ADIT, Dehradun V. M/s TDI Brooks Intl. Inc., Dehradun

ITA 749/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0048 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 01-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI J.S. REDDY ITA NO. 749/DEL/2013 ASSESSMENT YEAR: 2009-10 ADIT, VS. TDI BROOKS INTL. INC. INTERNATIONAL TAXATION, C/O. NANGIA & CO., DEHRADUN. 75/7, RAJPUR ROAD, DEHRADUN. (PAN: AACCT3238J) (APPELLANT) (RESPONDENT) REVENUE BY: SHRI SANJEEV S HARMA, CIT(DR) ASSESSEE BY: SHRI AMIT ARORA , CA DATE OF HEARING : 25.03.2015 DATE OF PRONOUNCEMENT: 22:05.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE REVENUES FOR P ROVIDING SERVICES FOR GEOPHYSICAL AND GEOLOGICAL INTERPRETATION OF 3D AND 2D SEISMIC DATA ARE NOT FEES FOR TECHNICAL SERVICES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN APPLYING THE DECISION OF THE IT AT IN THE CASE OF M/S. CGG VERITAS OVERLOOKING THE FACT THAT THE ITAT HAS CLEARLY HELD THAT INTERPRETATION OF SEISMIC DATA ARE IN THE NATU RE OF FTS. 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE EVEN THOUGH IN THE NATURE OF FTS AND NOT COVERED UNDER T HE EXCLUSIONARY PROVISO THERE UNDER I.E. NOT HAVING BEEN RENDERED F OR A PROJECT UNDERTAKEN BY THE RECIPIENT WERE TAXABLE UNDER SEC. 44BB. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN APPLYING THE DECISION OF ITAT I N THE CASE OF M/S. CGG VERITAS HOLDING THAT THE ASSESSEE COMPANY HAD A PE AND WAS THUS COVERED UNDER IT WHEN THE SAID DECISION IS BIN DING ONLY IN CASE OF ASSESSEE NOT HAVING A PE AND THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN MA HAS BEEN FILED, WHILE A PPEAL WAS NOT FILED PURELY ON ACCOUNT OF TAX EFFECT CONSIDERATION S. 5. WHETHER THE CIT(A) HAS ERRED IN THE IGNORING DEC ISIONS OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ON GC AS AN AGENT OF M/S. FORAMER FRANCE AND CIT VS. M/S. ROLLS ROYCE PV T. LTD. (2007- TII-03-HIGH COURT UTTRAKHAND-INTT) HOLDING THAT FTS IS NOT ELIGIBLE FOR 44BB. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN IGNORING THE DISTINCT SCHEME OF TAXATION OF FTS/ROYALTY AND HOLDING THAT THE INCOME OF THE ASSE SSEE WAS TAXABLE UNDER THE PRESUMPTIVE PROVISIONS OF SEC. 44BB, DISR EGARDING THE INSERTION OF PROVISO IN SEC. 44BB/44DA/115A AND THE RATIONALE BEHIND THE INTRODUCTION OF SAID CLARIFICATORY PROVI SOS IN THE FINANCE BILL 2010. 3 7. WHETHER THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT PROVISO TO SEC. 44BB IS NOT INSERTED PER MAJOREM CAUTELAM BU T EXPLAINS AND CLARIFIES THE MAIN PROVISION AS THE TERM SERVICES O R FACILITIES USED THEREIN ARE NOT DEFINED AND THE TWO TERMS USED ARE TOO GENERAL IN NATURE AND THUS ONCE THE PAYMENTS ARE CHARACTERIZED AS ROYALTY U/S. 9(1)(VI), THEY GO OUTSIDE THE PURVIEW OF SEC. 44BB AND HAVE TO BE TAXED AS ROYALTY. 8. WHETHER THE CIT(A), HAS ERRED IN NOT APPRECIATIN G THAT ASSESSEES RELIANCE ON JINDAL DRILLING IS MISPLACED SINCE S 44DABEING THE SPECIAL PROVISION FOR TAXATION OF INCOME IN THE NATURE OF ROYALTIES AND FTS WHERE THESE ARE EFFECTIVELY CONNECTED WITH A PE, IN THE NATURE OF ROYALTIES AND FTS WHERE THESE ARE EFFECTI VELY CONNECTED WITH A PE, THEN IF A SPECIAL PROVISION IS MADE RESPECTIN G A CERTAIN MATTER THAT MATTER IS EXCLUDED FROM THE GENERAL PROVISION UNDER THE RULE OF GENERALLIA SPECIALIBUS NON DEROGANT. 9. WHETHER THE CIT(A) ERRED IN HOLDING THAT RETROSP ECTIVITY CANNOT BE READ INTO AMENDMENTS RELYING ON THE CASE OF BJ S ERVICES CO. MIDDLE EAST LTD. VS. DDIT NOT APPRECIATING THE FACT THAT PROVISO TO SEC. 44DA/44BB BROUGHT IN BY THE FINANCE ACT, 2011 WAS ONLY CLARIFICATORY IN NATURE AND ITS APPLICATION HAS TO BE READ INTO THE ACT IN VIEW OF THE DECISION OF THE APEX COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING VS. CIT. 4 2. THE ISSUE INVOLVED IN THE ABOVE GROUNDS IS AS TO WHETHER THE SERVICES RENDERED IN CONNECTION WITH 2D AND 3D SEISMIC DATA ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES (FTS) OR SHOULD FALL UN DER SEC. 44BB OF THE ACT? 3. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 4. THE FACTS IN BRIEF ARE THAT DURING THE YEAR, TH E ASSESSEE RECEIVED REVENUE ON ACCOUNT OF THE CONTRACT ENTERED INTO WIT H ONGC FOR PROVIDING SERVICES OF SEISMIC SURVEY TO THE DATA CORRECTION S UPERVISION FOR THE PURPOSE OF HYDROCARBON RESERVOIR EXPLOITATION, POSSIBLE LEA K POINT IDENTIFICATION AND CORE SITE SELECTION FROM AVAILABLE 2D AND 3D SEISMI C DATA, CORE ACQUISITION WITH USBL SYSTEM, SAMPLE PROCESSING, PREVENTION AND TRANSPORTATION, LABORATORIES ANALYSIS AND INTERPRETATION AND REPORT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO E XPLAIN WHY LOOKING AT THE NATURE OF SERVICES, RECEIPT MAY NOT BE TREATED AS FEES FOR TECHNICAL SERVICES AND TAX ACCORDINGLY. THE ASSESSING OFFICER DID NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE ASSES SEE IS RENDERING TECHNICAL SERVICES AND, THEREFORE, ITS INCOME IS NOT COVERED UNDER SEC. 44BB OF THE 5 INCOME-TAX ACT, 1961 AND TAXABLE AS FEES FOR TECHNI CAL SERVICES. THE LEARNED CIT(APPEALS) ON THE OTHER HAND FOLLOWING TH E DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF CGG VERITAS - ITA NO. 4653/DEL/2010 ORDER DATED 25.01.2012 HAS HELD THAT THE INCOME I S ASSESSABLE UNDER SEC. 44BB OF THE ACT AND NOT AS FEE FOR TECHNICAL SERVIC ES. 5. IN SUPPORT OF THE GROUNDS, THE LEARNED CIT(DR) H AS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE SUBMITTED THAT WHILE DECIDING THE ISSUE, THE LEARNED CIT(APPEALS) HAS SIMPLY IGNORED THE DE CISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ON GC 2007.TII.03.H.C.UKHAND-INTL. THE LD.CIT(DR) POIN TED OUT THAT THE DELHI BENCH OF THE ITAT IN THE CASE OF SIEM OFFSHOR E A.S. & ORS. VS. ADIT ITA NO. 1295/DEL/2013 (A.Y. 2008-09) AND ORS . VIDE ORDER DATED 09.09.2014 IN VIEW OF THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL A.S. VS. ADIT ITA NOS. 612 OF 2012, ORDER DATED 09.07.2014 HAS SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE VARYING NATURE OF THE CONTRACT TO DECIDE THE ISSUE AFRESH REGARDING THE ELIGIBILITY OF ASSESEE FOR THE BENEFIT MADE AVA ILABLE U/S 44BB OF THE ACT. LEARNED CIT(DR) SUBMITTED THAT THE HON'BLE DELHI HI GH COURT IN THE CASE OF PGS GEOPHYSICAL A.S. (SUPRA) HAS BEEN PLEASED TO HO LD THAT THE RECEIPT OF 6 THE ASSESSEE CAN BE TAXED UNDER SEC. 44BB ONLY IF T HE ASSESSEE HAS A PE IN INDIA DURING THE RELEVANT PERIOD AND THE CONTRACT E NTERED INTO BY THE ASSESSEE IN INDIA WAS EFFECTIVELY CONNECTED WITH THE PE IN I NDIA. 6. THE LEARNED AR ON THE OTHER HAND POINTED OUT THA T THE ISSUE RAISED IN THE PRESENT APPEAL REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM TAXABILITY UNDER SEC. 44BB(1) OF THE ACT IS NOW FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PGS GEOPHYSICAL AS VS. ACIT 269 CTR 433 (DEL.) HOLDING THAT 2D AN D 3D SEISMIC SERVICES SHALL COME WITHIN THE AMBIT OF SECTION 44B B OF THE INCOME-TAX ACT, 1961. HE SUBMITTED FURTHER THAT IN THE PRESENT CAS E THE ASSESSING OFFICER HIMSELF IN PARA NO. 7 OF THE ASSESSMENT ORDER HAS A CCEPTED THAT THE ASSESSEE IS HAVING PE IN INDIA. THE OTHER CONDITION LAID DOW N BY THE HON'BLE HIGH COURT FOR THE ELIGIBILITY OF CLAIMING TAXABILITY UN DER SEC. 44BB OF THE ACT THAT REVENUE OF THE ASSESSEE IS EFFECTIVELY CONNECT ED WITH PE IN INDIA IS ALSO FULLY SATISFIED SINCE THE ASSESSING OFFICER HIMSELF HAS TAXED ASSESSEES INCOME UNDER SEC. 44DA OF THE ACT AFTER EXAMINING T HE ASPECT OF PE AND EFFECTIVE CONNECTION WITH THE PE IN INDIA REGARDING REVENUE OF THE ASSESSEE. THE LEARNED AR ALSO REFERRED THE DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF M/S. FUGRO GEOTEM AS VS. ADIT- ITA NO. 5823/DEL/2011- 7 ORDER DATED 21.11.2014 HOLDING THAT 2D AND 3D SEIS MIC SERVICES SHALL COME WITHIN THE AMBIT OF SEC. 44BB OF THE ACT. HE REFERR ED PARA NO. 5 OF THE SAID DECISION. HE SUBMITTED FURTHER THAT FACTS IN THE CA SE OF CIT VS. ONGC (SUPRA) ARE DISTINGUISHABLE, HENCE, IT IS NOT APPLI CABLE IN THE PRESENT CASE. 7. CONSIDERING THE ABOVE SUBMISSION, WE AGREE T HAT FACTS IN THE CASE OF CIT VS. ONGC (SUPRA) RELIED UPON BY THE LEARNED CIT (DR) ARE DIFFERENT AS IN THAT CASE THE ASSESSEE WAS RENDERING SERVICES FO R INSPECTION OF THE EXISTING CONTROL SYSTEM OF THREE UNITS, WHEREAS IN THE PRESE NT CASE, THE ASSESSEE WAS PROVIDING SERVICES IN CONNECTION WITH 2D AND 3D SEI SMIC DATA. HAVING ALMOST SIMILAR FACTS, AND THE IDENTIFIED ISSUE AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIMING THE BENEFIT OF TAXABILITY UND ER SEC. 44BB(1) OF THE ACT IS NOW COVERED BY THE DECISION OF HON'BLE DELHI HIG H COURT IN THE CASE OF PGS GEOPHYSICAL AS VS. ACIT (SUPRA) WHEREIN THE HON 'BLE HIGH COURT HAS BEEN PLEASED TO HOLD THAT IF THE ASSESSING OFFICER FINDS THAT (I) THE ASSESSEE HAD A PE IN INDIA DURING THE RELEVANT PERIOD AND (I I) IF THE FIRST CONDITION IS SATISFIED AND THE ASSESSING OFFICER FINDS THAT CONT RACT ENTERED INTO BY THE ASSESSEE WITH THE CONTRACTOR WERE EFFECTIVELY CONNE CTED WITH THE ASSESSEES PE IN INDIA THEN THE INCOME OF THE ASSESSEE WOULD B E COMPUTED UNDER SEC. 44B(1) OF THE ACT. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE IS HAVING PE IN INDIA AS IT IS EVIDENT FROM THE CONTEN TS FROM PAGE NO. 7 OF THE 8 ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAS NOTED AS THE PE OF ASSESSEE IN INDIA IS NOT DISPUTED AS THE ASSESSEE H AS FILED THE RETURN UNDER SEC. 44BB OFFERING ITS INCOME AS TAXABLE IN INDIA. SO FAR AS THE OTHER CONDITIONS THAT THE REVENUE OF THE ASSESSEE IS EFFE CTIVELY CONNECTED WITH PE IN INDIA IS CONCERNED, IT IS FOUND THAT THE ASSESSI NG OFFICER HAS ALREADY EXAMINED THE EFFECTIVE CONNECTION OF THE REVENUE OF THE ASSESSEE WITH THE PE IN INDIA WHILE HOLDING THAT THE INCOME OF THE AS SESSEE IS TAXABLE UNDER SEC. 44DA OF THE ACT. THE DELHI BENCH OF THE ITAT I N THE CASE OF FUGRO GEOTEAM AS VS. ADIT (SUPRA) HAS NOTED THAT THE RULI NG OF AAR IN THE CASE OF GEOPHZIKA TORUN SP. GO. HAS BEEN CONFIRMED BY T HE HON'BLE DELHI HIGH COURT IN THE CASE OF DIT VS. OHM LTD. (2012) - 28 TAXMAN 120 (DEL.). THE SAID JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX VS. OSM LTD. (SUPRA) WAS FOL LOWED BY THE HON'BLE HIGH COURT IN THE ASSESSMENT YEAR 2008-09 IN THE CA SE OF PGS GEOPHYSICAL AS (SUPRA). IN THE LIGHT OF ABOVE JUDGMENTS OF HON' BLE JURISDICTIONAL HIGH COURT, THE ITAT HELD THAT FOR THE RELEVANT ASSESSME NT YEAR I.E. 2008-09, THE ASSESSEE IS ENTITLED TO DECLARE ITS INCOME UNDER TH E PROVISIONS OF SEC. 44BB OF THE ACT. WE THUS RESPECTFULLY FOLLOWING THE ABO VE CITED DECISIONS HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM TAXABILITY O F ITS INCOME UNDER THE PROVISIONS OF SEC. 44BB OF THE ACT. THE LEARNED CIT (APPEALS) WAS THUS 9 JUSTIFIED IN HOLDING SO. THE FIRST APPELLATE ORDER IN THIS REGARD IS UPHELD. THE ISSUE IS THUS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUND NOS. 1 TO 9 INVOLVING THE ISSUE ARE ACCORDINGLY REJECTED. 7. IN RESULT, THE APPEAL IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 22 .05.201 5 SD/- SD/- ( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 /05/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 10 DATE DRAFT DICTATED ON COMPUTER 22..05.2015 DRAFT PLACED BEFORE AUTHOR 22.05.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 22.05.2015 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 22.05.2015 KEPT FOR PRONOUNCEMENT ON 22.05.2015 FILE SENT TO THE BENCH CLERK 22.05.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.