT THE RATIO LAID DOWN IN THE ABOVE SAID JUDGMENT IS NOT APPLICABLE IN THE INSTANT CASE BECAUSE THE AFORESAI D JUDGMENT OF THE CO-ORDINATE BENCH BRINGS THE RECEIPTS OF A NON-RESIDENT FOR PRO VIDING GEOLOGICAL AND GEOPHYSICAL SERVICES FOR EXPLORING MINING POTENTIAL WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES SOLELY ON THE BASIS OF THE PROV ISIONS OF THE ACT AND WITHOUT CONSIDERING THE INDO-FRENCH DTAA. MOREOVER, THE HON BLE APEX COURT HAS I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 12 GIVEN A VERY SPECIFIC RULING ON THE ISSUE WHICH HAS BEEN REPRODUCED ABOVE AND THE ISSUE HAS ATTAINED FINALITY. 15. AS FAR AS GROUND NOS. 1 & 2 ARE CONCERNED, T HE SAME WERE NOT PRESSED. THE BENCH WAS INFORMED THAT IN SUBSEQUENT YEARS, TH E ASSESEEE HAS ITSELF OPTED FOR DETERMINATION OF TAX AND ASSESSMENT UNDER THE P ROVISIONS OF SECTION 44BB OF THE ACT. HENCE, THE SAME ARE DISMISSED AS NOT PRESS ED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH OF MAR CH, 2016. SD/- SD/- (J.S. REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 17TH OF MARCH, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 13 I.T.A. NO. 5583/DEL/2012 ASSESSMENT YEAR: 2009-10 14