HALLIBURTON OFFSHORE SERVICES INC,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, DEHRADUN

per provision of section 44BB in the A.Y 2005-2006, Α.Υ 2007-2008, Α.Υ 2008-2009, Α.Υ 2009-2010, Α.Υ 2010-2011 and A.Y 2011-2012, as no appeal is filed before the Hon'ble High Court, has not been rebutted by the Revenue. Ground 1 to 6 of Revenue appeal is therefore, dismissed while ground 1 & 2 of assessee’s appeal is allowed. 18. On the issue of taxability of interest on income tax refund, we find that the CIT(A) has followed the decision of jurisdictional Uttarakhand High Court in the case of M/s B.J. Services reported at 60 taxmann.com 246 (Uttrakhand). In the instant case, the taxation of interest is governed by Article 11 of India US DTAA. In this context, it is therefore, prudent to reproduce the relevant provisions of India-US DTAA as under: ARTICLE 11 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed : a)10 per cent of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution (including an insurance company) ; and b)15 per cent of the gross amount of the interest in all other cases ********* 5. The provisions of paragraphs 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the interest is attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 15 (Independent Personal Services), as the case may be, shall apply. ******* 19. In the instant case, the assessee has not rebutted the ld AO findings that the assessee has a PE in India during the year. In such situation, we find that the hon’ble jurisdictional Uttarakhad High Court in the case of M/s B.J. Services (supra), squarely applies. We have not been appraised of any contrary decision of the jurisdictional High Court or the Hon’ble Supreme Court. The hon’ble Uttarakhand Court in the case of M/s B.J. Services (supra), in the context of India UK DTAA, where paragraph 6 of Article 12 is pari-materia with paragraph 5 of Article 11 of India US DTAA in respect of taxability of Interest Income, has held that interest received on an income tax refund under Section 244A of the Income-tax Act, 1961, constitutes business income if it is effectively connected with the assessee's Permanent Establishment (PE) in India as under: “ 7. We will consider whether there is any merit in the contention of the appellant that the appellant should have been taxed at the rate of 15 per cent on the gross amount of the interest under Clause 2 of Article 12. Under Clause 1 of Article 12, interest arising in a Contracting State and paid to the resident of the other Contracting State may be taxed in the other State. In the facts of this case, interest which was received in India can be taxed in England. However, Clause 2 provides that the said interest can also be taxed in the Contracting State in which it arises (which in this case is India) as tax was paid by the Government of India in the Income Tax Department on the excess tax paid on behalf of the assessee/appellant's employees. It is to be taxed according to the law in India, namely, the Income Tax Act, 1961, as it stands. The limitation which is cast is that when the beneficial owner of the interest so charged is a resident of the other State which means that since the appellant is resident of England, the tax so charged should not exceed 15 per cent of the gross amount of the interest. Therefore, the appellant would contend that the tax should have been charged at 15 per cent of the interest received which the appellant became entitled to on the basis of excess tax paid. 8. As matters stood there if there was no other provision to consider, the appellant would indeed be justified in offering 15 per cent to taxation. But if we come to Clause 6, we notice that Clause 6 expressly provides that provisions of paragraph 1, inter alia, will not apply, if the beneficial owner of interest (the appellant in this case) is the resident of the Contracting State carries on business in the other Contracting State (in India) in which the interest arises through a permanent establishment situated therein. There is not much dispute raised before us that the appellant was indeed carrying on business through a permanent establishment in India. Since the word 'or' figures immediately thereafter, we need not be concerned with the further provisions as the requirement of the Clause that interest arises through a permanent establishment situated therein as fulfilled in this case. To continue with the requirement of Clause 6 of Article 12, it contemplates that the debt claim in respect of which interest paid is effectively connected with such permanent establishment on fixed rates. In this case, appellant paid excess tax on behalf of its employees. The Income Tax Officer, after assessment, apparently has ordered refund. There was the delay and interest was paid under the Act at the statutory rate fixed. So there arises a debt claim and the interest is effectively connected with the permanent establishment on fixed rates. In such an eventuality, Clause 6 of Article 12 provides that the provisions of Article 7, which relate to Business profits, or Article 15 (Independent personal services) of this Convention, as the case may be, shall apply. This will be assessed as business profits and in regard to business profits, the rate of tax is 48 per cent. It is on the said basis that, in fact, the Assessing Officer in the first assessment and also in the further assessment after proceedings under Sec. 147 of the Act had assessed the appellant. This assessment has been upheld by the First Appellate Authority as also by the Tribunal. 9. We would think that in this analysis of the provisions of the Clauses of the Treaty, there is no error as such committed by the Assessing Officer as confirmed by the First Appellate Authority and the Tribunal and, therefore, the questions of law as framed must necessary be answered against the appellant in all the cases and we do So...."

In the instant case, the supplies of cementing units and batch mixers have been received by ONGC from the appellant. On going through the documents furnished by the appellant, it is noted that the Bill of Lading is drawn with the port consignee being ONGC. Further, the third party inspection of the supplies has been done outside India as is evident from the Test and Inspection Certificate issued by third party. Thus, before the goods were transported to India, they were as per the specification provided in the invoices and were in their final form. As evidenced from the invoices, packing List, combined transport bill of lading, and Bill of Entry it is seen that the goods & materials are imported into India directly by ONGC in its own name. The supplies were insured against all transit risks from warehouse to warehouse by the port consignee and in case of any damage enroute, the port consignee i.e ONGC was to lodge the claim with the underwriters. 5.4.4 In this backdrop, it is held that the appellant has not undertaken any activity in India w.r.t the supply of cement units and batch mixers to ONGC in India and consideration for supply of equipment, was received by the appellant in foreign currency directly in bank account outside India. The AO has taxed the profits from aforesaid supplies in India by applying profit attribution rate to Indian PE as per the deeming provision of section 44BB, but has grossly failed to bring out any operational activity undertaken by the appellant in India in order to establish a business connection or Permanent Establishment of the appellant in India with respect to the aforesaid supplies.

5.4.5 The Hon'ble Supreme court in the case of Ishikawajma-Harima Heavy Industries vs. DIT [2007] 158 Taxman 259, has w.r.t offshore supplies observed that only such part of income, as is attributable to the operations carried out in India can be taxed in India. In the instant case, since all parts of the transaction in question, were carried on outside the Indian soil, the transaction, cannot be taxed in India. 5.4.6 In this backdrop and in view of the established judicial precedents, it is held that, no income arising from the offshore supplies w.r.t the contract undertaken with ONGC can be attributed to India and taxed under section 44BB of the Act. The ground of appeal raised is allowed. 22. We find that the CIT(A) has given a finding of fact that the assessee has not carried out any activity in India in relation to the supply of the cement units and batch mixers to ONGC. We find that the ld AO has not controverted the assessee’s submission that the title and risk in the goods is transferred to ONGC, out of India and the payment for the same is received by assessee, out of India. The ld AO has not rebutted the fact that ONGC is the port/ultimate consignee and the bill of lading is drawn with the ONGC which has directly imported the goods & material. Also ONGC arranges for the insurance of cementing Unit and Batch Mixers and claim for any damage to the goods during transit, is to be made by ONGC. We also note that neither the AO nor the DR has established any business connection or Permanent Establishment of the assessee in India in respect to the said offshore supplies. Following therefore, the decision of Hon'ble Apex Court in case of Ishikawajima Harima Heavy Industries (supra), we are inclined to uphold the decision of the CIT(A) that since all parts of the transaction in question, were carried on outside the Indian soil, the transaction, cannot be taxed in India. Grounds 7 to 10 of Revenue is accordingly dismissed. 23. In the result, assessee’s appeal in ITA No.139/DDN/2025 is partly allowed and Revenue’s appeal in ITA No.174/DDN/2025 is dismissed. Order pronounced in the open court on 21.10.2026 Sd/- Sd/- SATBEER SINGH GODARA NAVEEN CHANDRA JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi Dated: 21.10.2026 Priti Yadav, Sr. PS*

Page 21 of 22 SHASHI Digitally signed by KANT SHASHI KANT PANDEY Date: 2026.10.27 PANDEY 14:51:56 +05'30'

Copy to: HALLIBURTON OFFSHORE SERVICES INC 6TH FLOOR, UNIT NO 603, SATELITE GAZEBO, GURU HARGOBINDJI MARG, 1 ANDHERI EAST MUMBAI, CHAKALA MIDC S.O, MUMBAI, MAHARASHTRA, INDIA, 400093, MUMBAI-400093, MAHARASHTRA DEPUTY COMMISSIONER OF INCOME TAX DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, INTERNATIONAL 2 TAXATION, INCOME TAX OFFICE, SUBHASH ROAD, DEHRADUN DEHRADUN-248001, UTTARAKHAND 3 THE PCIT / CIT, 4 THE D.R., ITAT, DEHRADUN BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR I.T.A.T., DEHRADUN

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