ADIT, Dehradun V. M/s Expro Gulf Ltd., Dehradun

ITA 748/DEL/2013

• Counselvise Citation: 74820114 RSA 2013
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESANG Y SHIRPA
• Keywords: Double taxation relief; Permanent establishment; Tax effect
• Section: 142(1); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B , NEW DELHI) BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO. 748/DEL/2013 ASSESSMENT YEAR : 2009-10 ADIT, (INTERNATIONAL TAXATION) VS. EXPRO GULF LTD. , 13-A, SUBHASH ROAD, C/O NANGIA & CO., AAYAKAR BHAWAN, 75/7, RAJPUR ROAD, DEHRADUN DEHRADUN GIR / PAN:AAACE5272B C.O. NO.71/DEL/2013 ASSESSMENT YEAR 2009-10 EXPRO GULF LTD., VS. ADIT (INTERNATIONAL TAXATIO N), C/O NANGIA & CO., DEHRADUN 75/5, RAJPUR ROAD, DEHRADUN (APPELLANT) (RESPONDENT) DEPARTMENT BY : MS. KESANG Y SHIRPA, SR. DR ASSESSEE BY : SHRI AMIT ARORA, CA DATE OF HEARING : 30.10.2015 DATE OF PRONOUNCEMENT : 27.11.2015 ORDER PER KULDIP SINGH, JM: SINCE IN THE AFORESAID APPEAL AND CROSS OBJECTION, IDENTICAL GROUNDS HAVE BEEN RAISED AND EVEN ISSUES INVOLVED ARE IDENT ICAL, WITH THE CONCURRENCE OF THE AUTHORIZED REPRESENTATIVES OF TH E PARTIES TO THE APPEAL, THE ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 2 SAME ARE TAKEN UP TOGETHER FOR DECISION BY WAY OF T HIS COMMON ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT ADIT, INTERNATIONAL TAXATION, DEHR ADUN BY FILING THE PRESENT APPEAL IN I.T.A.NO.748/DEL/2013 UNDER I. T. ACT, 1961 (HEREINAFTER REFERRED AS THE ACT), SOUGHT TO SET ASIDE THE IMP UGNED ORDER DATED 08.11.2012 PASSED BY LD. CIT(A) II, DEHRADUN FOR T HE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF WELL TE STING EQUIPMENTS AND SERVICES WAS NOT IN THE NATURE OF FTS SQUARELY COVE RED UNDER SECTION 9(1)(VII) OF THE I.T. ACT, 1961. 2. WHETHER THE CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE WAS TAXABLE UNDER THE PROVISION OF SECTION 44BB EVEN THOUGH THE NATURE OF SERVICES RENDERED BY THE ASSESSEE WER E TECHNICAL IN NATURE AND HAS NOT ADJUDICATED THE ASPECT OF ELIGIB ILITY IN TERMS OF SECOND LIMB OF THE EXCLUSIONARY PROVISO I.E. 'FOR A PROJECT UNDERTAKEN BY THE RECIPIENT' AS CONFIRMED IN DELHI HIGH COURT DECISION IN RIO TINTO. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSE E WAS TAXABLE UNDER THE PRESUMPTIVE PROVISIONS OF SEE 44BB AND IGNORING THE FACT THAT TAXABILITY U/S 44BB SHALL NOT APPLY IN RESPECT OF I NCOME REFERRED TO IN SECTION 44DA IN VIEW OF THE CLARIFICATORY PROVISO T O SEE 44BB AND SEE 44DA. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN INTERPRETATION OF THE LEGISLATIVE INTE NT BEHIND THE SCHEME OF TAXATION ENVISAGED IN 9(L)(VII) R.W. 44DA AND 44 BB AND THE INSERTION OF SECOND PROVISO TO SUB-SECTION (1) OF SECTION 44DA AND A REFERENCE TO SECTION 44DA IN THE PROVISO BELOW SUB- SECTION (1) OF SECTION 44BB. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN IGNORING THE DISTINCT SCHEME OF TAXATI ON OF FTS/ROYALTY ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 3 AND DISREGARDING THE INSERTION OF PROVISO IN SECTIO N 44BB/44DA/115A AND THE RATIONALE BEHIND THE INTRODUCTION OF SAID C LARIFICATORY PROVISO'S IN THE FINANCE BILL 2010 WHEN RELYING ON THE CASE OF M/S CGG VERITAS TO HOLD THAT THE INCOME OF THE ASSESSEE COMPANY WAS COVERED UNDER THE PROVISIONS OF SECTION 44BB. 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN RELYING ON THE CASE OF M/S CGG VERITAS IGNORING THAT THE SAID DECISION OF THE ITAT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND A MA HAS BEEN FILED, WHILE APPEAL WAS NOT FILED PURELY ON ACCOUNT OF TAX EFFECT CONSIDERATION. 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE FINDING GIVEN BY THE AO WHO HAD HELD THAT THE FEE FOR TECHNICAL /SERVICE/ROYALTY RE CEIVED BY THE ASSESSEE WHICH IS A NON-RESIDENT COMPANY WAS CORREC TLY ESTIMATED @ 25% OF GROSS RECEIPTS AS PER THE REQUIREMENTS OF RU LE 10 OF THE INCOME TAX RULES, 1962 IN THE ABSENCE OF BOOKS OF A CCOUNTS AND TAXED ACCORDINGLY. 8. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS IGNORED THE FACT THE DEPARTMENT HAS FILED A SPE CIAL PETITION BEFORE DIVISIONAL BENCH OF THE COURT IN THE CASE OF BJ SER VICES AND 22 OTHERS WHICH IS STILL PENDING. 9. WHETHER THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT PROVISO TO SECTION 44BB IS NOT INSERTED PER MAJOREM CAUTELA M' BUT EXPLAINS AND CLARIFIES THE MAIN PROVISION AS THE TERM SERVIC ES OR FACILITIES USED THEREIN ARE NOT DEFINED AND THE TWO TERMS USED ARE TOO GENERAL IN NATURE AND THUS ONCE THE PAYMENTS ARE CHARACTERIZED AS FTS UNDER SECTION 9(1 )(VII), THEY GO OUTSIDE THE PURVIEW OF SECTION 44BB AND HAVE TO BE TAXED AS FTS AT APPLICABLE FTS RATES AS PRESCRIBED UNDER THE ACT AND/OR DTAA. 10. WHETHER THE CIT(A), HAS ERRED IN NOT APPRECIATI NG THAT SINCE 44DA BEING THE SPECIAL PROVISION FOR TAXATION OF IN COME IN THE NATURE OF ROYALTIES AND FTS WHERE THESE ARE EFFECTIVELY CO NNECTED WITH A PE, THEN IF A SPECIAL PROVISION IS MADE RESPECTING A CE RTAIN MATTER THAT ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 4 MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RULE OF 'GENERALLIA SPECIALIBUS NON DEROGANT'. 11. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT PROVISO TO SECTION 44DA BROUGHT ABOUT BY THE FINANCE ACT 2011 WAS ONLY CLAR IFICATORY IN NATURE AND ITS APPLICATION HAS TO BE READ INTO THE MAIN PROVISIONS WITH EFFECT FROM THE TIME THE MAIN PROVISION CAME IN TO EFFECT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F SEDCO FOREX INTERNATIONAL DRILLING VS. CIT. 12. WHETHER THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THAT INTEREST U/S 234B WAS NOT CHA RGEABLE IN THIS CASE BY RELYING UPON THE DECISION OF / HON'BLE UTTA RAKHAND HIGH COURT IN T HE CASE OF MAERSK (334 ITR 79) WHERE AS THE DEPARTMENT HAS CONTESTED THE ISSUE AND HAS FILED SLP BEFORE TH E APEX COURT AGAINST IN THE CASE OF JACOBS CIVIL INCORPORATED / MITSUBISHI INVOLVING SIMILAR ISSUE. 3. THE APPELLANT M/S. EXPRO GULF LTD.., BY FILING T HE CROSS APPEAL IN C.O. NO.71/DEL/2013, SOUGHT TO SET ASIDE THE IMPUGNED OR DER DATED 08.11.2012 PASSED BY LD. CIT(A) II, DEHRADUN FOR THE ASSESSMEN T YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT: 1. THAT THE LD. COMMISSIONER OF INCOME-TAX, APPEA LS-II, DEHRADUN [CIT(A)) ERRED IN NOT UPHOLDING THE CLAIM OF THE APPELLANT THAT ITS NATURE OF OPERATIONS IN INDIA, I.E. THE WO RK PERFORMED BY THE APPELLANT IN INDIA UNDER THE VARIOUS CONTRACTS WITH ITS CUSTOMERS, WAS NOT FEES FOR TECHNICAL SERVICES AND/OR ROYALTY AS D EFINED IN EXPLANATION (2) TO SECTION 9(1)(VII) AND EXPLANATIO N (2) TO SECTION 9(1) (VI) RESPECTIVELY. 2. WITHOUT PREJUDICE TO THE ABOVE, THAT THE LD. CIT (A) HAS ERRED IN NOT UPHOLDING THAT THE ACTIVITIES PERFORMED BY THE APPELLANT ARE IN THE NATURE OF A BUILDING, CONSTRUCTION, INSTALLATION AN D/OR A MINING OR LIKE PROJECT AND FOR THIS REASON, EXCLUDED FROM THE AMBI T OF THE DEFINITION OF FEES FOR TECHNICAL SERVICES AS DEFINED IN EXPLAN ATION (2) TO SECTION 9(1 )(VII). ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 5 3. WITHOUT PREJUDICE TO ANY OF THE ABOVE, THAT THE LD. CIT(A) HAS ERRED IN NOT HOLDING THAT THE SCOPE OF OPERATIONS O F THE ASSESSEE ARE SQUARELY COVERED BY THE DECISION OF THE JURISDICTIO NAL HIGH COURT OF UTTARAKHAND IN THE CASE OF CIT VS. ONGC AS AGENT OF SCAN DRILLING COMPANY IN ITR NO.2 OF 2001. 4. THAT THE LD. CIT(A) HAS ERRED IN NOT UPHOLDING T HAT THE EQUIPMENT SUPPLIED BY THE APPELLANT ON HIRE IS NOT IN THE NATURE OF ROYALTY PAYMENTS IN VIEW OF CLAUSE (IVA) OF EXPLANA TION (2) TO SECTION 9(1 )(VI). 4. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF THE RETURN OF INCOME FILED BY THE ASSESSEE QUA THE ASSE SSMENT YEAR 2009-10 DECLARING TOTAL INCOME OF RS.94,72,390/-, THE CASE WAS SUBJECTED TO SCRUTINY AND CONSEQUENTLY, NOTICES U/S 143(2) AND 142(1) ALO NG WITH QUESTIONNAIRE DATED 26.07.2012 WERE SERVED UPON THE ASSESSEE AND IN RESPONSE THERETO, SHRI R. P. EASHWARAN, FCA ATTENDED THE PROCEEDINGS FROM TIME TO TIME, SUBMITTED WRITTEN REPLIES. 5. THE ASSESSEE, BEING NON-RESIDENT COMPANY INCORPO RATED UNDER THE LAWS OF CYPRUS, RECEIVED REVENUE ON ACCOUNT OF CON TRACT DATED 13.12.2008 WITH BG EXPLORATION AND PRODUCTION INDIA LTD; CAIRN ENERGY INDIA PVT. LTD.; JUBILANT OIL AND GAS PVT. LTD. AND HALLIBURTON OFFS HORE INC. THE ASSESSEE HAS RENDERED SERVICES FOR PROVIDING WELL TESTING EQ UIPMENT AND SERVICES TO AFORESAID COMPANIES AND HAS OFFERED GROSS REVENUE O F RS.9,47,23,889/-, AND HAS COMPUTED INCOME BY APPLYING DEEMED PROFIT RATE OF 10% U/S 44BB OF THE ACT. OUT OF THE AFORESAID CONTRACT, THREE CONT RACTS NAMELY BG ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 6 EXPLORATION AND PRODUCTION INDIA LTD; CAIRN ENERGY INDIA PTY. LTD. AND JUBILANT OIL AND GAS PVT. LTD. ARE PRODUCTION SHARI NG CONTRACTS AND AS SUCH FALLING IN FIRST LEG CONTRACT WITH COMPANY ENGAGED DIRECTLY IN OIL EXPLORATION. 6. DURING THE YEAR UNDER ASSESSMENT THE ASSESSEE HA S ALSO EXECUTED CONTRACT OF HIRE OF OFFSHORE SUPPLY VESSEL WITH M/S . HALIBURTON OFFSHORE SERVICES INC. WHICH IS NOT A PRODUCTION SHARING CON TRACT COMPANY, THUS IT IS A SECOND LEG CONTRACT. 7. FROM THE TERMS AND CONDITIONS OF CONTACT IT IS C LEAR THAT THE ASSESSEE IS PROVIDING WELL TESTING EQUIPMENT AND SERVICES THROU GH WIRE LINE TESTING, SURFACE TESTING ETC. USING A FULL SLIM HOLE DST STR ING OR WITH A PRODUCTION TEST INCORPORATION A WIRE LINE RETRIEVABLE DOWN HOLE SHU T IN TOOL. THUS, THE SERVICE PROVIDED UNDER ALL THE THREE CONTRACTS RELA TE TO WELL TESTING BY WEENIE OF SIMILAR PROCEDURES. SO, IN VIEW OF THE ABOVE PR OCEDURE, THE ISSUE OF TAXABILITY HAS BEEN DETERMINED TO BE TAXED AS FTS A ND CONFIRMED TO BE SO IN THE CASE OF PRECISION ENERGY SERVICES FOR ASSESSMEN T YEAR 2007-08 AND ALSO IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 200 8-09 WHERE THE SAME CONTRACTS WERE PERFORMED AND PART OF THE REVENUES F ROM THOSE CONTRACTS ARE CONTINUED TO BE RECEIVED IN THE PRESENT YEAR UNDER CONSIDERATION. SO, IT IS CLEAR THAT THE ASSESSEE HAS BEEN RENDERING TECHNICA L SERVICES AND AS SUCH, ITS INCOME IS NOT COVERED U/S 44BB OF THE ACT AND TAXAB LE AS FTS AND THIS ISSUE HAS BEEN CONFIRMED BY DRP IN THE AFOREMENTIONED YEA RS. 8. SO, IN VIEW OF THE PROVISIONS OF SECTION 144C, T HE DRAFT ASSESSMENT ORDER DATED 09.12.2011 IS FINALIZED FOR ASSESSMENT YEAR 2009-10 OF THE ASSESSEE. IN VIEW OF SECTION 144C(3)(B) OF THE ACT , TO WHICH NO OBJECTION HAS BEEN FILED BY THE ASSESSEE, THE ASSESSMENT IS A CCORDINGLY FINALIZED ON THE TOTAL INCOME OF RS.2, 36,80,970/-. ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 7 9. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A ) BY ASSESSMENT YEAR OF FILING APPEAL WHO HAS PARTLY ALLOWED THE SA ME VIDE IMPUGNED ORDER. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE T HE TRIBUNAL BY FILING THE PRESENT APPEAL. AT THE SAME TIME, ASSESSEE HAS ALSO FILED CROSS APPEAL BY RAISING THE IDENTICAL ISSUES. 10. HOWEVER, AT THE VERY OUTSET, LD. A.R. OF THE AS SESSEE M/S. EXPRO GULF LTD. LTD. HAS NOT PRESSED THE CROSS APPEAL AND CONS EQUENTLY THE SAME HAS BEEN DISMISSED AS WITHDRAWN WITHOUT PREJUDICE TO TH E RIGHT OF APPELLANT ASSESSEE IN THE APPEAL NO. 748/DEL/2013 FILED BY TH E REVENUE. 11. LD. D.R. CHALLENGING THE APPEAL UNDER CONSIDERA TION CONTENDED THAT LD. CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE WAS TAXABLE UNDER THE PROVISIONS OF SECTION 44BB(1)(B) AND RELI ED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RI O TINTO AND FURTHER RELIED UPON THE ORDER PASSED BY A.O. 12. HOWEVER, ON THE OTHER HAND, LD. A.R. REITERATED HIS ARGUMENTS EXTENDED BEFORE LD. CIT(A) AND RELIED UPON THE ORDE R PASSED BY ITAT DELHI BENCH B IN I.T.A. NO. 5561/DEL/2011 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND FURTHER CONTENDED THAT THE CASE OF THE ASSESSEE IS FULLY COVERED BY THE AFORESAID ORDER PASSED BY T HE TRIBUNAL. 13. NOW, THE SHORT QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS, AS TO WHETHER LD. CIT(A) HAS ERRED IN COMPUTATION OF INC OME OF THE ASSESSEE BY INVOKING PROVISIONS CONTAINED IN SECTION 44BB OF TH E ACT BY SETTING ASIDE THE ORDER PASSED BY THE A.O.. THE A.O. IN CONSONANCE WITH THE ORDER OF DRP; PASSED DRAFT ASSESSMENT ORDER DATED 09.12.2011 IN T ERMS OF THE PROVISIONS CONTAINED U/S 144C BY OBSERVING THAT THE ASSESSEE I S NOT ENTITLED FOR CONCESSIONAL BENEFIT U/S 44BB OF THE ACT. SINCE, N O OBJECTION HAS BEEN FILED ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 8 BY THE ASSESSEE TO THE DRAFT ORDER AND THE TOTAL IN COME OF THE ASSESSEE WAS ASSESSED AT RS.2,36,80,970/-. 14. UNDISPUTEDLY, THE ASSESSEES OWN CASE QUA THE A SSESSMENT YEARS 2008-09 AND 2010-11 HAS BEEN DECIDED BY ITAT DELHI BENCH B, NEW DELHI VIDE ORDER DATED 12.02.2015. LD. A.R. VEHEME NTLY CONTENDED THAT THE PRESENT CASE IS COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO.5561/DEL/2011 AND 4650/DEL/201 4 (SUPRA). FOR READY REFERENCE, THE SUBMISSIONS OF THE REVENUE IN RESPEC T OF PROVISIONS OF SECTION 44BB AND ITS NON APPLICABILITY TO THE CASE IN HAND ARE EXTRACTED AS UNDER: RULE IS THAT WHERE THE MAIN PROVISION IS CLEAR, IT S EFFECT CANNOT BE CUT DOWN BY THE PROVISO. BUT WHERE IT IS NOT CLE AR, THE PROVISO, WHICH CANNOT BE PRESUMED TO BE A SURPLUS AGE, CAN P ROPERLY BE LOOKED INTO, TO ASCERTAIN THE MEANING AND SCOPE OF THE MAIN PROVISION. IN SUPPORT OF THE ABOVE PROPOSITION, RELIANCE IS PL ACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN I DEAL INSURANCE CO. LTD. VS LIC OF INDI 1963 AIR S.C.1083. 1. PROVISO TO SECTION 44BB IS NOT INSERTED PER MAJO REM CAUTELAM AS CANVASSED BY AND ON BEHALF OF THE APPLI CANT BUT IT EXPLAINS AND CLARIFIES THE MAIN PROVISION AS THE TE RMS 'SERVICES OR FACILITIES 'USED THEREIN ARE NOT DEFINED AND THE TW O TERMS USED ARE TOO GENERAL IN NATURE. THE PROVISO THUS RESTRICTS THE A PPLICABILITY OF THE SUBSTANTIVE PROVISION OF SECTION 44BB IN RELATION T O THOSE PERSONS WHO ARE EITHER ENGAGED IN THE BUSINESS FOR PROSPECTING, ETC., FOR MINERAL OIL (SECTION 42) OR FOREIGN COMPANIES WHO RECEIVED FEE FOR TECHNICAL SERVICES FROM AN INDIAN CONCERN ETC., (44D) OR IN T HE CASES OF NON- RESIDENTS AND FOREIGN COMPANIES RECEIVING FEE FOR T ECHNICAL SERVICES (SECTION 115A) AND PERSONS COVERED BY THE NOTIFICAT ION ISSUED BY THE CENTRAL GOVERNMENT (SECTION 293A). 2. PROVISO WOULD BE RENDERED USELESS IF WE ARE TO HOLD THAT SECTION DEALS WITH ALL SORTS OF SERVICES BE IT OF G ENERAL NATURE, AS A CLASS IN ITSELF AS WELL SERVICES OF TECHNICAL, CONS ULTANCY OR MANAGERIAL NATURE WHICH FORM A DISTINCT AND SEPARATE SPECIES O F SERVICES. THIS CAN ALSO BE EXPLAINED BY PROVISIONS CONTAINED AT LE AST IN THREE (3) TAX ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 9 TREATIES WHICH INDIA HAS ENTERED INTO WITH AUSTRIA, GERMANY AND JAPAN. RELEVANT EXTRACTS OF PARAGRAPH 3 OF ARTICLE 5 RELATING TO PERMANENT ESTABLISHMENT AND ARTICLE DEALING WITH RO YALTIES AND FEE FOR TECHNICAL SERVICES OF THESE TAX TREATIES MAY BE REFERRED TO. IT MAY BE PERTINENT TO MENTION THAT THE LANGUAGE USED IN P ARAGRAPH 3 OF ARTICLE 5 IN THESE TAX TREATIES IS SAME AS THAT USE D IN SECTION 44BB OF THE INCOME TAX ACT, 1961. THE EXISTENCE OF PES IS C OVERED IN THE ARTICLE DEALING WITH ROYALTIES AND FEE FOR TECHNICA L SERVICES SEPARATELY AND THE TAXABILITY OF PE BY VIRTUE OF AR TICLE 5, PARAGRAPH 3 WOULD BE COVERED SEPARATELY BY ARTICLE 7 OF THESE T AX TREATIES. 3. THE PHRASE 'IN CONNECTION WITH' USED IN SECTION 44BB ONLY BROADENS THE SCOPE OF THE SECTION TO COVER SERVICES WHICH ARE NOT OF TECHNICAL NATURE AND ENACTS A SPECIAL PROVISION FOR DETERMINATION OF TAX LIABILITY OF PERSONS ENGAGED IN PROVIDING SUCH SERVICES WHICH WOULD BE OUTSIDE THE SCOPE OF TECHNICAL SERVICES. 4. INSTRUCTION O. 1862 DATED 22-10-1990 DEALING WIT H THE INTERPRETATION OF THE TERM 'MINING OR LIKE PROJECT' , IS ISSUED IN AN ENTIRELY DIFFERENT CONTEXT AS CAN BE SEEN FROM THE STATEMENT OF THE CASE REFERRED FOR THE OPINION OF LEARNED ATTORNEY GENERA L AND THE OPINION OF LEARNED AG. FROM THE CONTEXT OF THIS INSTRUCTION , IT CAN BE SEEN THAT THE SAME WOULD NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THOSE APPLICANTS WHO ARE ENGAGED IN THE CARRYING OUT SEIS MIC SURVEYS AS THE INSTRUCTION WOULD APPLY ONLY TO THOSE WHO ARE ENGAG ED IN THE DRILLING OPERATIONS. THE SERVICES PROVIDED BY SUCH APPLICANT S WOULD NOT COME WITHIN THE EXCLUSIONARY PART OF THE EXPLANATION (2) TO SECTION 9 (1) (VII) OF THE ACT AS NO MINING OR LIKE PROJECT IS UN DERTAKEN BY SUCH APPLICANTS 5. SECTION 44D HAS BEEN MADE INOPERATIVE IN RESPECT OF AGREEMENTS AFTER THE 3151 DAY OF MARCH 2003 AND WIT H THIS TWO STREAMS FOR TAXATION OF PERSONS ENGAGED IN PROVIDIN G SERVICES OF TECHNICAL NATURE IS EVIDENT, ONE FOR THOSE HAVING A PE IN INDIA (SECTION 44DA) AND THE OTHER WHO DO NOT HAVE A PE [ SECTION 9 (1) (VII) READ WITH SECTION 115A]. 6. BOARD'S CIRCULAR NO 649 DATED 31-3-1993 ALSO CLA RIFIES WHAT SITUATION WOULD GOVERN THE ASPECT OF TAXABILIT Y OF FEE FOR TECHNICAL SERVICES WHERE THERE IS A TREATY EXISTENT AND WHERE THERE IS NONE. ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 10 IN VIEW OF THE ABOVE, THE INCOME OF THE ASSESSEE CO VERED U/S 9(L)(VII) OF THE INCOME-TAX ACT, 1961 AND THEREFORE, THE ASSE SSEE IS NOT ENTITLED FOR CONFESSIONAL BENEFIT UNDER SECTION 44BB OF THE INCOME-TAX ACT, 1961. THE ISSUE OF TAXABILITY OF RECEIPTS IN RESPECT OF T HE ABOVE CONTRACTS AS FEES FOR TECHNICAL SERVICES U/S 9(1)(V II) HAD COME UP BEFORE THE DRP WHEN THE AO HAS DETERMINED RECEIPTS FOR A.Y 2008-09 AS FTS, THE DRP HAS CONFIRMED THE STAND TAKEN BY TH E AO AND HELD THAT INCOME OF THE ASSESSEE IS FTS. THE CONTRACT WI TH HOSI ALSO COMPRISE OF PERFORMANCE OF SAME TYPE OF ACTIVITIES VIZ. PROVISION OF WELL TESTING SERVICES AND EQUIPMENT. ACCORDINGLY, F OLLOWING THE DIRECTIONS OF DRP AS OLD CONTRACT FROM LAST YEAR AR E CONTINUING IN THIS YEAR ALSO INCOME OF THE ASSESSEE IS HELD AS FTS. 15. HOWEVER, LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SINCE THE PRESENT APPEAL IS ON IDENTICAL FACTS AND ISSUE ALRE ADY RAISED HAVE BEEN DECIDED BY ITAT IN I.T.A. NO. 5561/DEL/2011, 4650/D EL/2013 AND C.O.29/DEL/2013 IN ASSESSEES OWN CASE, THE PRESENT APPEAL MAY BE TREATED AS COVERED ONE. 16. THE CONTENTION OF LD. D.R. THAT THE A.O. HAS RE TURNED THE SPECIFIC FINDINGS THAT THE ASSESSEE HAS NO PE IN INDIA DURIN G THE RELEVANT PERIOD, IS NOT TENABLE IN VIEW OF THE ADMITTED FACT THAT THE A SSESSEE HAS PE IN INDIA AND RETURN OF INCOME (ROI) WAS FILED AND ASSESSMENT WAS PASSED ACCORDINGLY. 17. THE A.O. ON THE ISSUE OF TAXABILITY OF PROCEEDS IN RESPECT OF ALL THE CONTRACTS ENTERED INTO BY THE ASSESSEE FOR THE YEAR UNDER ASSESSMENT AS FEE FOR TECHNICAL SERVICES (FTS) U/S 9(1)(VII) COMPLIED WITH THE ORDER PASSED BY DRP WHO HAS CONFIRMED THE STAND TAKEN BY A.O. THAT THE INCOME OF THE ASSESSEE IS FTS. THE CONTRACT WITH M/S. HALLIBURTO N OFFSHORE SERVICES INC. (HOSI) ALSO RELATES TO THE PERFORMANCE OF SALE AND ITS ACTIVITIES VIZ. ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 11 PROVISION OF WELL TESTING SERVICES AND EQUIPMENTS A ND CONSEQUENTLY, THE INCOME OF THE ASSESSEE IS HELD AS FTS. 18. HAVING PERUSED THE DECISION OF COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE IN I.T.A. NO. 5561/DEL/2011 (SU PRA) FOR THE ASSESSMENT YEAR 2008-09 AND 2010-11, WE ARE OF THE CONSIDERED VIEW THAT THE PRESENT CASE IS FULLY COVERED AS CONTENDED BY LD. A.R. FOR THE ASSESSEE. FOR READY REFERENCE, OPERATIVE PART OF THE ORDER PASSED BY TH E TRIBUNAL IN THE CASE (SUPRA) IS REPRODUCED AS UNDER: 12. THE CONTENTION OF THE REVENUE THAT IT IS TO BE DETERMINED WHETHER THE ASSESSEE HAD A PE IN INDIA DURING THE R ELEVANT PERIOD, IT IS ARGUED THAT THIS HAS TO BE LOOKED INTO. THIS AR GUMENT IN OUR VIEW HAS NO MERIT FOR THE REASON THAT, THE ADMITTED POSI TION IS THAT THE ASSESSEE HAS A PE IN INDIA. AN ROI WAS FILED AND A SSESSMENT WAS FRAMED ON THAT BASIS. 13. THE DRP HAD FOLLOWED ITS OWN ORDER IN THE CASE OF M/S. PRECISION ENERGY SERVICES LTD. FOR ASSESSMENT YEAR 2007-08 AND HELD THAT THE INCOME IN QUESTION IS TAXABLE AS FTS U/S 9(1)(VI) OF THE ACT. THE ITAT, DELHI BENCH REVERSED THIS ORDER OF THE DRP IN THE CASE OF PRECISIONS ENERGY SERVICES LTD. OF ASSESSME NT YEAR 2007-08 IN I.T.A. NO. 5286/DEL/2010 AND HELD THAT UNDER THE FA CT AND CIRCUMSTANCES OF THE CASE, THE INCOME IS TAXABLE U/ S 44BB OF THE ACT. THE REASON IS THAT THE SCOPE OF WORK AS PER THE CON TRACTS REQUIRES, THE ASSESSEE TO PROVIDE A RIG BASED SURFACE WELL, TESTI NG EQUIPMENT ALONG WITH OPERATING PERSONNEL. THUS THE ORDER OF THE DR P IN THE CASE OF M/S. PRECISION ENERGY SERVICES LTD. IS NO MORE A GO OD LAW. HENCE, WE HAVE REVERSED THIS IMPUGNED ORDER OF THE DRP. 19. HON'BLE HIGH COURT OF UTTARAKHAND IN I.T.A. NO. 35 OF 2015 IN ASSESSEES OWN CASE BY FOLLOWING THE JUDGEMENT OF HON'BLE SUPREME COURT IN CIVIL APPEAL NO.731/2007 ON IDENTICAL ISSUE HAS HELD THAT THE AMOUNT REPRESENTING WORK LIKE DRILLING AND EXPLORATION OF WELL IS COVERED BY SECTION 44BB OF THE ACT AND AS SUCH, LIABLE TO BE RECKONED U/S 44BB OF THE ACT. ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 12 20. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND IN CONSONANCE WITH THE VIEW TAKEN BY THE COORDINATE BENCH OF ITAT (SUPRA) AND BY APPLYING THE RATIO OF JUDGEMENT DATED 06 TH AUGUSTS 2015 DELIVERED BY HON'BLE HIGH COURT OF UTTARAKHAND IN THE ASSESSEES OWN CASE (SUPRA) O N THE IDENTICAL ISSUE IN SIMILAR FACTS AND CIRCUMSTANCES, THE ASSESSMENT ORD ER PASSED IN CONSONANCE WITH THE ORDER OF DRP FOR THE ASSESSMENT YEAR 2009- 10 IS NOT SUSTAINABLE IN THE EYES OF LAW. CONSEQUENTLY, FINDING NO ILLEGALI TY AND PERVERSITY IN THE IMPUGNED ORDER, THE PRESENT APPEAL FILED BY THE REV ENUE IN I.T.A. NO. 748/DEL/2013 FOR THE ASSESSMENT YEAR 2009-10 IS HER EBY DISMISSED. CROSS OBJECTIONS NO.71/DEL/2013 FILED BY THE ASSESSEE IS ALSO DISMISSED. 20. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV., 2015. SD./- SD./- ( N. K. SAINI) (KULDIP SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 27.11. 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.748/DEL/2013 C.O.NO71/DEL/2013 13 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 3/11 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 3,4,16,26/11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 27/11/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 27/11 SR. PS/PS 7 FILE SENT TO BENCH CLERK 27/11 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER