Schlumberger Asia Services Ltd., Gurgaon V. DDIT, Dehradun

ITA 6437/DEL/2014

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2973 (ITAT-DEHRADUN)
• Duration Of Justice: 7 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUES ARISING FROM PSC PARTNERS US
• Keywords: Business income; Question of law; Capital receipt; TDS
• Section: 234B; 44BB; 192; 113; 43; 9(1); 115A; 9(1); 9(1); 44DA; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘DB’: NEW DELHI (Through Video Conferencing) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER ITA No.6437/DEL/2014 [Assessment Year: 2011-12] Schlumberger Asia Services Limited, 14 th Floor, Tower C, Building No.1, DLF City, Phase II, Gurgaon-122002 Deputy Director of Income Tax (International Taxation), Dehradun PAN-AADCS1107J Assessee Revenue ITA No.6439/DEL/2014 [Assessment Year: 2011-12] Deputy Director of Income Tax (International Taxation), Dehradun Schlumberger Asia Services Limited, 14 th Floor, Tower C, Building No.1, DLF City, Phase II, Gurgaon-122002 PAN- AADCS1107J Revenue Assessee Assessee by Sh. Salil Kapoor, Adv. Ms. Ananya Kappor & Ms. Soumya Singh, Adv. Revenue by Sh. T.S.Mapwal, Sr.DR Date of Hearing 18.04.2022 Date of Pronouncement 05.05.2022 2 ITA No.6437/Del/2014 ITA No.6539/Del/2014 ORDER PER R.K. PANDA, AM, These are cross appeals. The first one is filed by the assessee and the second one filed by the Revenue and are directed against the order dated 04.09.2014 of the CIT(A), Dehradun, relating to Assessment Year 2011-12. For the sake of convenience these cross appeals were heard together and are being disposed of by this common order. 2. Facts of the case, in brief, are that the assessee is a foreign company engaged in the business of providing various services and facilities in connection with and supply of plant and machinery, used or to be used in the prospecting for and extraction and exploration of mineral oils world-wide. It filed its return of income on 18.07.2012 declaring total taxable income of Rs.145,32,98,837/- to tax u/s 44BB of the IT Act. The AO completed the assessment u/s 143(3)/144C(3)(a) of Income Tax Act, 1961 determining the total income of the assessee at Rs.260,74,25,630/- after making the following adjustments/disallowances:- i. Bifurcated income between production sharing contractors (‘PSC’) and Non-PSC contractorsfor income from rental of equipment treating the same 3 ITA No.6437/Del/2014 ITA No.6539/Del/2014 as Royalty under section 9(l)(vi) of the Act and taxing income from non-PSC contractors under section 44DA of the Act. ii. Further, income from provision of various services has been treated as fees for technical services (‘FTS’) under 9(l)(vii) of the Act, applying estimated profit rate of 25% as against said income offered to tax under section 44BB of the Act in the ROI; iii. Receipts on account of reimbursement of service tax from PSC and Non-PSC included in the revenue chargeable to tax (under section 44BB and section 44DA respectively depending on the stream of income) as opposed to not chargeable to tax claimed in the ROI; and iv. Receipts on account of reimbursement of expenditure (equipment lost in hole, customs duty etc.)from PSC and Non-PSC totaling to Rs 32,23,63,873included in the revenue chargeable to tax as against said receipts not chargeable to tax being pure reimbursement. 3. Before the CIT(A), the assessee made elaborate arguments and also filed the order of the Tribunal in assessee’s own case for AY 2010-11 in which all the issues were decided in some way or the other. 4. Based on the arguments advanced by the assessee, ld. CIT(A) granted part relief to the assessee by observing as under:- 4. For Ground no.1 challenges the action of Id. AO in bifurcating revenue streams pertaining to PSC and non- 4 ITA No.6437/Del/2014 ITA No.6539/Del/2014 PSC partners. Thus, the Id. AO has applied different yardsticks for revenues arising from PSC partners (u/s 44BB of the Act) and non-PSC partners (treated as royalty or FTS). The Id. ARs have filed detailed submissions on this point to canvass the view that activities need to be viewed holistically and not be artificially split into various facets. However, this issue is covered in favour of the Appellant through adjudication for AY 2010-11 (supra). This ground is accordingly allowed. 5. Grounds 2,3 and 4 need to be adjudicated jointly since they are interconnected. It may be reiterated that on identical issues, decision has been rendered in favour of the Appellant on the basis of the CGG Veritas case (supra). However, after the CGG Veritas case (supra), the decision in the case of Ohm Ltd. (supra) has put things in better perspective with regard to the applicability of sections 44BB of the Act and section 44DA of the Act, especially after the amendment brought in from 01.04.2011 (discussion in para 12 of this judgement). It is seen that as in AY 2010-11, this year also the Id. AO has termed the services as being royalty or FTS with respect to non-PSC partners relying on interpretation of the Law which basically revolves around believing that the amendment to both the sections was retrospective in effect being clarificatory and that once the services are technical in nature they had to be excluded from the purview of section 44BB of the Act. 5.1 The Id. ARs have submitted that the services are directly connected with oil extraction or exploration then they have to be assessed u/s 44BB of the Act. Relevant portions from their submissions need to be extracted as under:- 1. With reference to the appeal filed with your office and in continuation to our submission filed on August 21, 2014, we would like to submit as under. The appellant requests that the below mentioned 5 ITA No.6437/Del/2014 ITA No.6539/Del/2014 submissions may please be read in conjunction with the submissions filed on August 21, 2014.The below mentioned submissions are independent to each other and without prejudice to the submissions filed earlier. Without prejudice to the claim of the appellant that the receipts are not in the nature of ‘FTS’, the appellant claims that specific provision (Section 44BB) overrides general provisions (Section 44DA) 1.1. The assessee wishes to place reliance on the decision of the Hon’ble Delhi High Court in the case of Director of Income Tax -II vs. OHM Limited1 wherein the Hon 'ble Court upheld the ruling of the AAR that specific provision (section 44BB) overrides general provision (section 44DA). 1.2. The interplay between section 44BB and section 44DA has been examined in detail by the Hon 'ble Delhi High Court in the case of OHM Limited (supra). The Hon’ble Court has relied upon the well settled rule of interpretation that if a special provision is made for a certain matter, that matter is excluded from the general provision under the rule which is expressed by the maxim “Generalliaspecialibus non derogant”. Further, the Court has also relied upon another well settled rule of construction that when, in an enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. Based on the above principles of construction and interpretation, the Hon’ble Court held that income from services which are specific to the oil & gas E&P sector shall be subject to the computation provisions of section 44BB as opposed to section 44DA. 1.3. Furthermore, the appellant wishes to submit that the Hon’ble Court held that in the instance the services are “general in nature” and can be categorized as 'fees for technical service ” ’ under Explanation 2 to Section 9(l)(viii), the benefit of section 44BB cannot be availed by the assessee. In other 6 ITA No.6437/Del/2014 ITA No.6539/Del/2014 words, it has been held that revenue in the nature of “fees for technical service ” and earned from activities in connection with exploration and production of mineral oil are includible in the revenue chargeable to tax under section 44BB of the Act. 2. The activities of the appellant are NOT “general in nature” and are directly in connection with the oil & gas E&P 2.1. Based on the scope of work awarded to the appellant, the following activities were performed by the appellant:  Cementing Services  Drill stem testing services;  Wireline Logging:  Measurement-while-logging (MWD)  Logging-while-drilling (LWD)  Coring Services  Electro Logging The activities carried out by the appellant are detailed in the Exhibit-1 attached herewith. In view of the foregoing, the appellant wishes to assert that the activities carried out by the appellant are activities in connection with oil & gas exploration & production (“E&P”) activities. Furthermore, the appellant wishes to invite your goodself’s attention to the following;  during the course of assessment proceedings, copy of the Essentiality Certificates (ECs) issued by the Directorate General of Hydrocarbons were submitted before the Ld. AO. The ECs are a conclusive proof that the equipment are used in oil & gas E&P and the usage of the equipment has never been disputed by the Ld. AO in the entire assessment proceedings. The copy of the ECs, on sample basis, were also enclosed with our earlier submission; 7 ITA No.6437/Del/2014 ITA No.6539/Del/2014  Your goods elf in own case of appellant mentioned that the services are clearly connected with extraction of mineral oils and thus would be covered for the application of section 44BB of the Act.  the oilfield equipment provided by the appellant are used in India in the respective contract areas awarded under the respective Production Sharing Contracts (PSCs). This fact is on record and is also verifiable from the contracts. 3. Delhi High Court in the case of PGS Geophysical AS2 upheld its earlier ruling in the case of OHM Ltd. (supra) In the instant case, the assessee was engaged in the business of providing geophysical services including acquisition and processing of seismic data. In the appeal, the taxpayer did not agitate that the scope of work executed by it was not fees for technical services as defined in section 9(l)(vii) of the Act. Under these circumstances, the Court proceeded on the basis that the income of the assessee was within the definition of fees for technical services. The question as to whether not the services were specific and essential for the oil & gas E&P operations or were general fees for technical services was never considered by the Court. In view of the above facts, the High Court ruled that -  The Court upheld1 its earlier ruling in the case of OHM Ltd. (supra); and  Accordingly it went on to hold that even though the income was in the nature of fees for technical services falling within section 44DA, the provisions of section 44BB would nevertheless apply because the taxpayer was engaged in the business of providing services in connection with prospecting for mineral oils. A harmonious construction of the Delhi High Court’s decision in the case of OHM Ltd and PGS Geophysical AS would be that income from services which are specific to the oil & gas E&P sector shall be subject to the computation provisions of section 44BB as opposed to section 44DA. In making the assertion we wish to submit as under: 8 ITA No.6437/Del/2014 ITA No.6539/Del/2014  The Hon’ble Delhi High Court in the case of PGS Geophysical has nowhere dissented from its earlier judgment in the case of OHM Ltd. On the contrary, the Court has categorically stated that it was following its own judgment in the case of OHM in the present case also;  The ruling in the case of PGS Geophysical be thus read in consonance with the ruling in the case of OHM Limited, wherein it has been specifically held that only services which were general in nature would be taxable under section 44DA. For this reason, services which are specific to the oil & gas E&P operations would be taxable under section 44BB in preference to section 44DA; and  Again, it is important to note that the scope of work performed by PGS was not examined in detail by the High Court and its role in the E&P industry not appreciated by the Court In nutshell, the appellant wishes to submit as under:  the activities of the appellant are explicitly in connection with oil & gas E&P;  The Hon’ble Delhi High Court in the case of OHM Ltd. (supra) held that revenue from services which are specific to the oil & gas E&P sector shall be subject to the computation provisions of section 44BB as opposed to section 44DA;  The above principle has been upheld by the Hon ’ble Delhi High Court in a subsequent decision in the case of PGS Geophysical (supra); In view of all of the foregoing, the appellant submits that the revenue is includible in the revenue chargeable to tax under section 44BB of the Act. Furthermore, the summarized grounds vis-a-vis the grounds raised and adjudicated in the earlier year(s) is also enclosed herewith as Exhibit-2. 5.2. The findings of ld. AO and the averments of ld. ARs have been carefully considered. It is not in doubt that all the services rendered by the Appellant (as detailed in 9 ITA No.6437/Del/2014 ITA No.6539/Del/2014 the extract above) had a direct nexus with oil extraction or exploration. Thus following the detailed reasoning given and interpretation of law in the Ohm Ltd. case (supra) it is held that the Appellant’s case deserves to be dealt with u/s 44BB of the Act for the entire quantum of income. These grounds are accordingly allowed. 6. Ground no.6 challenges the inclusion of Service Tax reimbursement in the turnover for the purposes of computing income u/s 44BB of the Act or as royalty/FTS. This ground is allowed following the case of Precision Energy Services Ltd. [ITANo.5609/Del/2012], 7. Ground no.5 challenges the inclusion of certain general reimbursements in the computation of income, both u/s 44BB of the Act or as FTS/Royalty. Following the decision in AY 2010-11 (Supra) this ground is rejected but the ld. AO is directed to consider these expenses only u/s 44BB of the Act. 8. Ground no. 7 protests the treatment of consortium between the Appellant and SASL as an AOP-. This ground is identical to the one adjudicated in AY 2010- 11 (Supra) and following the findings given there, it is allowed. 9. Ground No.8 protests the fact that credit for TDS has not been given. The Id. AO must do so at the time of giving effect to this order. 10. Ground no. 9 challenges the levy of interest u/s 234B of the Act. This ground is allowed following the case of Maersk reported in 334 ITR 79 (UK). 11. Ground nos. 10 and 11 challenge the initiation of penalty proceedings u/s 27IB and 271(l)(c) of the Act. These grounds are dismissed on the ground that mere initiation of penalty is not an appellable matter. 12. In the result, this appeal is partly allowed.” 5. Aggrieved with such part relief, the assessee as well as the Revenue are in appeal before the Tribunal by raising the following grounds:- 10 ITA No.6437/Del/2014 ITA No.6539/Del/2014 Revenue’s Appeal (ITA No.6439/Del2014) “1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that the revenue earned by the assessee from various entities on account provision of cementing services, well-testing services, wireline logging services etc. (‘technical services’), was taxable u/s 44BB of the Income Tax Act, 1961 (‘the Act’) as opposed to Section 44DA read with section 9(l)(vii) of the Act. 2. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in holding that the receipts of the assessee from the entities which are not parties to the Production Sharing Contracts (Non-PSC Partners), on account of provision of equipment on hire (‘equipment rental’) was taxable u/s 44BB of the Income Tax act, 1961 (‘the Act’) as opposed to Section 44DA read with section 9(l)(vi) of the Act. 2.1 The Ld. CIT(A) has erred in holding that no distinction can be made between receipts from PSC and Non-PSC Partners, ignoring the fact that the receipts from Non-PSC Partners on account of equipment rental are in respect of Contracts which are entered into with companies not directly engaged in Oil Production and Exploration and, therefore liable to tax as Royalty u/s 9(l)(vi) read with section 44DA, and not eligible for treatment u/s 44BB of the Act. 3. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in ignoring the effect of the amendment brought in vide Finance Act, 2010 w.e.f. 01.04.2011, in terms of which income covered by section 44DA has been specially excluded from the scope of section 44BB for Asstt Years 2011-12 (the year under consideration) onwards. 3.1 Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the distinct scheme of taxation of Fees for Technical Services (‘FTS’) and Royalty and disregarding the insertion of proviso in section 44BB /44DA/115A and the rationale behind the introduction of said amendment in the Finance Bill 2010in holding that the income of the assessee from the 11 ITA No.6437/Del/2014 ITA No.6539/Del/2014 above services was covered under the presumptive provisions of section 44BB. 3.2 The Ld CIT(A) has erred in not appreciating the fact that even in terms of ratio of the judgment in the said case of OHM Ltd [352, ITR 406 (Delhi)] cited by him, the provisions of section 44BB are not applicable where the scope of the services/facilities provided by an assessee is general in nature falling under section 44DA(1) of the Act. 3.3 The Ld CIT(A) has erred in mechanically following the decisions in the case of M/s OHM Ltd. without first adjudicating upon the issue as to whether and how the scope of the services/facilities rendered under the contracts is not general in nature and therefore, does not qualify as FTS u/s 9(l)(vii) of the Act taxable under section 44DA. 3.4 The Ld CIT(A) has erred in holding that the income earned by the assessee for imparting of technical services was eligible for treatment u/s 44BB of the Act, without adjudicating the aspect of eligibility under the second limb of the exclusionary proviso (Explanation to Section 9(l)(vii) of the I.T. Act, 1961) i.e. “for a project undertaken by the recipient” in terms of decisions of Hon’ble Delhi High Court in CIT Vs Rio Tinto Technical Services [2012-TII-01 -HC-DEL-INTL]. 3.5 Without prejudice to the forgoing, the Ld CIT(A) has erred in ignoring the ratio of the judgment in the case of M.s CGG Veritas Services [para 46 of the judgment dated 25.01.2012 rendered in ITA No. 4653/Del/2010] wherein the Hon’ble IT AT has categorically held that the w.e.f. Asstt. Year 2011-12, FTS, even if rendered in connection with oil exploration, will be assessable u/s 44DA/115A and not u/s 44BB of the Act. 4. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the decisions of jurisdictional High Court in the cases of ONGC as Agent of Foramer France and M/s Rolls Royce Pvt Ltd. [2007- TII-03-HC- UKHAND-INTL]. 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that receipts 12 ITA No.6437/Del/2014 ITA No.6539/Del/2014 on account of re-imbursement of expenses (whether from PSC or Non-PSC partners) are chargeable to tax u/s 44BB, ignoring the fact that such receipts part take the character of related receipts on account of FTS/Royalty and hence liable to be taxed u/s 44DA of the Act. 6. Without prejudice to the generality of the ground relating to taxation of entire receipts as FTS, whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that the amounts received as re-imbursement of Service Tax are not liable to tax at all and are not includible in gross turnover even for the purpose of computing taxable income u/s 44BB. a. The Ld. CIT(A) has erred in not appreciating the fact the provisions of section 44BB are a self-contained code providing for computation of profits at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from income are deemed to have been allowed to the assessee. b. Whether the Ld. CIT(A) has erred in not appreciating the fact that once the receipts held as taxable u/s 44BB of the Act, there is no scope for computing or re-computing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits u/s 44BB of the Act and obviating the need for accounting for individual receipts and payments etc. c. Whether the Ld. CIT(A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P) Ltd. (82 ITR 542, SC) wherein the Hon’ble Apex Court has held that the Sales Tax Collected by an assessee in the ordinary course of its business forms part of its business receipts. Owing to the inherent similarity in the nature of the sales tax and service tax, the ratio of the judgment in the said case is directly applicable in the facts of the instant case. 7. Whether on the facts and circumstances on the facts, the Ld. CIT(A) has erred in reversing the action of the AO who, having held that the assessee’s revenues on account of aforesaid services under Contracts with various entities are liable to be taxed u/s 44DA, rightly 13 ITA No.6437/Del/2014 ITA No.6539/Del/2014 estimated the income of the assessee by applying 25% rate of profit on gross receipts in the absence of books of accounts and details of expenses incurred in providing the services. 8. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in holding that interest u/s 234B of the Income Tax Act, 1961 (‘the Act’) was not chargeable in this case by relying upon the case of M/s Maersk [334 ITR 79], a. The Ld. CIT(A) has erred in not appreciating the fact that the case of M/s Maersk was distinguishable on facts as it dealt with a case where the employer failed to deduct tax at source despite the specific provisions of the Act in terms of which the employer was mandatorily required to deduct tax from the salary paid to the employee. In the said case, the Hon’ble Court held that an employee is not liable to pay advance tax on salary because u/s 192 there is an obligation on the employer to deduct tax at source. The case does not lay down a general proposition of law that interest u/s 234B is not chargeable in all cases, particularly in cases where the Non-resident assessee/payee/deductee has played a role in inducing non-deduction or short-deduction on the part of the payer/deductor. b. The Ld.CIT(A) has erred in failing to take note of the observations of the Hon’ble High Court in the case of M/s Mitsubishi [330 ITR 578, Del] that the role of the assessee/payee/deductee in short-deduction or non¬deduction of tax needs to be ascertained before claim regarding non¬liability to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgment of Delhi High Court dated 07.11.2013 in ITA No. 327 & Ors of 2012). 9. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in reversing the finding of the Assessing Officer that the assessee, along with M/s Transocean Offshore Deepwater Drilling Inc. (TODDI) is liable to be taxed in the status of Association of Persons in respect of revenues on account of provision of Deepwater Drilling rigs along with integrated services to 14 ITA No.6437/Del/2014 ITA No.6539/Del/2014 ONGC under a contract undertaken by the assessee as consortium with TODDI. 10. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.” Assessee’s Appeal (ITA No.6437/Del2014) “Based on the facts and circumstances of the case, Schlumberger Asia Services Limited (hereinafter referred to as ‘SASL’ or the ‘Appellant’) respectfully craves leave to prefer an appeal against the order dated 04 September 2014 passed by the Commissioner of Income Tax (Appeals) - II [hereinafter referred to as the ‘learned CIT(A)’] under section 250(6) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) (received by the Appellant on 29 September 2014) on the following grounds: Ground No.1 - Taxability of reimbursement of expenses The learned CIT(A) has erred on facts and in law in holding that receipts on account of reimbursement of various expenses amounting to Rs 32,23,63,873 are to be included in computing the gross receipts for the purpose of the estimation of income under section 44BB of the Act as opposed to Appellant’s claim for non-taxability of such receipts ignoring the orders of the jurisdictional High Court and Hon’ble Income Tax Appellate Tribunal in Appellant’s own case.” 6. So far as the grounds of appeal filed by the Revenue are concerned, the ld. DR heavily relied on the order of the AO. The ld. Counsel, on the other hand, submitted that the AO himself in subsequent years i.e., AY 2012-13 and onwards has accepted that the revenue earned by the assessee on account of rental on equipments and provision of services are in the 15 ITA No.6437/Del/2014 ITA No.6539/Del/2014 nature of section 44BB of the Act even in cases where such revenues were received from the same contracts as AY 2010-11. Further, for certain stream of services in assessee’s own case for AY 2013-14 wherein the AO did not accept that the services are covered u/s 44BB, the Tribunal has held that income from provision of services having nexus with oil exploration or production should be taxed u/s 44BB of the Act. He accordingly submitted that the issue stands covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for AY 2013-14. 6.1 He submitted that identical issue had also been decided by the coordinate Bench of the Tribunal in the case of Smith International Inc. Vs. DCIT, vide ITAs No.4561/Del/2013 and 3824/Del/2014 order dated 10.11.2021. He submitted that where the AO has accepted that income from rental of equipment from PSC contractors is taxable u/s 44BB, there should not be any distinction for such revenues from non-PSC contractors. He accordingly submitted that the grounds of appeal No.1 to 7 by the Revenue stand decided in favour of the assessee by the decision of the Tribunal in assessee’s own case for AY 2013-14. 16 ITA No.6437/Del/2014 ITA No.6539/Del/2014 7. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee is engaged in providing various services including equipment on rent connected with exploration, exploitation and prospection of oil and gas to its clients. During the year it has provided certain equipments on rent and provided various services, namely, drilling fluid services, coring services, completion services, cementing services, liner hanger services, drill stem testing services, AMC for software in relation to oil and gas exploration and production etc. The income from rental of equipment and provision of services were offered to tax under section 44BB of the Act. However, in respect of income from rental of equipment to Non-PSC contractors and various services, the AO for various reasons mentioned in the assessment order held that income from services are to be taxed as FTS/ Royalty under section 9(1 )(vi)/ 9(1 )(vii) of the Act. The profit from this income was estimated at 25% and offered to tax at 40% plus applicable taxes as against income offered to tax under section 44BB of the Act ie profit being 10% 17 ITA No.6437/Del/2014 ITA No.6539/Del/2014 of gross receipts. We find the ld.CIT(A) held that income from services and equipment of rentals involved have direct nexus with oil exploration or production. Accordingly, bifurcation of income between PSC and Non-PSC is to be deleted and held that income from the aforesaid streams are to be taxed under section 44BB of the Act. 7.1 We do not find any infirmity in the order of the CIT(A) on this issue. We find, the AO himself in subsequent years i.e., 2012-13 and onwards has accepted that revenues earned by the assessee on account of rental of equipments and provision of services are in the nature of section 44BB of the Act even in cases where such revenues were received from same contracts as AY 2011-12. We find for certain other streams of services in assessee’s own case for AY 2013-14, the AO did not accept that the services are covered u/s 44BB. We find, the Tribunal vide ITA No.6172/Del/2017, order dated 7 th December, 2021 for AY 2013-14, held that income from provision of services having nexus with oil exploration or production should be taxed u/s 44BB of the Act. The relevant observation of the order of the Tribunal reads as under:- 18 ITA No.6437/Del/2014 ITA No.6539/Del/2014 “6. The appellant has entered into several contracts earning revenues, details of which is tabulated between Sl. no. 1 to 121 of the table inserted between page 1 to 10 of the assessment order. The assessing officer accepted the revenue mentioned between SI No. 1 to 9 and 11 to 112 as taxable u/s 44BB of the Act. The revenue in respect of the contracts mentioned at serial number 113 to 121 in respect of post-stack inversion study, core pressure and well-bore study, data processing and maintenance services were considered by the AO in the nature of fees for technical services u/s 9(1)(vii) of the Act. The Assessing Officer treated these receipts as per provisions of section 44DA of the Act as ‘fees for technical services’ as defined in section 9(1) (vii) of the Act. It was observed by the Assessing Officer that the services cannot be considered as any activity relating to “mining activity” and basically in these activities assessee is providing technical and consultancy services. It was considered that the post-stack inversion study, core pressure and well-bore study, data processing and maintenance services are covered under the definition of FTS as per the provision of section9 (1) (vii) of the Act. 7. The issue under dispute is the section under which the receipts from ‘post-stack inversion study, core pressure and well-bore study, data processing and maintenance services’ ought to be brought to tax. The AO has treated receipts in the nature of fee for technical services and taxed the same u/s 44DA of the Act. On the other hand, the Appellant is of view that its receipts should have been brought to tax under section 44 BB of the Act. The Appellant has primarily relied upon the judgment of the Apex Court 19 ITA No.6437/Del/2014 ITA No.6539/Del/2014 passed in the case of ONGC (Civil Appeal No.731 of 2007) to support its contention. 8. Combined effect of the provisions of sections 44BB, 44DA and 115A is that if the income of a non-resident is in the nature of fee for technical services, it shall be taxable under the provisions of either section 44DA or section 115A irrespective of the business to which it relates. Section 44BB applies only in a case where consideration is for 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, mineral oils. 9. Memorandum to the Finance Bill, 2010 clarifies that it is not the kind of business which is material but it is the nature of services which is of importance to determine whether receipts are taxable as fee for technical services under section 44 DA of the Act or under section 44 BB of the Act. In order to ascertain the aforesaid, it would be pertinent to have a look at the contractual agreements and scope of work as provided in the contract. 10. The Assessing officer at para 7.1 of the assessment order has observed that these services cannot be considered as any activity relating to mining activity and basically in these activities assessee is providing technical and consultancy services and therefore covered under the definition of FTS as per provision of section 9 (1)(vii) of the Act.” 11. On perusal of the judgment of Hon’ble Supreme court of India in civil appeal number 731 of 2007 in the case of ONGC Ltd vs. CIT and others it is found that the issue before the Hon’ble court was to decide 20 ITA No.6437/Del/2014 ITA No.6539/Del/2014 whether certain services in connection with prospecting, extraction or production of mineral oil is chargeable to tax as “fees for technical 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 under section 44BB of the Act”? The relevant portion of the judgment is reproduced as below: “8. A careful reading of the aforesaid provisions of the Act goes to show that under Section 44BB (1) in case of a non-resident providing services or facilities in connection with or supplying plant and machinery used or to be used in prospecting, extraction or production of mineral oils the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10% of the aggregate of the amounts paid or payable to such non-resident assessee as mentioned in Sub-section (2). On the other hand, Section 44D contemplates that if the income of a foreign company with which the government or an Indian concern had an agreement executed before 1.4.1976 or on any date thereafter the computation of income would be made as contemplated under the aforesaid Section 44D. Explanation (a) to Section 44D however specifies that “fees for technical services” as mentioned in Section 44D would have the same meaning as in Explanation 2 to Clause (vii) of Section 9(1). The said explanation as quoted above defines “fees for technical services” to mean consideration for rendering of any managerial, technical or consultancy services. However, the later part of the explanation excludes from consideration for the purposes of the expression i.e. “fees for technical services” any payment received for construction, assembly, mining or like project undertaken by the recipient or consideration 21 ITA No.6437/Del/2014 ITA No.6539/Del/2014 which would be chargeable under the head “salaries”. Fees for technical services, therefore, by virtue of the aforesaid explanation will not include payments made in connection with a mining project. 9. Before the High Court, a Circular No. 1862 dated 22.10.1990 having a bearing on the subject was placed for consideration by the assessee. The aforesaid instruction may be reproduced herein below. “Subject: Definition of ‘fees for technical services” in Explanation to Section 9(1) (vii) of the Income Tax Act, 1961 whether prospecting for or extraction of production of mineral oil are “mining” operations-clarification regarding. The expression “fees for technical services” has been defined in Explanation 2, to Section 9(1) (vii) of the Income Tax Act, 1961 as under: “Explanation 2. - For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”. 2. The question whether prospecting for, or extraction or production of, mineral oil can be termed as ‘mining operations, was referred to the Attorney General of India for his opinion. The Attorney General has opined that such operations are mining operations and the expressions ‘mining project’ or ‘like projects’ 22 ITA No.6437/Del/2014 ITA No.6539/Del/2014 occurring in Explanation 2 to Section 9 (1) (ii) of the Income Tax. Act would cover to Section 9(1) (vii) of the Income Tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. 3. In view of the above opinion, the consideration for such services will not be treated as fees for technical services for the purpose of Explanation 2 to Section 9(1) (vii) of the Income-tax Act, 1961. Payments for such services to a foreign company, therefore, will be income chargeable to tax under the provisions of section 44BB of the Income-tax Act, 1961 and not under the special provision for the taxation of fees for technical services contained in section 115A read with section 44D of the Income-tax Act, 1961. 4. A copy of the statement of the case dated 16.3.1990 (without annexures) and a copy of the Attorney General’s opinion dated 13.5.90 are enclosed. 5. These instructions may brought to the notice of all the officers in your region. [F. No. 500/6/89-FTD dt.22.10.90 from CBDT]” 10. Before us the opinion of the learned Attorney General has been placed by the learned counsel for the appellants at great length to contend that the views expressed by the learned Attorney which had been accepted by the CBDT were based on an exhaustive consideration of the provisions of the Mines Act, 1952 and the Mines and Minerals (Regulation and Development) Act, 1957 read with the relevant Entries in the Union and the 23 ITA No.6437/Del/2014 ITA No.6539/Del/2014 State List in the 7th Schedule to the Constitution of India. It is urged that the eventual test is one of pith and substance of the agreement, namely, whether the works contemplated or services to be rendered under the agreement is directly and inextricably linked with the prospecting, extraction or production of mineral oil. It is submitted on behalf of the appellants that the agreements in question satisfy the above test for-.which purpose the appellants have categorized the different contracts under 8 heads which may be conveniently set out at this stage herein below. 1. Carrying out seismic surveys and drilling for oil and gas 2. Services starting/re-starting/enhancing production of oil and gas from, wells 3. Services for prospecting for exploration of oil and or gas 4. Planning and supervision of repair of wells 5. Repair, Inspection or Equipment used in the exploration, extraction or production of oil and gas 6. Imparting Training 7. Consultancy in regard to exploration of oil and gas 8. Supply, Installation, etc. of software used for oil and gas exploration” 11. It is also urged on behalf of the appellants that the instruction/Circular dated 22.10.1990 issued by the CBDT was binding on the primary authority on the ratio of the decision of this Court in K.P. Varghese Vs. Income Tax Officer, Emakulam and Others. It has been further pointed on behalf of the appellants that even under the provisions of Section 3D of the Oil Fields (Regulation and Development) Act 1948 a mining lease means 24 ITA No.6437/Del/2014 ITA No.6539/Del/2014 a lease granted for the purposes of searching for, winning, working, getting, making merchandisable, carrying away or disposing of mineral oils or for the purpose connected therewith and such a lease includes an exploring or prospecting lease. Reference has also been made to the Petroleum and Natural Gas Rules, 1959 Framed under Section 5 of the aforesaid Act. Under Rule 4 of the said Rules no person can prospect for petroleum except pursuant to a Petroleum Exploration License (PEL) granted under the Rules and no person can mine petroleum except in pursuance of a Petroleum Mining License (PML) granted under the Rules. It is pointed, out that under Rule 7 of the Rules of 1959 a petroleum mining license (PML) entitles the licensee to carry out construction and maintenance in and on such land, works, buildings, plants, waterways, roads, pipelines etc. as may be necessary for full enjoyment of the PML. On the said basis it is argued that rendering any service in connection with prospecting and extraction is an integral part of mining and. that the expression “mining” in the Explanation 2 to Section 9(1) of the Income Tax Act, in the absence of any definition under the Income Tax Act, has to be understood as per the provisions of the Oil Fields (Regulation and Development) Act, 1948 read with the Petroleum and Natural Gas Rules, 1959. 12. Opposing the contentions advanced, on behalf of the appellants, Shri. Gurukrishna Kumar, learned senior counsel for the Revenue has urged, that the opinion of the Attorney General relied upon and the CBDT Circular has no relevance to the present case inasmuch as the agreements between ONGC and the non-resident companies made it abundantly clear that, what is paid, to the non-resident company are fees for technical services 25 ITA No.6437/Del/2014 ITA No.6539/Del/2014 rendered. Though such services may have some connection with the prospecting, extraction or production of mineral oil, the primary service rendered by the non-resident companies on the basis of the agreements is not for prospecting, extraction or production of mineral oil but various ancillary services like training of personnel etc. which may have a somewhat remote connection with the business of prospecting, exploration or production of mineral oils. Learned Counsel for the revenue has even suggested that if it is held that the High Court ought to have examined each agreement or contract to find out its real purpose and intent the revenue would have no objection if the matters are remanded for a complete exercise to be made on the above basis. 13. The Income Tax Act does not define the expressions “mines” or “minerals”. The said expressions are found defined and explained in the Mines Act, 1952 and the Oil Fields (Development and Regulation) Act 1948. While construing the somewhat pari materia expressions appearing in the Mines and Minerals (Development and Regulation) Act 1957 regard must be had to the provisions of Entries 53 and 54 of List I and Entry 22 of List II of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined, in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted and earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 26 ITA No.6437/Del/2014 ITA No.6539/Del/2014 2(j) and 2(jj) of the Mines Act, 1952 which define mines and minerals and the provisions of the Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting and exploration of mineral oils, exhaustively referred to earlier, it is abundantly clear that drilling operations for the purpose of production of petroleum would clearly amount to a mining activity or a mining operation. 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 determination of the question whether the payments made under such an agreement to the non-resident assessee or the foreign company is to be assessed und.er Section 44BB or Section 44D of the Act. The test of pith and substance of the 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 circular as far back as 22.10.1990 to the effect that mining operations and the expressions “mining projects” or “like projects” occurring in Explanation 2 to, Section 9(1) of the Act would cover 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- resident/foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see hour 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. Keeping in mind the above provision, we have looked into each of the 27 ITA No.6437/Del/2014 ITA No.6539/Del/2014 contracts as culled, out by the appellants and placed before the Court is correct. The said details are set out below. S. No. Civil Appeal No. Work covered under the contract 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. 740 Drilling, furnishing personnel for manning, maintenance and operation, of drilling rig and training of personnel. 3. 731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 4. 1722 Furnishing supervisory staff with expertise in operation and management of Drilling unit. 5. 729 Capping including subduing of well, fire fighting. 6. 738 Capping including subduing of well, fire fighting. 7. 1528 Analysis of data to prepare job design, procedure for execution and details regarding monitoring. 8. 1532 Study for selection of enhanced Oil Recovery processes and conceptual design of Pilot Tests. 9. 1520 Engineering and technical support to ONGC in implementation of Cyclic Steam Stimulation. 10. 2794 Assessment and processing of seismic data along with engineering and. technical support in implementation of Cyclic Steam Stimulation. 11. 1524 Conducting reservoir stimulation studies in association with personnel of ONGC. 12. 1535 Laboratory testing under simulated reservoir conditions. 13. 1514 Consultancy for optimal exploitation of hydrocarbon resources. 14. 2797 Consultancy for all aspects of Coal Bed Methane. 15. 6174 Analysis of data of wells to prepare a job design. 16. 1517 Geological study of the area and analysis of seismic information reports to design 2 dimensional seismic surveys. 17. 7226 Opinion on hydrocarbon resources and foreseeable potential. 18. 7227 Opinion on hydrocarbon resources and foreseeable potential. 19. 7230 Opinion on hydrocarbon resources and foreseeable potential. 28 ITA No.6437/Del/2014 ITA No.6539/Del/2014 20. 6016 Opinion on hydrocarbon resources and foreseeable potential. 21. 6008 Evaluation of ultimate resource potential and presentations outside India in connection with promotional activities for Joint Venture Exploration program. 22. 1531 Review of sub-surface well data, provide repair plan of wells and supervise repairs. 23. 733 Repair of gas turbine, gas control system and inspection of gas turbine and generator. 24. 741 Repair and inspection of turbines. 25. 737 Repair, inspection and overhauling of turbines. 26. 736 Inspection, engine performance evaluation, instrument calibration and inspection of far turbines. 27. 1522 Replacement of choke and kill consoles on drilling rigs. 28. 1521 Inspection of gas generators. 29. 1515 Inspection of rigs. 30. 2012 Inspection of generator. 31. 1240 Inspection of existing control system and deputing engineer to attend to any problem arising in the machines. 32- 1529 Inspection of drilling rig and verification of reliability of control systems in the drilling rig. 33. 2008 Expert advice on the device to clean insides of a pipeline. 34. 4 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 35. 925 Engineering analysis of rig. 36. 1519 Imparting training on cased hold production log evaluation and analysis. 37. 1533 Training on well control. 38. 1518 Training on implementation of Six Sigma, concepts. 39. 1516 Training on implementation of Six Sigma concepts. 40. 6023 Training on Drilling project management. 41. 2796 Training in Safety Rating System and assistance in development and audit of Safety Management System. 42. 1239 To develop technical specification for 3D Seismic API modules of work and. to prepare bid packages. 29 ITA No.6437/Del/2014 ITA No.6539/Del/2014 43. 1527 Supply supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 44. 1523 Supply, installation and familiarization of software for processing seismic data. The above facts would indicate that the pith and substance of each of the contracts/agreements is inextricable connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated, thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under 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 conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High. Court, passed, in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal. 14. Consequently, all the appeals are allowed with no order as to the casts.” 12. In the said order the Hon’ble Court had examined the contracts involved in the group of cases and summarized the brief description of the works covered under each of the said contracts in a table between pg 19-21 of the said order. In view of the ratio of the above judgment, it is to be seen whether the receipts under the head “post-stack inversion study, core pressure and well-bore study, data processing and maintenance services” is covered within the scope of work under the 30 ITA No.6437/Del/2014 ITA No.6539/Del/2014 contracts examined by the Hon’ble Supreme court in the said order. It is the scope of work and nature of service that determines taxability under section 44 BB and 44DA of the Act. 13. On examination of several sources available on the public domain it was found that post-Stack inversion transforms a single seismic data volume into acoustic impedance through integration of the assessment data, well data and a basic stratigraphic interpretation. The data input to the post stack inversion project typically consists of a set of wells containing sonic and density logs, optional check shots, formation markers and aviation service, a series of interpreted horizons and a seismic data volume. It generates acoustic impedance volumes from 2D or 3D seismic. 14. On perusal of the material on wellborn analysis it is found that “Wellbore study” is done to avoid drilling related failures. Many drilling related failures are caused by unstable boreholes, poor hole cleaning or stuck BHA and casing, Wellbore study identifies the wellbore instability, along with the mode of failure and is critical in correcting and reducing the cost associated with it. A range of measures based on wellbore acoustics and seismic as well as laboratory measurements assess the significance of the surroundings and reduces the risk. 15. Similarly, core pressure study is part of the Core Analysis which is done in course of Oil exploration to study the rock samples yield data basic to the evaluation of the productive potential of the hydrocarbon reservoir. Unbroken pieces of reservoir rock are obtained through coring techniques, either from the 31 ITA No.6437/Del/2014 ITA No.6539/Del/2014 bottom during drilling or from the site of the borehole walls after drilling. 16. It is clear from features of the post-stack inversion study, core pressure and well-bore study that all the services are integral to exploration of mineral oil. It is clear enough form the description of work at serial no. 1,10,11,12,13,15,16, 17 and 22 of the table inserted in the ONGC Ltd case (supra) that the purpose of the services given by the assessee is squarely covered with the scope of work involved in the contracts examined by the Hon’ble Supreme court in the above said order. The scope of work does not indicate that the services provided were exclusively in the nature of technical, consultancy and managerial in nature as per section 9(1) (vii) of the Act. The services provided by the Assessee were very much in connection with exploration of mineral oil. 17. Similarly, serial no. 10, 15, 22 and 44 of the table inserted in the ONGC Ltd. case (supra) covers the services of data processing given by the assessee with the scope of work involved, in the contracts examined by the Hon’ble Supreme court in the above said order. 18. In the decision of Ld. ITAT, Delhi in the case of Paradigm Geophysical Pty limited (ITA No. 2753/Del/ 2016) wherein the activities of the assessee in regard to maintenance support has been considered as activities falling within the ambit of section 44BB of the Act. The relevant portion of the decision is reproduced below: “7. Further, we find, that in the case of ONGC vs CIT (supra) the Hon’ble Supreme Court held that if the pith and substance of each 32 ITA No.6437/Del/2014 ITA No.6539/Del/2014 contracts/agreement is inextricably connected with prospecting, extraction or production of mineral oil, then payment received by the non- resident assessee or foreign companies under the said contract is more appropriately assessable under the provisions of section 44BB and not u/s 44D of the Act. The list of contracts, in the said appeal before the Supreme Court included following contracts: “1. Contract of supply, installation and familiarization of software for processing seismic data. 2. Contract of supply, supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. ....................... 8. In the case in hand also the software is supplied and maintained were related to various activities of exploration including for reservoir navigator, up-gradation of the Geo log multimin etc. 9. In view of the above, respectfully following the decision of the Hon’ble Supreme Court, in the case of ONGC versus CIT (supra) and the decision of the Tribunal (supra) in the case of the assessee itself, we hold that the services provided with assessee falls within the ambit of section 44BB of the Act.” 19. In view of the above discussion and respectfully relying upon the decision of Hon’ble Supreme Court in the case of ONGC versus CIT (supra) and the decision of Ld ITAT, Delhi in the case of Paradigm Geophysical Pty limited (ITA No. 2753/Del/ 2016) it is held that the receipts of the Assessee on account of post-stack inversion study, core pressure and well-bore study, data processing and maintenance services were taxable under section 44 BB of the Act. 33 ITA No.6437/Del/2014 ITA No.6539/Del/2014 20. In the result, the appeal of the revenue on this ground is dismissed. 21. With regard to the contention of the revenue that the amounts have to be taxable u/s 44DA, we hold that to invoke the provisions of Section 44DA, the revenue has to prove that the receipts are indeed or in the nature of FTS taxable u/s 9(1)(vii). 22. With regard to the reimbursement of “equipment lost in hole” amounting to Rs.11,01,66,066/- as includible in the gross receipts as opposed to the claim of the assessee that the same being is a capital receipt are not chargeable to tax. The assessee has relied upon the decision of the Hon’ble Uttarakhand High Court in the case of CIT Vs Schlumberger Asia Services Limited (ITA No. 58 of 2006). Submission 23. The reimbursement of equipment lost in hole is in the nature of capital receipts and therefore, same could not be included, in the revenue chargeable to tax u/s 44BB of the Act. As the name signifies lost in hole means destruction and loss of capital assets like drilling equipment which are provided by the assessee to oil exploration and. production companies. Therefore, the revenue received on account of loss of equipment does not form income in the hands of the assessee rather it is a mere reimbursement of the cost of equipment destroyed in the process of oil extraction. 24. The assessee wishes to place reliance on the decision of the Hon’ble Uttarakhand High Court in the own case of the assessee (CIT vs. Schlumberger Asia Services Ltd) wherein the 34 ITA No.6437/Del/2014 ITA No.6539/Del/2014 Hon’ble Court held that the receipts on account of equipment lost in hole being in the nature of capital receipts cannot, be included in the revenues chargeable to lax u/s 44BB of the Act. Adjudication of the ld. CIT(A) 5.24 The averments of the appellant have been critically examined in light of the decision in the case of CIT vs. Schlumberger Asia Services Ltd (supra), wherein Hon’ble Uttarakhand High Court has endorsed the view of Hon’ble ITAT and held that no question of law arises to be answered in this appeal. It is further gathered from the decision of the Hon’ble ITAT, Delhi in the case Schlumberger Asia Services Ltd(ITA NO. 6063/Del/2010) for the assessment year 2007-2008 that the issue of reimbursement received on account of equipment lost in hole is decided in favour of the assessee by considering the earlier decisions. Ld ITAT has observed as below: “7.7 It has further been noted that the A.O. has included a sum of Rs. 7,23,59,963/- received by the Assessee as reimbursements of certain expenses being customs duties paid, by the Assessee on behalf of its clients, equipments lost in hole etc. It has been submitted that the inclusion of this amount within the scope of receipts for purpose of determining income of the Assessee is contrary to the settled law on the issue and decisions in the case of the Assessee itself. Income tax is leviable only on those receipts, which constitute 'income'. "Income" as contemplated under the Act does not include "reimbursement of expenses". There is no element of profit and. gains in the reimbursements received by the Assessee, which has incurred expenses for and on behalf of other companies. Contractually the liability 35 ITA No.6437/Del/2014 ITA No.6539/Del/2014 to incur these expenses was with those companies. Therefore the amounts towards reimbursement cannot be considered as income of the Assessee. Furthermore, we note that assessee's contention is that that Ld. Assessing Officer has also erred on facts and in law in not following the decision of the jurisdictional High Court of Uttarakhand in Assessee's own cases DIT v. Schlumberger Asia Services Limited [2009] 317 ITR 156/ and CIT v. Schlumberger Asia Services Limited (ITA No. 58 of2006, Order dated 26-10-2007, in which it was held, that such reimbursement does not constitute income. These decisions have also been followed by the Hon'ble Tribunal in Assessee's own case ACIT ITA NO. 6063/Del./2010 v. Schlumberger Asia Services Limited, ITA No. 4180(Del)/2006 Order dated 13-04-2007. We find considerable cogency in assessee's submission as above. Hence, we hold that the Assessing Officer has erred in including Rs.72359963/- received by the assessee as reimbursements for determining the taxable income of the assessee.” 5.25 Respectfully following the decision of the Jurisdictional Tribunal and Hon’ble High Court. 25. Since, the order of the ld. CIT(A) is relied on the order of the ITAT and the Hon’ble Jurisdictional High Court, we decline to interfere with the order of the ld. CIT(A).” 8. We further find the Dehradun Bench of the Tribunal in the case of Smith International Inc., vide ITAs No.4561/Del/2013 and 3824/Del/2014, order dated 10.11.2021 has held as under:- 36 ITA No.6437/Del/2014 ITA No.6539/Del/2014 “10. We have perused the record before us and the rationale of the Id. CIT(A). The Id. CIT(A) held that the distinction between PSC and non-PSC partners for deciding whether a receipt would be assessed u/s 44BB or as FTS or Royalty does not have the support of law or for that matters any judicial authority. Thus such a distinction has to be rejected as an artificial construct devoid of merit. Secondly, it also cannot be accepted that similar kinds of services can be taxed u/s 44BB of the Act if rendered to a PSC and thereafter, sought to be taxed as FTS or royalty if rendered to a non-PSC partner. The plethora of case laws cited by the Id. ARs and especially the case of CGG Veritas (50 SOT 335) makes it clear that once a PE is known or admitted to exist then the income as in this case, has to be assessed u/s 44BB of the Act more so because the equipment supplied and services rendered are for the purposes of extraction or production of mineral oils. Thirdly, treating of supply of skilled personnel to operate equipment supplied by the assessee cannot be viewed in isolation since the activity of supplying such manpower is part and parcel of the supply of equipment to be used for extraction or production of mineral oils. For this reason also, the income has to be assessed u/s 44BB of the Act only.” 9. We further find the co-ordinate Bench of the Tribunal in the case of INTECSEA Asia Pacific Sdn. Bhd vs. ACIT, vide ITA No.5577/Del/2018, order dated 8 th October, 2021 for AY 2015- 16, while deciding an identical issue has observed as under:- “15. From the perusal of the services and the nature of scope of work, we find that duties carried out by the appellant on contract with ONGC in fact has mining activity which was excluded from the definition of FTS u/s 9(1)(vii) as they are essential to the development and exploration of the oil and gas 37 ITA No.6437/Del/2014 ITA No.6539/Del/2014 fields of ONGC. These services ostensibly is to be regarded as exclusion to FTS under section 9(1)(vii) and such activities need not itself be of mining or like nature so long as they are related to ‘mining or like project’ as has been clarified in the Circular No. 1862 dated 22.10.1990, that the expressions 'mining projects' or like projects' occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas. 16. Thus in parting of training is a part of mining activity only carried out by his appellant in his contract to the aforesaid parties. In so far as the reliance placed by the Ld. DR on the decision of Paradigm Geophysical Pty Limited, was on different facts as the assessee therein was involved in providing software services definition of which is covered under section 9(1)(vi) of the Act whereas Appellant’s case is that of FTS under section 9(1)(vii) read with section 44DA of the Act. AR further explained that section 44DA of the Act can be applied only if the income in the first-place falls within the definition of FTS under section 9(1)(vii). In the Appellant’s case, since the services are covered by the exclusion in section 9(1)(vii), they do not qualify as FTS for invoking section 44DA of the Act. 17. Accordingly we hold that not only receipt of accounts of services which has been accepted by the Ld. CIT (A) was also other scope of work relating to attending meetings but also the other activities are inextricably linked with the contract of design and engineering of submarine pipeline. Therefore the entire receipts for the ONGC as well as Leighton India are taxable u/s 44BB. Accordingly the appeal of the assessee is allowed.” 38 ITA No.6437/Del/2014 ITA No.6539/Del/2014 10. Respectfully following the above decisions, we do not find any infirmity in the order of the CIT(A) on this issue. Accordingly the grounds raised by the revenue are dismissed. 11. So far as ground of appeal 6.c. by the Revenue is concerned, we find during the year under consideration, the assessee charged service tax on services rendered to various customers which was paid to the Government of India as per Service Tax Law. The said service tax was reimbursed to the Assessee by its customers as the same was paid on behalf of customers. We find, the CIT(A) following the decision of the Tribunal in the case of Precision Energy Services Ltd vide ITA No. 5609/Del/2012, reversed the order of the AO. We find, the issue stands decided in favour of the assessee by the decision of the Hon’ble Uttarakhand High Court (Full Bench) in Assessee’s own case and Others reported in 414 ITR 1 wherein the Hon’ble High Court has held that amount reimbursed to the Assessee by ONGC representing service tax paid earlier by Assessee to the Government of India and not “on account of provision of services in connection with exploration and production of mineral oil”, would not form part of aggregate taxable amount as referred under section 44BB. We find, the 39 ITA No.6437/Del/2014 ITA No.6539/Del/2014 Tribunal in assessee’s own case for AY 2012-13 vide ITA 79 of 2017 has also followed the above decision of the Hon’ble High Court. Since the decision of the Hon’ble High Court was not challenged before the Hon’ble Supreme Court by the Revenue, a statement made by the ld. Counsel for the assessee at the Bar and not controverted by the ld. DR, therefore, the said issue, in our opinion, has reached finality. Once the Revenue has accepted a position in Assessee’s own case, the same, in our opinion, needs to be followed and applied in the year under consideration. In view of the above discussion, the ground of appeal No.6.c. by the Revenue is dismissed. 12. Ground of appeal No.8 of Revenue relates to Levy of interest under section 234B. After hearing both sides, we find, the issue stands decided in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of DIT vs Mitsubishi Corporation, reported in 130 taxmann.com 276 wherein the Hon’ble Supreme Court has held that the liability for payment of interest as provided in section 234B is for default in payment of advance tax. While the definition of “assessed tax” under section 234B pertains to tax deducted or collected at source, the pre-conditions of section 234B viz., 40 ITA No.6437/Del/2014 ITA No.6539/Del/2014 liability to pay advance tax and non-payment or short payment of such tax, have to be satisfied, after which interest can be levied taking into account the assessed tax. Therefore, section 209 of the Act which relates to the computation of advance tax payable by the assessee cannot be ignored while construing the contents of section 234B. The relevant extract of the decision of the Hon’ble Supreme Court given at para 20 of the order reads as under:- “20. We do not find force in the contention of the Revenue that Section 234B should be read in isolation without reference to the other provisions of Chapter XVII. The liability for payment of interest as provided in Section 234B is for default in payment of advance tax. While the definition of “assessed tax” under Section 234B pertains to tax deducted or collected at source, the pre-conditions of Section 234B, viz. liability to pay advance tax and non- payment or short payment of such tax, have to be satisfied, after which interest can be levied taking into account the assessed tax. Therefore, Section 209 of the Act which relates to the computation of advance tax payable by the assessee cannot be ignored while construing the contents of Section 234B. As we have already held that prior to the financial year 2012-13, the amount of income-tax 41 ITA No.6437/Del/2014 ITA No.6539/Del/2014 which is deductible or collectible at source can be reduced by the assessee while calculating advance tax, the Respondent cannot be held to have defaulted in payment of its advance tax liability. We uphold the view adopted in the impugned judgement of the Delhi High Court in Civil Appeal No. 1262 of 2016 as well as by the Madras High Court in the Madras Fertilizers case (supra), that the Revenue is not remediless and there are provisions in the Act enabling the Revenue to proceed against the payer who has defaulted in deducting tax at source. There is no doubt that the position has changed since the financial year 2012-13, in view of the proviso to Section 209 (1) (d), pursuant to which if the assessee receives any amount, including the tax deductible at source on such amount, the assessee cannot reduce such tax while computing its advance tax liability.” 12.1 Accordingly, ground No.8 filed by the Revenue is dismissed. 13. So far as the appeal filed by the assessee is concerned, we find, the assessee, during the impugned assessment year, has received an amount of Rs.32,23,63,873/- on account of reimbursement of various expenses which include equipment lost in hole, reimbursement of customs duty, reimbursement of 42 ITA No.6437/Del/2014 ITA No.6539/Del/2014 hotel cost, insurance cost, etc. The detailed break-up of the expenses are as under:- 4 Insurance Premium Cost 3,34,432 5 Reimbursement of Transportation Charges 7,59,919 6 Reimbursement of Freight 4,35,532 7 Others 6,04,124 Total 32,23,63,873 14. It is the submission of the ld. Counsel for the assessee that they have not charged and earned any profits from reimbursement of the above expenses and the same merely represents the recovery of costs for the Assessee for which the assessee did not offer the same to tax. So far as the reimbursement on account of equipment lost in hole amounting to Rs 27,87,39,161 is concerned, we find, the Hon’ble Supreme Court in the case of Sedco Forex International Inc vs CIT, reported in 399 ITR 1 has held that reimbursement of cost of tools lost in hole shall not be taxed under section 44BB of the Sr no. Nature of reimbursement Amount (Rs) 1 Equipment lost in hole 27,87,39,161 2 Reimbursement of Customs Duty 3,77,70,682 3 Hotel reimbursement 37,20,022 43 ITA No.6437/Del/2014 ITA No.6539/Del/2014 Act. We find the coordinate Bench of the Tribunal in assessee’s own case, vide ITA No.79/Del/2017, order dated 01.07.2021 for AY 2012-13, has held that reimbursement of amount towards loss of equipment shall not be taxed under section 44BB of the Act. The relevant observations of the Tribunal at paras 7 and 8 of the order reads as under:- “7. The underlying facts in the first issue are that the AO has considered the receipts on account tools lost in hold as includible in the gross receipts. The case of the assessee is that the said receipt is of capital in nature and hence not chargeable to tax. This issue has been decided by the Hon’ble Uttarakhand High Court in asessee’s own case which has been confirmed by the Hon’ble Supreme Court in 399 ITR 1. The relevant findings of the Hon’ble Supreme Court read as under :- 8. As the CIT(A) has followed the earlier order of this Tribunal which has been upheld by the Hon’ble Uttarakhand High Court and subsequently by the Hon’ble Supreme Court we do not find any error or infirmity in the findings of the CIT(A) grounds relating to the first issue are dismissed. 44 ITA No.6437/Del/2014 ITA No.6539/Del/2014 15. So far as the reimbursement of Customs duty amounting to Rs.3,77,70,682/- is concerned, we find, the Hon’ble High Court of Uttarakhand in assessee’s own case reported in 317 ITR 156 has held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44BB of the Act as the same is a statutory liability and any reimbursements are pure reimbursements. The relevant observation of the Hon’ble High Court at para 8 of the order reads as under:- “8. Having considered submissions of learned counsel for the parties, we are of the view that reimbursement towards the customs duty, paid by the assessee, being statutory in nature, cannot form part of amount for the purposes of deemed profits unlike the other amounts received towards reimbursement. Therefore, we do not find any sufficient reason to interfere with the impugned orders, passed by the ITAT, which has affirmed the view taken by the CIT(A). Question of law stands answered accordingly.” 16. We find the coordinate Bench of the Tribunal in the case of ACIT vs Transocean Offshore DeepWater Drilling Inc reported in 176 taxman 122 has held that reimbursement of custom duty shall be exempt from tax while computing income under section 44BB of the Act. So far as the other reimbursements 45 ITA No.6437/Del/2014 ITA No.6539/Del/2014 are concerned, we find the same are decided against the assessee by the decision of the Hon’ble Supreme Court in the case of Sedco Forex International Inc (supra). The grounds raised by the assessee are accordingly partly allowed. 17. In the result, the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is partly allowed. Order was pronounced in the open Court on 05.05.2022 Sd/- Sd/- SSss Sd/- Sd/- [C.N. PRASAD] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 05 th May, 2022. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi