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Income Tax Appellate Tribunal, [ DEHRADUN BENCH “DB” : DELHI ]
Before: SHRI CHALLA NAGENDRA PRASADSHRIM. BALAGANESH
आदेश /O R D E R PER C. N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-2 [hereinafter 1 referred to CIT (Appeals)] Noida, dated 28.4.2017 for assessment year 2013-14.
The Revenue has raised the following substantive grounds of appeal:-
“(i) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that receipts on account of offshore/on board processing of 2D/3D Marine Seismic data is taxable u/s 44BB of the Act and not as FTS, as per the second proviso 01.04.2011. sec. 44DA read with proviso to sec. 44BB of the Act, inserted w.e.f. 1.04.2011. (ii) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in facts and in law in not appreciating the fact that the second proviso to sec. 44DA(1) read with proviso to sec. 44BB of the Act, inserted w.e.f. 01.04.2011 were inserted with the intention of the legislature to exclude income in the nature of Fees for Technical Services from the purview of section 44BBwhich is evident from Clauses 16 & 17 of Explanatory Notes to Finance Bill, 2010. (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the activities which are purely technical in nature and do not involve any mining activities, as stipulated in Explanation 2 to sec. 9(1)(vii) of the Act, falls within the ambit of FTS and hence taxable u/s 44DA of the Act. (iv) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that receipts on account of offshore/onboard processing of 2D/3D marine seismic data is taxable u/s 44BB of the Act and not as FTS without considering the fact that AO in his assessment order has explicitly narrated the scope of work of specific contracts which involve only processing of marine data and not any other activities which can be considered as mining activities within the meaning of Explanation-2 to sec. 9(1)(vii) of the Act. (v) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that AO in 2 his assessment order has considered the receipt to be taxable as FTS from those contracts only whose scope of work do not contain the activity of acquisition of marine data which can be considered as mining activities within the meaning of Explanation-2 to sec9(1)(vii) of the Act. (vi) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that AO in his assessment order has considered receipt from contract no. 031/31033493 of RIL being taxable as FTS for the reason that the scope of work of this contract requires the assessee only to process the said data. This scope does not at all contain any acquisition of data which could be stated to be involving any mining activity. (vii) Whether on facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not appreciating the fact that AO in his assessment order has considered receipt from contract no. 4600002283 of Cairn India Limited being taxable as FTS for the reason that the scope of work of this contract requires the assessee only to process the said data. This scope does not at all contain any acquisition of data, which could be stated to be involving any mining activity. (viii) Whether on facts and circumstances of the case and in law the Ld. CIT (A) has erred in not appreciating the fact that AO in his assessment order has considered receipt from agreement dated 13.04.2012 of Jay Polychem Limited being taxable as FTS for the reason that the scope of work of this contract requires the assessee only to process the said data. This scope does not at all contain any acquisition of data which could be stated to be involving any mining activity. (ix) Whether on facts and circumstances of the case and in law, the Ld. CIT (A) has erred in not appreciating the fact that the AO has accepted the claim of the assessee for taxability of receipts u/s 44BB of those contracts which contained the provisions for acquisition of data or any other mining activity. Total receipt from such contracts is to the tune of Rs.113.93 Crores. The AO held the receipts to the tune of Rs.1.86 Crore only being taxable as FTS as these contracts did not contain any scope for any mining activity.
(x) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that receipts on account of service tax are not includible in gross revenue of the assessee for the purpose of computation of profits under the presumptive provisions of u/s 44BB of the I.T. Act, 1961. (xi) Whether the Ld. CIT (A) has erred in not appreciating the fact that the provision of section 44BB of the Act are a self- contained code providing for computation of profit 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. (xii) Whether the Ld. CIT (A) has erred in not appreciating the fact that once the receipts are offered to tax u/s 44BB of the Act which provides for computation of profits on gross basis, 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 simple mode of computation of profits u/s 44BB of the Act and obviating the need for accounting for individual receipts and payments etc. (xiii) Whether the Ld. CIT (A) has erred in ignoring the ration 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 on 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.”
At the outset, the ld. Counsel for the assessee submits that ground Nos. (i) to (ix) of appeal of the Revenue is in respect of taxability of receipts under section 44BB of the Income Tax Act, 1961 (the Act) and the issue has been decided in assessee’s own case for the assessment year 2011-12 by the Tribunal in dated 15.07.2022, which order is placed at page Nos. 1 to 46 of the paper book. 4
The ld. Counsel further submits that ground Nos. (x) to (xiii) relates to Service tax whether the same are includible in gross turnover or not for the purpose of computation of profits under presumptive of section 44BB of the Act. The ld. Counsel submits that this issue also has been decided by the Tribunal in assessee’s own case at para 36 (page 44) of the Tribunal’s order holding that reimbursement of Service tax is not includible in gross turnover for the purpose of computing taxable income under section 44BB of the Act.
The ld. DR placed reliance on the orders of the authorities below.
Heard rival contentions perused the orders of the Tribunal. In so far as ground Nos. (i) to (ix) are concerned, we observe that the Tribunal in assessee’s own case held as under:-
“33. After taking into consideration the conflict or inconsistency in the provisions of Section 44BB and Section 44DA of the Act, attempt made by virtue of the amendments introduced under the Finance Act, 2010 to resolve the same, the nature and scope of both the provisions, the legislative history of amendments made in both the provisions and the legislative intent behind the amendments made by the Finance Act, 2010, it was held by the Hon'ble Delhi High Court that Section 44BB applies if the assessee is engaged in the business of providing services or facilities in the prospecting for, or extraction or production of minerals oils; but, if income earned by such assessee takes the colour of royalty or FTS then the computation of income is to be done as per the provisions of section 44DA of the ActThe services or facilities provided by the assessee in the present case are similar to the services provided in the case of ONGC (supra), which as held by the Hon'ble Supreme Court, are inextricably connected with the prospecting for or extraction or production of mineral oils, and the same being covered by the exclusion provided in Explanation (2) to Section 9(1)(vii) of the Act, are not in the nature of fee for technical services (FTS). Provision of Section 44BB of the Act thus applies in the case of the assessee and not Section 44DA of the Ac as held by the Hon'ble Delhi High Court in the case of Paradigm Geophysica Pty Ltd. (supra) after taking into consideration, inter alia, the amendments made to Section44BB and Section 44DA of the Act by Finance Act, 2010 with effect from 01.04.2011.
In support of the Revenue's case, reliance has been strongly placed on the decision of Hon'ble Delhi High Court in the case of PGS Geophysical AS (supra). It is observed that the assessee-company in the said case was engaged in providing geophysical services to oil and natural gas and conducted electric magnetic survey, processing and interpretation of data. The data so collected for the survey was used for the off- shore oil industries and the nature of the said services being FTS was not disputed by the assessee in the said case as noted by the Hon'ble Delhi High Court in paragraph No.7 of the judgement. The services rendered by the assessee in the said case thus were covered by Section 44DA of the Act and keeping in view this admitted position, it was held by the Hon'ble Delhi High Court that Section 44DA was applicable in the case of the assessee and not Section 44BB of the Act. As rightly pointed out by the learned Counsel for the assessee, the said decision was rendered by the Hon'ble Delhi High Court on 09.07.2014 and the benefit of the decision of Hon'ble Supreme Court in the case of ONGC (supra) rendered subsequently on 01.07.2015 was not available to the Hon'ble Delhi High Court while deciding the said case. Moreover, the Hon'ble Delhi High Court had an occasion again to consider a similar issue subsequently in the case of Paradigm Geophysical Pty Ltd. (supra) which was decided on 13.03.2020. In the said case, the assessee-company was engaged in the business of developing and providing customized software enabled solutions and annual maintenance services. The solutions provided by the assessee-company were used by oil and gas industry in relation to excavation, extraction, production activities and seismic analysis. The assessment year involved was 2012-13 and the issue was whether the case of the assessee was covered by the provisions of Section 44BB or Section 44DA of the Act. After analyzing the provisions of Section 44BB and Section 44DA, as amended by 6 the Finance Act, 2010 with effect from 01.04.2011 read with the provisions of Section 9(1)(vi) and Section 9(1)(vii), and taking into consideration the judicial pronouncements cited by both the sides including the decision of Hon'ble Supreme Court in the case of ONGC (supra) as well as the decision of their own court in OHM Ltd(supra), the Hon'ble Delhi High Court held that if the income from the services provided by the assessee is in the nature of FTS under Explanation (2) to Section 9(1)(vii) of the Act, the income would be taxable under Section 44DA of the Act and, if not, the income of the assessee would be taxable under Section 44BB of the Act as held by Hon'ble Supreme Court in the case of ONGC (supra) and as clarified by the CBDT in Circular No.1862 dated 22.10.1990 since it is excluded from the definition of fees for technical services' under Explanation (2) to Section 9(1)(vii) of the Act being covered under the exception relating to "mining" and "like activities" provided in the definition of FTS.
Having regard to all the facts of the case and keeping in view the legal position emanating from the judicial pronouncements as discussed above, I am of the view that the revenue received by the assessee-company during the year under consideration on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance/ upgradation /support of software licenses, etc, is not in the nature of fees for technical services as the same is covered by the exclusion provided in Explanation (2) to Section 9(1)(vii) of the Act being consideration received for "mining or like projects" and the same, therefore, is not taxable under Section 44DA of the Act. The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mineral oils as held by the Hon'ble Supreme Court in the case of ONGC (supra) under the similar facts and circumstances and the revenue received for the same accordingly is taxable under Section 44BB of the Act.”
Respectfully following the said order of the Tribunal in assessee’s own case we reject ground Nos. (i) to (ix) of grounds of appeal of the Revenue.
8. Coming to ground Nos. (x) to (xiii) we find that the Tribunal adjudicated the issue in favour of the assessee in its own case for assessment year 2011-12 wherein the Tribunal held as under:-
36. As regards the issue involved in question No.2, the learned representatives of both the sides have agreed that the same is squarely covered in favour of the assessee by the decision of Hon'ble Uttarakhand High Court in the case of Director of Income-tax International Taxation Vs. Schlumberger Asia Services Ltd, [2019] 414 ITR 1, wherein it was held that the amount reimbursed to assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by assessee to Government of India, not being an amount paid to assessee on account of providing services and facilities in connection with prospecting for, or extraction or production of, mineral oils in India, would not form part of aggregate amount referred to in clauses (a) and (b) of sub-section (2) of Section 44BB of the Act. To the similar effect is the decision of Hon'ble Delhi High Court in the case of Director of Income-tax Vs. Mitchell Drilling International (P.) Ltd., [2016] 380 ITR 130 (Del), wherein it was held that the service tax collected by the assessee for passing it on to Government was not to be included in gross receipt in terms of Section 44BB (2) read with Section 44BB(1) of the Act for the purpose of computing presumptive income of the assessee under Section 44BB of the Act. Respectfully following the decision of Hon'ble jurisdictional High Court in the case of Schlumberger Asia Services Ltd (supra) as well as that of Hon'ble Delhi High Court in the case of Mitchell Drilling International (P.) Ltd. (supra), I hold that the amount received by the assessee in the present case as reimbursement of service tax is not includible in gross turnover for the purpose of computing taxable income under Section 44BB of the Act.
9. Following the order of the Tribunal in assessee’s own case, ground Nos. (x) to (xiii) of the Revenue are rejected.
In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on : 21/11/2023.