Adani Welspun Exploration Ltd., Ahmedabad V. The ITO, (Int. Taxn.)-2, Ahmedabad

ITA 629/AHD/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1576 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S SHARMA
• Assessee Lawyers: VARTIK R CHOKSI
• Keywords: Double taxation relief; Advance ruling; Question of law
• Section: 201(1); 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 629/AHD/2016 (ASSESSMENT YEAR: 2011-12) ADANI WELSPUN EXPLORATION LTD. SAMBHAV BUILDING, NR. JUDGES BUNGLOWS, BODAKDEV, AHMEDABAD V/S I.T.O. [INTL. TAXATION]-II, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAFCA 3786P APPELLANT BY : SHRI VARTIK R. CHOKSI, A.R . RESPONDENT BY : SHRI C.S. SHARMA, SR. D.R. ( )/ ORDER DATE OF HEARING : 25 -04-201 6 DATE OF PRONOUNCEMENT : 04 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- I3, AHMEDABAD DATED 07.01.2016 PERTAINING TO A.Y. 2 011-12. ITA NO. 629/ AHD/2016 . A.Y. 2011-12 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE RELATES TO THE UPHOLDING OF THE ORDER OF THE A.O MADE U/S. 201(1) & 201(1A) AND R.W.S 195 OF THE ACT. 3. IT IS THE CLAIM OF THE ASSESSEE THAT THE A.O ERRED AND THE LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE A.O I N TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTIN G TAX AT SOURCE ON REMITTANCES MADE TO M/S. RPS ENERGY LTD., U.K. AS P ER THE PROVISIONS OF THE LAW. 4. THE ASSESSING OFFICER (INTERNATIONAL TAXATION)-II, AHMEDABAD WHILE SCRUTINIZING RECORDS OF THE ASSESSEE NOTICED THAT D URING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS MADE REMITTANCES TO RPS ENERGY LTD., U.K., A NON-RESIDENT, WITHOUT WITHHOLDING OF TAX IN TERMS OF SECTION 195 OF THE ACT. THE NATURE OF REMITTANCE IS AS UNDE R:- AMOUNT OF REMITTANCE DATE OF REMITTANCE NATURE OF REMITTANCE 6069250 4892103 04-01-2011 03-03-2011 FEES FOR 3D SEISMIC DATA PROCESSING CHARGES I.E. FEES FOR TECHNICAL SERVICES 5. THE A.O WAS OF THE FIRM BELIEF THAT THE REMITTANCES ARE IN NATURE OF FEES FOR TECHNICAL SERVICES AND, THEREFORE THE ASSE SSEE OUGHT TO HAVE DEDUCTED TAX IN ACCORDANCE WITH SECTION 195 OF THE ACT. 6. ASSESSEE WAS SERVED A SHOW CAUSE NOTICE TO EXPLAIN WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT WITHIN THE MEA NING OF SECTION 201(1) AND WHY TAX DEDUCTIBLE SHOULD NOT BE RECOVER ED WITH INTEREST U/S. 201(1A) OF THE ACT. ITA NO. 629/ AHD/2016 . A.Y. 2011-12 3 7. VIDE SUBMISSION DATED 16.01.2013, ASSESSEE FILED A DETAILED REPLY IN THE LIGHT OF THE PROVISIONS OF SECTION 4, SECTION 5 AND SECTION 90 OF THE ACT. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT T HE SERVICES OF M/S. RPS ENERGY LTD. ARE NOT IN THE NATURE OF FEES FOR T ECHNICAL SERVICES AS PER ARTICLE 13 OF INDIA-UK DTAA. THE CLAIM OF THE A SSESSEE WAS BASED ON THE FACT THAT THE NON-RESIDENT RECIPIENT RPS EN ERGY DID NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE, SKILL KNOW-HOW TO TH E ASSESSEE AND HENCE IT IS NOT LIABLE TO TAX IN INDIA. 8. THIS CLAIM OF THE ASSESSEE WAS OUT-RIGHTLY REJECTED BY THE A.O WHO WAS OF THE OPINION THAT SINCE THE SERVICES ARE UTILIZED IN INDIA, THE REMITTANCES ARE LIABLE FOR TAX DEDUCTION AS PER THE ACT AND ALSO IN THE LIGHT OF TAX TREATY WITH UK. DRAWING SUPPORT FROM T HE PROVISIONS OF SECTION 9(1)(VII) READ WITH EXPLANATION 2 OF THE AC T, THE A.O STRENGTHEN HIS VIEW THAT SERVICES RENDERED BY RPS E NERGY LTD. ARE IN THE NATURE OF TECHNICAL SERVICES. THE A.O FURTHER R UBBISHED THE CONTENTION OF THE ASSESSEE THAT RPS ENERGY LTD DID NOT MAKE AVAILABLE TECHNICAL KNOWLEDGE, SKILL AND KNOW-HOW TO THE ASSE SSEE. 9. AFTER CONSIDERING VARIOUS CLAUSES OF THE AGREEMENT BETWEEN THE ASSESSEE AND RPS ENERGY LTD., THE A.O OBSERVED THAT RPS ENERGY LTD., HAS TO CARRY OUT THE 3D SEISMIC INTERPRETATION INCL UDING BASIN MODELING, CULMINATING IN PROSPECT GENERATE ALONG WI TH GRV CALCULATIONS, PLAY FAIRWAY MAPPING AND RISKING OF P ROSPECTS FOR EXPLORATORY DRILLING. THE A.O FURTHER OBSERVED THAT THE NON-RESIDENT IS FURNISHING THE REPORT WHICH CONSISTS DEVELOPMENT AN D TRANSFER OF A TECHNICAL PLAN AND TECHNICAL DESIGN WHICH ENABLES T HE ASSESSEE TO TAKE DECISION OF EXPLORATION IN THE BLOCK MB-OSN-20-5/2. THE A.O FURTHER ITA NO. 629/ AHD/2016 . A.Y. 2011-12 4 OBSERVED THAT THE REPORT CONTAINS NUMBER OF MAPS, D ESIGNS, SEISMIC DATA CHARTS AND FIGURES. 10. THE OFFICER WAS CONVINCED THAT THE REPORT OF RPS EN ERGY LTD., CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNI CAL PLAN OR TECHNICAL DESIGN AND IS THEREFORE, WELL COVERED BY ARTICLE 13 (4)(C) OF THE INDIA- UK DTAA AND, THEREFORE, THE REMITTANCE IS COVERED B Y THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. 11. THE A.O FINALLY CONCLUDED BY HOLDING THE ASSESSEE A S ASSESSEE IN DEFAULT AND COMPUTED THE TAX LIABILITY + INTEREST A S UNDER:- SR. NO. NAME OF THE PAYEE AMOUNT OF REMITTANCE/GROSSED UP 195A DATE OF REMITTANCE TAX + INTEREST = RS. RS. RS. 1 RPS ENERGY LTD., UK 6069250 4892103 04.01.2011 03.03.2011 1393850 +376326 = 1770176 978420 + 244600 = 1223020 TOTAL TAX AND INTEREST PAYABLE 2372270 + 620926 = 2993196 12. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. THE FIRST APPELLATE AUTHORITY WAS ALSO CONVINCED THAT THE SERVICES RENDERED BY M/S. RPS ENERGY LTD ARE OF THE NATURE OF TECHNICAL SERVICES. THE REPORT SUBMITTED BY M/S. RP S ENERGY LTD ENABLED THE ASSESSEE COMPANY TO TAKE CRUCIAL DECISI ON IN EXPLORATION OF OIL OUT OF THE VAST AREA OF 1191 SQ. KM. 13. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. . THE LD. COUNSEL TOOK US TO THE VARIO US RELEVANT CLAUSES OF THE AGREEMENT BETWEEN THE ASSESSEE AND RPS ENERGY L TD., THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE RELEVANT ART ICLE OF INDO-UK DTAA. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL RELIED UPON THE ITA NO. 629/ AHD/2016 . A.Y. 2011-12 5 DECISION OF THE HONBLE HIGH COURT OF KARNATAKA HIG H COURT IN THE CASE OF DE BEERS INDIA MINERALS PVT. LTD. 346 ITR 467. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE CO-ORDINATE BENCH , AHMEDABAD IN THE CASE OF DHOLERA PORT LTD. IN ITA NO. 1407/AHD/2 009. PER CONTRA, THE LD. D.R. HEAVILY RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD THE RIVAL CONTENTIONS, CAREFULLY PERU SED THE ORDERS OF THE AUTHORITIES BELOW AND HAVE GIVEN A TH OUGHTFUL CONSIDERATION TO THE AGREEMENT BETWEEN THE ASSESSEE AND M/S. RPS ENERGY LTD. WE HAVE ALSO GONE THROUGH THE RELEVANT ARTICLE OF THE INDO-UK DTAA. 15. THE ASSESSEE HAS MADE A REMITTANCE OF RS. 1,09,61,3 53/- DURING THE YEAR UNDER CONSIDERATION TO RPS ENERGY LTD., UK . THE SAID REMITTANCES HAD BEEN MADE FOR PROVIDING 3D SEISMIC DATA INTERPRETATION SERVICES. THE ASSESSEE HAS AVAILED T HESE SERVICES FOR CONDUCTING EXPLORATION WORK IN MUMBAI SHALLOW OFFSH ORE BLOCK MB- OSN-2005/2, WHICH IS LOCATED IN TAPTI-DAMAN SECTOR OF MUMBAI OFFSHORE BASIN ALONG WITH WEST COAST OF INDIA WHICH COVERS AN AREA OF 1191 SQ. KM. A PERUSAL OF THE RELATED DOCUMENTARY E VIDENCES SHOWS THAT THE OBJECTIVE OF THE PROJECT WAS TO CARRY OUT A 3D SEISMIC INTERPRETATION WHICH INCLUDED THE BASIN MODELING, C ULMINATING IN PROSPECT GENERATION ALONG WITH GRV CALCULATIONS, PL AY FAIRWAY MAPPING AND RISKING OF PROSPECTS FOR EXPLORATORY DRILLING. 16. BEFORE PROCEEDING FURTHER, LET US FIRST SEE THE SCO PE OF AGREEMENT WITH RELEVANT COVENANTS WHICH READ AS UND ER:- THE OUTLINE SCOPE OF WORK WAS DEFINED IN THE AWEL T ENDER REFERENCE NO. : AWEL/MB- OSN-2005/2/2009/TB003 (AS DETAILED BELOW). THE PROP OSED SCOPE WAS THEN DEFINED IN FURTHER DETAIL IN RPS ENERGY LIMITED TECHNO-COMMERC IAL PROPOSAL DATED 19 JANUARY 2010 (REFERENCE ECC 09-1912). FOLLOWING THE AWARD O F THIS CONTRACT WITH EFFECT FROM ITA NO. 629/ AHD/2016 . A.Y. 2011-12 6 DATE OF ISSUANCE OF LOA DATED 7TH JULY 2010 AND SIG NED BY RPS ENERGY ON 17TH AUGUST 2010, THE FOLLOWING SCHEDULE HAS BEEN ESTABLISHED: TABLE -1 : COORDINATES OF THE BLOCK: MB-OSN-2005/2 TABLE -2 A : GENERALIZED STRATIGRAPHY OF BLO CK MB-OSN-2005/2 TABLE - 2 B : GENERALIZED STRATIGRAPHY OFTAP TI DAMAN AREA TABLE - 2 C : TECTONO-STRATIGRAPHY OF MUMBAI -SAURASHTRA SHALLOW WATER AREA (AFTER USGS) 03.0 SCOPE OF WORK AND WORK VOLUME THE COMPANY INTENDS TO GET INTERPRETED -1200 SQ KM OF NEWLY ACQUIRED 3D MARINE SEISMIC DATA IN THE BLOCK MB-OSN-2005/2 ACQUIRED AN D PROCESSED (PSTM) BY WESTERN GECO USING Q MARINE TECHNOLOGY. THE CONTRACTOR, WITH HIS OWN PERSONNEL, HARDWARE & SOFTWARE, SHALL CARRY OUT THE INTERPRETATION AS PER DETAILS PROVIDED BELOW AND AS SPECIFIED HEREUNDER WITH PROFESSIONAL COMPETENCE AND IN AN EFFICIENT MANNER, ADOPTING BES T STANDARDS OF WORK CUSTOMARILY PROVIDED BY REPUTED CONTRACTORS TO OIL COMPANIES. THE CONTRACTOR WILL DEPLOY LATEST INTERPRETATION SY STEMS COMPRISING OF STATE OF THE ART HARDWARE AND LEADING SEISMIC DATA INTERPRETATION SO FTWARE PRESENTLY IN USE GLOBALLY. THE SELECTED BIDDER WILL CARRY OUT SEISMIC DATA INT ERPRETATION AS PER THE PLAN THAT WILL BE PROVIDED BY THE COMPANY. 04.0 GENERAL REQUIREMENT THE CONTRACTOR SHOULD POSSESS SEISMIC DATA INTERPRE TATION FACILITIES CONSISTING OF COMPUTERS, SOFTWARE, TAPE DRIVES, PLOTTERS, PRINTER S AND OTHER REQUIRED PERIPHERAL EQUIPMENT. A COMPETENT TEAM OF SEISMIC DATA INTERPR ETERS SHOULD DELIVER AN OUTPUT OF HIGH QUALITY IN A PROFESSIONAL AND EFFICIENT MANNER . THE SELECTED BIDDER WILL BE SOLELY RESPONSIBLE FOR THE QUALITY FOR ALL ASPECTS OF THE DATA INTERPRETATION. HOWEVER, ALL TECHNICAL CO-ORDINATION INCLUDING QUALITY CONTROL ( QC) CHECK ETC., SHALL BE DONE BY THE QC TEAM OF COMPANY. THE CONTRACTOR SHALL SUBMIT A DETAILED INTERPRETATI ON REPORT IN TRIPLICATE (PRINT AS WELL AS SOFT COPY ON USB HARD DRIVE AND DVD) IN RESPECT OF EACH DATA SET. ALL DELIVERABLES (USB DRIVES, DVD, PAPER PLOTS ETC.) MUST CONFIRM TO THE HIGHEST INDUSTRY STANDARDS. 05.0 DATA AVAILABILITY AND PROJECT SCHEDULE COMPANY SHALL MAKE ARRANGEMENT TO PROVIDE RELEVANT DATA FOR INTERPRETATION AFTER LOA. 3D PROCESSED DATA WILL BE HANDED OVER / COLLECTED O N MUTUAL UNDERSTANDING. ALL RELEVANT INFORMATION DATA REQUIRED FOR INTERPRETATION WILL B E AVAILABLE AT THE PROJECT OFFICE OF AWEL, AHMEDABAD, GUJARAT, INDIA. ITA NO. 629/ AHD/2016 . A.Y. 2011-12 7 AFTER INTERPRETATION OF THE DATA, CONTRACTOR WILL A RRANGE FOR PACKING, INSURANCE AND OTHER FORMALITIES AND SAFE TRANSPORTATION / HANDOVER THE FINAL INTERPRETED DATA AT COMPANY'S DESIGNATED PREMISES. THE PROCESSED DATA WILL BE PROVIDED IN THE FOLLOWIN G FORMATS AND STORAGE MEDIA: A) 3D SEISMIC DATA IN SEG -Y FORMAT. B) ALL RELEVANT INFORMATION ON CD /DVD/ USB DRIVE C) ALL OTHER GEO-SCIENTIFIC DATA / INFORMATION AVAILAB LE FOR INTERPRETATION. REPRESENTATIVE OF COMPANY MAY BE ASSOCIATED WITH TH E INTERPRETATION JOBS PERIODICALLY DURING THE EXECUTION OF THE WORK. ALL TECHNICAL CO- ORDINATION INCLUDING QUALITY CONTROL (QC) CHECK ETC., SHALL BE DONE BY COMPANY'S REPRESE NTATIVES. A DETAILED PROJECT SCHEDULE WITH CRITICAL MILESTONE S IS TO BE SUBMITTED BY THE SUCCESSFUL BIDDER IN CONSULTATION WITH COMPANY REPRESENTATIVE. 06.0 3D SEISMIC DATA INTERPRETATION 6.1 OBJECTIVE THE OBJECTIVE IS TO CARRY OUT 3D SEISMIC INTERPRETA TION INCLUDING, BASIN MODELING, CULMINATING IN PROSPECT GENERATION ALONG WITH GRV C ALCULATIONS, PLAY FAIRWAY MAPPING AND RISKING OF PROSPECTS FOR EXPLORATORY DRILLING. 6.2 3D SEISMIC DATA VOLUME AREA : BLOCK MB-OSN-2005/2 QUANTUM : -1200 SQ KM 3D SEISMIC DATA 6.3 INTERPRETATION WORK FLOW AND DELIVERABLES A) IDENTIFICATION AND MAPPING OF KEY HORIZONS IN TIME AND DEPTH. B) IDENTIFICATION FAULTS AND THEIR CORRELATION USING A DVANCED TECHNIQUES SUCH AS COHERENCY AND SEMBLANCE ANALYSIS. C) PREPARATION OF ISOCHRON MAPS OF KEY HORIZONS. D) PREPARATION OF DEPTH MAPS OF KEY HORIZONS. E) PREPARATION OF ISOPACH MAPS. F) PREPARATION OF PALAEO RECONSTRUCTION MAPS AT KEY ST RATIGRAPHIC LEVELS. G) PREPARATION OF PALAEO STRUCTURAL SECTIONS DURING DI FFERENT STRATIGRAPHIC INTERVALS. H) SEISMIC FADES MAPS AND ANALYSIS. I) STRUCTURAL ANALYSIS. J) PRECISE IDENTIFICATION AND MAPPING OF UNCONFORMITIE S. K) 3D BASIN MODELING STUDIES, PLAY FAIRWAY MAPPING AND PREDICTION OF PORE PRESSURES. PORE PRESSURE PREDICTION FROM VELOCITIES DERIVED FR OM SEISMIC DATA TO PROVIDE INDIRECT PRESSURE PROFILE AT PROPOSED DRILLING LOCATION. ITA NO. 629/ AHD/2016 . A.Y. 2011-12 8 LARGE STRUCTURAL REVERSALS ARE ENVISAGED IN THE EAR LY EOCENE TO LATE PALEOCENE (PANNA FORMATION) SANDSTONE AND SHALES. THERE ARE EXPECTED TO BE OVER PRESSURE AS HAS BEEN REPORTED IN NEARBY AREAS. 1) ATTRIBUTE ANALYSIS AND THEIR INTERPRETATION WITH SP ECIFIC REFERENCE TO SUBTLE STRATI- STRUCTURAL TRAPS WHICH WILL NECESSARILY INCLUDE BUT NOT BE LIMITED TO THE FOLLOWING. SWEETNESS-ATTRIBUTES IN CONJUNCTION WITH COHERENC Y FOR CHANNEL FACIES & ISOLATED /STACKED SAND BODY IDENTIFICATION SPECTRAL DECOMPOSITION FOR DELINEATING THIN SANDS TONE RESERVOIRS EMBEDDED IN SHALES DEPOSITED IN SHALLOW MARINE ENVIRONMENTS THE INTEGRATION OF SEQUENTIAL HORIZON SLICING, AT TRIBUTE EXTRACTION, SEISMIC FADES CHARACTERISTICS, AND AVAILABLE WIRELINE INFORMATION FOR RECONSTRUCTION OF THE DEPOSITIONAL SEQUENCE, IDENTIFICATION OF RESERVOIR UNITS, AND TH E ANALYSIS OF RESERVOIR GEOMETRY WITHIN SEISMIC DATA VELOCITY MODELING STUDIES ALL MAPS AND SECTIONS WILL BE FINALISED AFTER SCRUT INIZING RESULTS ALONG WITH COMPANY'S REPRESENTATIVE (S) WHO WOULD BE ASSOCIATED AT THE T IME OF INTERPRETATION. NOTE: THE CONTRACTOR CAN ALSO PROPOSE AN ALTERNATE WORKFL OW BASED ON EXPERIENCE OF INTERPRETATION IN SIMILAR GEOLOGICAL REGIMES TO COM PREHENSIVELY EVALUATE THE BLOCK BRINGING OUT DRILLABLE PROSPECTS. FINALLY INTEGRATING 3D SEISMIC DATA INTERPRETATION AND OTHER GEOSCIENTIFIC DATA, A FINAL INTERPRETATION WILL INCLUDE: STRUCTURAL MODEL OF THE BLOCK VIS-A- VIS REGIONAL STRUCTURAL SETTING. GEOLOGICAL MODEL OF THE BLOCK VIS-A- VIS REGIONAL GEOLOGICAL SETTING. VELOCITY MODEL. MULTI-ATTRIBUTE ANALYSIS. IDENTIFICATION OF DRILLABLE PROSPECTS AND THEIR R ANKING. (A) THE CONTRACTOR WILL EVALUATE THE HYDROCARBON PROSPE CTIVELY OF IDENTIFIED PROSPECTS FROM GENERATION, MIGRATION AND ENTRAPMENT POINT OF VIEW. BASED ON THE OVERALL ASSESSMENT, THE CONTRACTOR WILL RECOMMEND DRILLING LOCATIONS AND WILL ALSO RANK THE ITA NO. 629/ AHD/2016 . A.Y. 2011-12 9 IDENTIFIED PROSPECTS FOR EXPLORATORY DRILLING BASED ON THEIR OVERALL MERITS, RECOMMEND FUTURE EXPLORATION & DEVELOPMENT PROGRAMM ED STRATEGY. (B) VOLUMETRIC RESERVE CALCULATIONS WITH THE HELP OF TH E PARAMETERS FROM NEIGHBORING WELLS IN THREE DIFFERENT SCENARIOS. (C) RISK WEIGHTED ECONOMIC ANALYSIS FOR EACH IDENTIFIED PROSPECT, RISK-WEIGHTED ECONOMIC ANALYSIS NEEDS TO BE CARRIED OUT BY THE SE LECTED BIDDER USING THE COST PARAMETERS TO BE PROVIDED BY THE COMPANY USING BOTH NPV & IRR METHODS 6.4 DELIVERABLES 6.4.1. INTERPRETATION REPORT: THE COMPREHENSIVE INTERPRETATION WILL INCLUDE, BUT NOT BE LIMITED TO, THE FOLLOWING: A) INTRODUCTION AND DATA BASE. B) TECTONIC SETTING OF THE BLOCK VIS-A-VIS THE REGIONA L GEOLOGY. C) SEISMIC AND WELL DATA BASE. D) EXPLORATION HISTORY. E) GENERAL GEOLOGY. F) TECTONICS OF THE AREA. G) PETROLEUM SYSTEM PREVAILING IN THE AREA AND RESULTS OF 3D BASIN MODELING. H) DETAILED DESCRIPTION AND EVALUATION OF PROSPECTS AN D LEADS WITH RELEVANT FIGURES AND PLATES. I) GEOLOGICAL PROGNOSIS OF DRILLABLE PROSPECTS WITH CO MPLETE GEOLOGICAL INFORMATION AND PREDICTED PRESSURE REGIMES. 6.4.2. ENCLOSURES: A) PROSPECT SUMMARY REPORT ALONG WITH A SUMMARY MONTAG E B) WELL PROGNOSIS OF DRILLABLE PROSPECTS C) LARGE SCALE PLOTS OF MAPS AND SECTIONS AS HARD COPI ES 6.4.2. OTHER DELIVERABLES: A) XYZ DATA E.G. HORIZON, FAULT CONTOUR DATA FILE. B) ANY OTHER INTERMEDIATE DATA FILE GENERATED FOR FINA L REPORT. C) INTERPRETATION PROJECT FILE IN APPROPRIATE FORMAT. D) VELOCITY ESTIMATES. E) ALL LIME AND DEPTH MAPS GENERATED DURING THE COURSE OF THE STUDY IN 'CGM' OR SIMILAR FORMAT. F) BACK UP OF DATABASE + WORK FLOWS + DATA SETS. 12.0 DATA 12.1 DELIVERY OF DATA ITA NO. 629/ AHD/2016 . A.Y. 2011-12 10 THE CONTRACTOR SHALL DELIVER TO THE COMPANY OR TO A NY OTHER PARTY DESIGNATED BY THE COMPANY, ALL DATA, PROMPTLY ON OBTAINING SUCH DATA. IN THE EVENT OF SUSPENSION OR TERMINATION OF THE CONTRACT, THE CONTRACTOR SHALL I MMEDIATELY DELIVER TO THE COMPANY ALL UNDELIVERED DATA. THE CONTRACTOR SHALL NOT RETA IN COPIES OF SUCH DATA UNLESS IT SHALL HAVE FIRST OBTAINED THE COMPANY'S WRITTEN CON SENT. THE CONTRACTOR SHALL TAKE ALL POSSIBLE MEASURES TO ENSURE THAT NO MAGNETIC MEDIUM (TAPE, DISK OR OTHER) WILL BE PASSED THROUGH, OR OTHERWISE COME INTO THE VICINITY OF, AN Y FORM OF MAGNETIC DEVICE DURING TRANSPORT OF THE DATA. PRIOR TO THE TRANSPORT OF AN Y DATA BY THE CONTRACTOR, THE CONTRACTOR SHALL ADVISE THE COMPANY'S REPRESENTATIV E OF THE SHIPPING AND PACKING DETAILS. 12.2 OWNERSHIP OF DATA 12.2.1 ALL DATA SHALL BE THE PROPERTY OF THE COMPAN Y FROM THE DATE OF ITS CREATION OR DEVELOPMENT. NO DATA CREATED OR DEVELOPED BY THE CO NTRACTOR UNDER THIS CONTRACT SHALL BECOME THE PROPERTY OF THE CONTRACTOR; PROVIDED THA T THE RISK AND RESPONSIBILITY FOR THE LOSS OF, OR DAMAGE TO, ANY DATA SHALL REMAIN WITH T HE CONTRACTOR UNTIL DELIVERY OF SUCH DATA TO THE COMPANY. 12.2.2 ALL DATA SHALL BE FIT FOR THE PURPOSES SPECI FIED IN THE CONTRACT. 12.2.3 ALL ITEMS CREATED OR DEVELOPED BY THE CONTRA CTOR OUTSIDE THE CONTRACT SHALL REMAIN THE PROPERTY OF THE CONTRACTOR, PROVIDED THA T THE COMPANY SHALL HAVE THE RIGHT TO USE ANY SUCH ITEM WHERE IT IS PROVIDED TO THE COMPA NY AS PART OF THE SERVICES. 17. A PERUSAL OF THE ABOVE CLAUSES CLEARLY SHOWS THAT T HE INITIAL DATA WERE PROVIDED BY THE ASSESSEE ITSELF, IT HAS TO BE UNDERSTOOD THAT 3D SEISMIC IS AN EXPLORATION TECHNIQUE USED IN THE SEA RCH FOR OIL AND GAS UNDERGROUND STRUCTURES. THIS TECHNIQUE IS IN ANALOG OUS TO ULTRA SOUND TECHNOLOGY USED IN THE MEDICAL FIELD. SOUND FROM A SHOT HOLE IS RECORDED FROM GEOPHONES AND INTERPRETED TO GIVE A P ICTURE OF THE UNDERLYING STRUCTURES WITHIN THE EARTH. 18. IT APPEARS THAT THE A.O HAS GROSSLY ERRED IN TREATI NG THE MAPS/DESIGNS GIVEN BY M/S. RPS ENERGY LTD. TO THE A SSESSEE AS TECHNICAL PLAN OR DESIGN OCCURRING MADE AVAILABLE O F TECHNICAL EXPERTISE, SKILL OR KNOWLEDGE. THE A.O COMPLETELY I GNORED THE FACT THAT M/S. RPS ENERGY LTD WAS ONLY REQUIRED TO PROVIDE IN TERPRETATION REPORT ITA NO. 629/ AHD/2016 . A.Y. 2011-12 11 OF THE DATA PROVIDED BY THE ASSESSEE. THE MAPS/DESI GNS ARE NOTHING BUT A WAY TO INTERPRET THE DATA AND CANNOT BE EQUAT ED TO DEVELOPMENT AND TRANSFER OF TECHNICAL MAPS AND DESIGNS AS CONTE MPLATED BY THE A.O. THE MAPS PROVIDED BY RPS ARE MERELY A MANNER I N WHICH 3D SEISMIC DATA PROVIDED BY THE ASSESSEE COMPANY ARE I NTERPRETED. THE PAYMENT MADE BY THE ASSESSEE TO RPS ENERGY LTD., IS FOR PROVIDING THE ANALYSIS OF DATA AND CONCLUSION PROVIDED BY RPS AND NOT FOR PROCURING SUCH MAPS AND PICTURES. THE FACT THAT THE PROCESSED DATA HAS BEEN PROVIDED TO M/S. RPS ENERGY LTD. FURTHER FORTIFIES THE PLEA THAT THE PLAN OR DESIGN AS ENVISAGED IN THE ARTICLE 13(4)(C) OF THE TREATY IS NOT DEVELOPED BY M/S. RPS ENERGY LTD. 19. FURTHER FROM CLAUSE 12 OF THE AGREEMENT, IT CAN BE PERUSED THAT ALL THE DATA SHALL BE PROPERTY OF THE ASSESSEE FROM THE DATE OF ITS CREATION. 20. ON IDENTICAL SET OF FACTS, THE HONBLE HIGH COURT O F KARNATAKA IN THE CASE OF DE BEERS INDIA MINERALS PVT. LTD. 346 I TR 467 HAD THE OCCASION TO INTERPRET THE RELEVANT ARTICLES OF INDI A-NETHERLANDS DTAA. IN THIS CASE, THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER:- THE TEST IS WHETHER THE RECIPIENT OF THE SERVICE IS EQUIP PED TO CARRY ON HIS BUSINESS WITHOUT REFERENCE TO THE SERVICE PROVIDER, IF HE IS ABLE TO CARRY ON HIS BUSINESS IN FUTURE WITHOUT THE TECHNICAL SERVICE OF THE SERVICE PROVIDER IN RESPECT OF SERVICES RENDERED THEN, IT WOULD BE SAID THAT TECHNICAL KNOWLEDGE IS MADE AVAILABLE.' THE FACTS OF THE CASE AND OBSERVATIONS MADE BY THE HON'BLE KARNATAKA HC ARE A S UNDER: (PARA 18) IN TERMS OF THE CONTRACT ENTERED INTO WITH FUGRO, T HEY HAVE GIVEN THE DATA, PHOTOGRAPHS AND MAPS. BUT THEY HAVE NOT MADE AVAILABLE TECHNICAL EXPERTISE, SKILL OR KNOWLEDGE IN RESPECT OF SUCH COLLECTION OR PROCESSING OF DATA TO THE ASSESSEES, WHICH THE ASSESSEE CAN ITA NO. 629/ AHD/2016 . A.Y. 2011-12 12 APPLY INDEPENDENTLY AND WITHOUT ASSISTANCE AND UNDE RTAKE SUCH SURVEY INDEPENDENTLY EXCLUDING FUGRO IN FUTURE. THE FUGRO HAS NOT MADE AVAILABLE THE AFORESAID TECHNOLOGY WITH THE AID OF WHICH THEY WERE ABLE TO COLLECT THE DATA, WHICH WAS PASSED ON TO THE ASSESSEES AS A TECHNICAL SERVICE. IN OTHER WORDS, F UGRO HAS RENDERED TECHNICAL SERVICE TO THE ASSESSEES. THEY HAVE NOT MADE AVAILABLE THE TECHNICAL KNOWLEDGE WITH WHICH THEY RENDERED TECHNICAL SERVICE. THERE IS NO TRANSMISSIO N OF TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, ETC., FROM FUGRO ALONG WITH TECHNICAL SERVIC ES RENDERED BY THEM. THE ASSESSEES ARE COMPLETELY KEPT IN DARK ABOUT THE PROCESS AND THE T ECHNOLOGIES WHICH THE FUGRO ADOPTED IN ARRIVING AT THE INFORMATION/DATA WHICH IS PASSED ON TO THE ASSESSEES AS TECHNICAL SERVICE. THE ASSESSEE IS UNABLE TO MAKE USE OF THE SAID TECHNICAL KNOWLEDGE BY ITSELF IN ITS BUSINESS OR FOR ITS OWN BENEFIT WITHOUT RECOURSE TO FUGRO. IN FACT, THE QUESTION WHETHER ALONG WITH RENDERING TECHNICAL SERVICES, WHETHER TH E TECHNICAL KNOWLEDGE WITH WHICH THAT SERVICES WAS RENDERED WAS ALSO MADE AVAILABLE TO THE ASSESSEES/CUSTOMERS IS PURELY A QUESTION OF FACT WHICH IS TO BE GATHERED FROM THE T ERMS OF THE CONTRACT, THE NATURE OF SERVICES UNDERTAKEN AND WHAT IS TRANSMITTED IN THE END AFTER RENDERING TECHNICAL SERVICES, IF ALONG WITH TECHNICAL SERVICES RENDERED, IF THE S ERVICE PROVIDER ALSO MAKES AVAILABLE THE TECHNOLOGY WHICH THEY USED IN RENDERING SERVICES, T HEN IT FALLS WITH THE DEFINITION OF FEE FOR TECHNICAL SERVICES AS CONTAINED IN DTAA. HOWEVE R IF THE TECHNOLOGY IS NOT MADE AVAILABLE ALONG WITH THE TECHNICAL SERVICES AND WHA T IS RENDERED IS ONLY TECHNICAL SERVICES AND THE TECHNICAL KNOWLEDGE IS WITH-HELD, THEN, SUCH A TECHNICAL SERVICE WOULD NOT FALL WITHIN THE DEFINITION OF TECHNICAL SERVICE S IN DTAA AND NOT LIABLE TO TAX. (PARA 26) IN THE BACKGROUND OF THE AFORESAID PRINCIPLES AND F ACTS OF THIS CASE, IT IS CLEAR THAT ASSESSEES ACKNOWLEDGE THE SERVICES OF FUGRO FOR CON DUCTING AERIAL SURVEY, TAKING PHOTOGRAPHS AND PROVIDING DATA INFORMATION AND MAPS . THAT IS THE TECHNICAL SERVICES WHICH THE FUGRO HAS RENDERED TO THE ASSESSEES. THE TECHNOLOGY ADOPTED BY FUGRO IN RENDERING THAT TECHNICAL SERVICES IS NOT MADE AVAILABLE TO THE ASSESSEES. THE SURVEY REPORT IS VERY CLEAR. UNLESS THAT TECHNOLOGY IS ALS O MADE AVAILABLE, THE ASSESSEES ARE UNABLE TO UNDERTAKE THE VERY SAME SURVEY INDEPENDEN TLY EXCLUDING FUGRO IN FUTURE. THEREFORE THAT TECHNICAL SERVICES WHICH IS RENDERED BY FUGRO IS NOT OF ENDURING IN NATURE. ITA NO. 629/ AHD/2016 . A.Y. 2011-12 13 IT IS A CASE SPECIFIC. THAT INFORMATION PERTAINS TO 8 BLOCKS. THE ASSESSEES CAN MAKE USE OF THE DATA SUPPLIED BY WAY OF TECHNICAL SERVICES AND PUT ITS EXPERIENCE IN IDENTIFYING THE LOCATIONS WHERE THE DIAMONDS ARE FOUND AND CARRYING ON ITS BUSINESS. BUT THE TECHNICAL SERVICES WHICH IS PROVIDED BY FUGRO WILL NOT ENABLE THE ASSESSES TO INDEPENDENTLY UNDERTAKE ANY SURVEY EITHER IN THE VERY SAME AREA F UGRO CONDUCTED THE SURVEY OR IN ANY OTHER AREA. THEY DID NOT GET ANY ENDURING BENEFIT F ROM THE AFORESAID SURVEY. IN THAT VIEW OF THE MATTER, THOUGH FUGRO RENDERED TECHNICAL SERV ICES AS DEFINED UNDER SECTION 9(1)(VII) EXPLANATION 2, IT DOES NOT SATISFY THE R EQUIREMENT OF TECHNICAL SERVICES AS CONTAINED IN DTAA. THEREFORE THE LIABILITY TO TAX I S NOT ATTRACTED. ACCORDINGLY THE FIRST SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEES AND AGAINST THE REVENUE. (PARA 27) THEREFORE THE ASSESSEES NOT BEING POSSESSED WITH TH E TECHNICAL KNOW HOW TO CONDUCT THIS PROSPECTING OPERATIONS AND RECONNAISSANCE OPERATION S, ENGAGED THE SERVICES OF FUGRO WHICH IS EXPERT IN THE FIELD. BY WAY OF TECHNICAL S ERVICES FUGRO DELIVERED TO THE ASSESSEES THE DATA AND INFORMATION AFTER SUCH OPERATIONS. THE SAID DATA IS CERTAINLY MADE USE OF BY THE ASSESSEES. NOT ONLY THE SAID DATA AND INFORMATI ON WAS FURNISHED IN THE DIGITAL FORM, IT IS ALSO PROVIDED TO THE ASSESSEES IN THE FORM OF MA PS AND PHOTOGRAPHS. THESE MAPS AND PHOTOGRAPHS WHICH WERE MADE AVAILABLE TO THE ASSESS EES CANNOT BE CONSTRUED AS TECHNOLOGY MADE AVAILABLE. FUGRO HAS NOT DEVISED AN Y TECHNICAL PLAN OR TECHNICAL DESIGN. THEREFORE THE QUESTION OF FUGRO TRANSFERRIN G ANY TECHNICAL PLAN OR TECHNICAL DESIGN DID NOT ARISE IN THE FACTS OF THESE CASES. T HE MAPS WHICH ARE DELIVERED ARE NOT OF KIND OF ANY DEVELOPMENTAL ACTIVITY. AS SUCH, EARLIE R THE INFORMATION WHICH IS FURNISHED TO THE ASSESSEES BY WAY OF TECHNICAL SERVICES IN THE D IGITAL FORM IS ALSO GIVEN IN THE FORM OF MAPS. THEREFORE THE CASE ON HAND DOES NOT FALL IN T HE SECOND PART OF THE AFORESAID CLAUSE DEALING WITH DEVELOPMENT AND TRANSFER OF PLANS AND DESIGNS. THEREFORE THE SECOND SUBSTANTIAL QUESTION OF LAW IS ALSO ANSWERED IN FAV OUR OF THE ASSESSEES AND AGAINST THE REVENUE. CONCLUSION ITA NO. 629/ AHD/2016 . A.Y. 2011-12 14 THOUGH FUGRO RENDERED TECHNICAL SERVICES AS DEFINED UNDER SECTION 9(1)(VII) EXPLANATION 2, IT DOES NOT SATISFY THE REQUIREMENT OF TECHNICAL SERVICES AS CONTAINED IN INDIA NETHERLANDS DTAA 21. IN THE CASE OF PERFETTI VAN MELLE HOLDING B.V AUTHO RITY FOR ADVANCE RULING IN (AAR NO. 869 OF 2010 DECIDED ON 09.12.2011 HELD AS UNDER:- THE EXPRESSION 'MAKE AVAILABLE' ONLY MEANS THAT THE RECIPIENT OF THE SERVICE SHOULD BE IN A POSITION TO DERIVE AN ENDURING BENEFIT AND BE IN A POSITION TO UTILISE THE KNOWLEDGE OR KNOW-HOW IN FUTURE ON HIS OWN . 'BY MAKING AVAILABLE THE TECHNICAL SKI/IS OR KNOW HOW, THE RECIPIENT OF THE SAME WILL GET EQUIPPED WITH THAT KNOWLEDGE OR EXPERTISE AND BE ABLE TO MAKE USE OF IT IN FUTURE, INDEPENDENT OF THE SERVICE PROVIDER. SO WHEN THE EXPERTISE IN RUNNING THE INDUSTRY RUN BY T HE GROUP IS PROVIDED TO THE INDIAN ENTITY IN THE GROUP TO BE APPLIED IN RUNNING THE BU SINESS, THE EMPLOYEES OF THE INDIAN ENTITY GET EQUIPPED, TO CARRY ON THAT BUSINESS MODE L OR SERVICE MODE! ON THEIR OWN WITHOUT REFERENCE TO THE SERVICE PROVIDER, WHEN THE SERVICE AGREEMENT COMES TO AND END. IT IS NOT AS IF FOR MAKING AVAILABLE, THE RECI PIENT MUST ALSO BE CONVEYED SPECIFICALLY THE RIGHT TO CONTINUE THE PRACTICE PUT INTO EFFECT AND ADOPTED UNDER THE SERVICE AGREEMENT ON ITS EXPIRY.' 22. AN ANALYSIS OF THE AFOREMENTIONED RULINGS LEAD TO O NE CONCLUSION- IF THE FRUITS OF THE SERVICES REMAINED WITH THE SER VICE PROVIDER THEN OUT OF THE AMBITS OF THE TERM MAKE AVAILABLE BUT AFTER THE FRUITS OF THE SERVICE RENDERED REMAINED WITH THE SERVICE RECI PIENT AND THE SERVICE RECIPIENT IS ABLE TO PERFORM SIMILAR ACTIVI TY, FOR WHICH THE SERVICES WERE SOUGHT, WITHOUT THE HELP OR RECOURSE OF THE SERVICE RENDERED THEN THE TECHNOLOGY CAN BE SAID TO BE TRAN SFERRED OR MADE AVAILABLE TO THE RECIPIENT. 23. FOR THE SAKE OF COMPLETENESS, THERE ARE SIGNIFICANT DISTINCTION BETWEEN THE DEFINITION AS PRESCRIBED U/S. 9 OF THE ACT OF FEES FOR TECHNICAL SERVICES AS COMPARED WITH THE DEFINITION PRESCRIBED IN ARTICLE ITA NO. 629/ AHD/2016 . A.Y. 2011-12 15 13OF INDO-UK TREATY. BUT THE SETTLED LAW IS THAT TH E PROVISIONS OF DTAA OVERRIDES THE PROVISIONS OF IT ACT IN THE MATTER OF ASCERTAINMENT OF TAXABILITY UNDER THE INCOME TAX ACT. AT THIS JUNCT URE, IT IS WORTH TO MENTION THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. 327 ITR 456 WHERE IN THE HONBLE APEX COURT HAS DECIDED THAT THERE WAS NO OBLIGATION FOR WITHHOLDING TAX ON ANY PERSON MAKING PAYMENT TO A NON-RESIDENT, IF THE PAYMENT MADE TO NON-RESIDENT IS NOT CHARGEABLE UNDER THE PR OVISIONS OF THE I.T. ACT. 24. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE IN HAND, IN OUR CONSIDERED OPINION, THE REVENUE COULD NOT PROVE THAT THERE WAS TRANSFER OF TECHNOLOGY BY M/S. RPS ENERGY LTD TO TH E ASSESSEE NOR IT HAS BEEN PROVED THAT THE IMPUGNED TRANSACTIONS HAVE MADE AVAILABLE TECHNICAL EXPERTISE SKILL OR KNOWLEDGE BY PROCESSIN G THE DATA PROVIDED BY THE ASSESSEE. NOR IT HAS BEEN PROVED THAT THE AS SESSEE CAN APPLY INDEPENDENTLY AND WITHOUT ASSISTANCE AND UNDERTAKE SUCH SURVEY INDEPENDENTLY EXCLUDING RPS ENERGY LTD. IN FUTURE. 25. ASSUMING THAT M/S. RPS ENERGY LTD., RENDERED SERVI CES AS DEFINED U/S. 9(1)(VII) EXPLANATION 2 OF THE ACT, Y ET IT DOES NOT SATISFY THE REQUIREMENT OF TECHNICAL SERVICES AS CONTAINED IN INDIA-UK DTAA. WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIR ECT THE A.O TO DELETE THE IMPUGNED ADDITION. 26. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 04 - 05 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER