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Before: Shri Bhavnesh Saini & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee, challenging the findings of the Dispute Resolution Panel-II, New Delhi as incorporated in the assessment order passed u/s 143(3)/144C(13) of the Income Tax Act, 1961. Following grounds have been raised by the assessee :
“Based on the facts and circumstance of the case and in law, KOP Surface Products (Services) Pte Limited (formerly known as Aker Solutions (Services) Pte Limited (hereinafter referred to as ‘the Appellant’) respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] against the order passed by the Deputy Director of Income-tax (International tax) Dehradun [hereinafter referred to as ‘learned AO’] under Section 143(3) read with section 144C(13) of the Act pursuant to the directions of the Dispute Resolution Panel - II (‘DRP’), New Delhi dated 30 October 2013 on the following grounds, each of which are without prejudice to one another:
On the facts and in the circumstances of the case and in law, the learned AO : Denial of the benefit of Section 44BB of the Act and holding the revenues of the Assessee as Fees for technical Services (‘FTS’): 1. has failed to appreciate that the services rendered by the Assessee were ‘in connection’ with the prospecting for, or extraction or production of, mineral oils and hence liable to be taxed under the presumptive provisions of Section 44BB of the Act.
2. erred in holding that the income received by the Assessee was FTS under Section 9(1 )(vii) of the Act, without appreciating the facts and circumstances of the case and the legal position in this regard.
3. erred in law and in facts in holding that the income receivable by the Assessee is FTS under the India-Singapore Double Taxation Avoidance Agreement (‘DTAA’), without appreciating the facts and circumstances of the case and the legal position in this regard.
4. erred in not appreciating that in view of decision of Hon’ble Delhi High Court in the case of DIT v. OHM Ltd.: 352 1TR 406 services performed by the Assessee are covered within the ambit of section 44BB of the Act.
Estimation of income at 25 percent of gross revenues 5. Without prejudice to the above, erred in not following the directions of the DRP for taxing the income as FTS under Section 9(1)(vii) of the Act read with Article 12 of the India-Singapore DTAA at the rate of 10 per cent of the gross revenues, instead applying an arbitrary estimate of taxable income at 25 per cent of gross revenues in the computation.
Without prejudice to the above, erred in passing the order in violation of provisions of section 144C(10) of the Act.
Without prejudice to the above, the arbitrary estimate of taxable income at 25 percent of gross revenues by the Learned AO is unreasonable, excessive and ought to be reduced substantially.
erred in not appreciating that an Assessee opting for presumptive provisions of section 44BB(1) is not required to maintain books of accounts unless the Assessee would require his taxability to be lower that the presumptive rate of 10 per cent.
Levy of penalty under Section 271(1)(c) of the Act 9. erred in initiating penalty proceedings under Section 271 (1 )(c) of the Act on the ground that the Assessee has concealed income without appreciating the facts and circumstances of the case.
Levy of penalty under Section 271B of the Act
erred in initiating penalty proceedings under Section 271B of the Act without appreciating the facts and circumstances of the case.
Levy of interest under sections 234A, 234B, 234C and 234D of the Act 11. has erred in law and in facts in levying interest under sections 234A, 234B, 234C and 234D of the Act disregarding the fact of the case.”
The brief facts of the case are that the assessee is a company incorporated in Singapore. During the year under consideration, the assessee had earned income from providing well-head equipment and services in terms of contract with Enron Oil and Gas India Ltd. (now known as BG Exploration and Production India Ltd.). The assessee had also earned income during the year from providing well-head services in terms of contract with Gujarat State Petroleum Corporation Ltd. The assessee had offered the gross revenue of Rs. 67,82,671/- from the above two contracts for taxation in its return of income after applying the deemed profit rate of 10% u/s 44BB of the Act. However, the Assessing Officer denied the applicability of section 44BB to the assessee on the ground that the services rendered by the assessee were in the nature of fee for technical services (FTS). The Assessing Officer accordingly brought the gross revenue to tax u/s 9(1)(vii) read with section 44DA of the Act. Since the assessee had not maintained any books of accounts, the Assessing Officer estimated the net profit @25% of gross receipts. It was the contention of the assessee that the activities performed by the assessee related to providing services ‘in connection’ with installation/handling tools to facilitate well- head/X-mas tree installation relating to prospecting etc. of mineral oil. The assessee also contended that it had provided technical support in relation to well-head/X-mas tree equipment. The Hon’ble DRP also upheld the action of the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal.
We have heard the submissions of both the parties and have gone through the entire material available on record. During the course of hearing, both the parties agreed that the issues involved in this appeal are squarely covered by the order dated 18.01.2017 of co-ordinate Bench in the case of assessee itself in its former name “Aker Solutions (Services) Pte Ltd. vs. ADIT in for A.Y. 2010-11, wherein the arguments advanced by the assessee are also the same as advanced in the instant case. The contentions raised by the assessee and the findings reached by the Tribunal in that case read as under :
3. Ld. AR placed reliance on the decision of the Hon’ble Apex Court in the case of Oil & Natural Gas corporation Limited vs CIT & Another which was pronounced on July 1, 2015 and submitted that the facts of the assessee’s case were similar and, therefore, the assessee’s case was covered in assessee’s favour by the aforesaid judgment of the Hon’ble Apex Court. Ld. AR also filed a copy of the assessment order dated 17.03.2006 for assessment year 2013-14 and submitted that the Assessing Officer has accepted the assessee’s claim of being assessed u/s 44BB of the Act in this assessment year and that the facts in assessment year 2013-14 and assessment year 2010-11 (the year to which this appeal pertains) are similar and there has been no change in business.
Ld. CIT DR placed his reliance on the findings of the lower authorities and vehemently argued that the facts in assessee’s case were distinguishable from the facts of the ONGC Limited.
We have heard the rival submissions and have also perused the record. A reference can be made to the decision of the Hon'ble Apex Court in ONGC vs. CIT & Anr. in Civil Appeal No 731 of 2007 wherein the Hon'ble Apex Court in its Order dated 01/07/2015 has allowed the appeal of ONGC on the substantial question of law framed which reads as, " Whether the amounts paid by the ONGC to the non- resident assesses/foreign companies for providing various services in connection with prospecting extraction or production of mineral oil is chargeable to tax as 'fees for technical services' under section 44D read with Explanation 2 to section 9(l)(vii) of the Income Tax Act or will such payments be taxable on a presumptive basis under section 44BB of the Act?"
5.1 The Hon’ble Apex Court has answered the question as under, "Viewed thus, it is the proximity of the works contemplated under an agreement, executed with a non- resident assessee or a foreign company, with mining activity or mining operations that would be crucial for the determination of the question whether the payments made under such an agreement to the non-resident assesses or the foreign company is to be assessed under section 44BB or section 44D of the Act The test of pith and substance of the agreement commends to us as reasonable for acceptance. Equally important is the fact that the CBDT had accepted the said test and had in fact issued a circular as far as 22.10.1990 to the effect that mining operations and the expressions "mining projects" or "like projects" occurring in Explanation 2 to section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/foreign company would be chargeable to tax under the provisions of section 44BB and not section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting extraction or production of mineral oil"
5.2 Respectfully following the judgment of the Hon’ble Apex Court, we hold that the entire receipts of the assessee will be chargeable to tax under section 44BB of the Act.”
4. In view of the above decision of Co-ordinate Bench rendered in the case of assessee itself for A.Y. 2010-11 (supra), we have no reason to take a contrary view. Accordingly, we also hold that the receipts of the assessee are chargeable to tax as per provisions of section 44BB of the Act. Therefore, grounds Nos. 1 to 4 of appeal deserve to be allowed. The alternative grounds Nos. 5 to 8, thus, become academic and need not to be adjudicated separately. Grounds Nos. 9 & 10 pertaining to levy of penalty are dismissed being premature and ground No. 11 relating to levy of interest is consequential in nature. Accordingly, the appeal of the assessee deserves to be partly allowed.