ONGC AS REPRESENTATIVE ASSESSEE OF ASSET MANAGEMENT SOLUTIONS INC., USA,DEHRADUN vs. DCIT (INTERNATIONAL TAXATION), DEHRADUN

PER N.S.SAINI, ACCOUNTANT MEMBER :

2. The assessee has raised following grounds of appeal :-

1. The Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in holding that the receipts of Asset Management Solutions Inc., USA, from ONGC are taxable as “fees for technical services” and in not holding that the same are taxable u/s 44BB of the Income-tax Act, 1961. 2. Without prejudice to the preceding ground, the Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in upholding the AO’s action to apply a deemed profit of 25% for computing the total income.”

3. At the outset, the AR (Mohd. Frid, CA) of the assessee argued that the issue involved in this appeal is that the CIT(A) erred in confirming the addition made by the Assessing Officer. The Assessing Officer held that the services provided by the non- resident company to the assessee are covered u/s 44DA of the Act while estimating income @ 25%. On appeal the CIT(A) confirm the action of the AO by observing that in absence of maintenance of any books of accounts and audit thereof, estimation of expenditure or allowance which is wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India is not feasible. Therefore, action of the AO in estimating profit at the rate of 25% does not seem to be unreasonable.

“4.3 We have perused the orders passed by the authorities below, arguments advanced by both the side and the decision passed by Hon'ble Supreme Court in the assessee's own case. The assessee has received services for the purpose of activities relating to prospecting for or exploration of mineral oils. The only issue that arises from the grounds of appeal filed by the Revenue is in respect of the taxability of the amount paid to the non- resident / foreign companies under the contract was to be assessed u/s 44BB or 44DA of the Act. 4.4 Hon'ble Supreme Court has dealt with the substantial question of law relating to the assessability of the amounts paid to the non-resident u/s 44BB and have answered the questions in favour of the assessee and held as under: "1. The Income-tax Act does not define the expressions 'mines' or 'minerals'. The said expressions I.T.A.Nos/4652 & 4654/Del/2013 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 the Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation, i.e., Oil Fields (Regulation and Development) Act, 1948. Reading section 2. (j) and 2W) 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.