DCIT (IT) 2(1)(1), MUMBAI vs. CAMERON AUSTRALASIA PTY . LTD, MUMBAI

आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER:

2. Whether on the facts and in circumstances of the case and in law, the CIT(A) has erred in holding that income from sale of products cannot be construed to be fees for technical services or Royalty as it is outright transfer of title in the products by the assessee to ONGC.

3. Whether on the facts and in circumstances of the case and in law, the CIT(A) has erred in holding held that since such repair work is undertaken at the overseas workstation the question of taxability of such receipts from repair work as attributable to PE does not arise and directed the A.O to delete the addition made for the revenues earned by the assessee from repairs activity under ONGC contract.

4. The Appellant prays that the order of the ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored.

5. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 2. Briefly stated, the assessee company which is incorporated under the laws of Australia is engaged in the business of supply of products, provision of services and undertaking activities relating to drilling and production systems etc. to various oil and gas producers across the globe. The assessee

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. which is a tax resident of Australia had filed its return of income for A.Y 2011-12 on 04.03.2013, declaring a total income of Rs.62,01,500/-. The case of the assessee was thereafter selected for scrutiny assessment 143(2) of the Act.

Sr. No. Name of the Scope of services Taxability contracting party 1. Northern Offshore Assistance in well Taxable u/s 44BB Drilling Pte. Ltd. intervention, retrieval and tie-in in relation to specific oil well 2. ONGC Offshore supply of Not taxable in India products/ equipment Repairs activities Not taxable in India Equipment rentals Taxable u/s 44BB Project management Taxable u/s 44BB services

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. of 13.27% that was arrived at after making certain adjustments to its global financial statements. The A.O on the basis of his aforesaid deliberations assessed the income under Sec. 143(3) r.w.s 144C(3) at Rs. 1,45,70,950/-.

(A) Composite taxability of aggregate revenue from ONGC contrat: It was observed by the CIT(A) that the assessee during the year under consideration viz. A.Y 2011-12 had entered into a contract with ONGC for inspection and refurbishment of subsea equipment, supply of well completion tools and technicians for completion of balance work on field development project. The assessee had in its return of income offered revenue of Rs. 5,39,47,447/- in respect of ONGC contract for taxation under Sec. 44BB of the Act. It was observed by the CIT(A) that the said revenue comprised of viz. (i) Project management fees: Rs.2,96,17,267/-; and Equipment rental: Rs.2,43,30,180/-. Still further, a perusal of the notes forming part of the computation of income of the assessee revealed that the assessee had also received an amount aggregating to Rs.4,97,76,660/- towards offshore supply of spare tools and fees for repair of equipments carried outside India. The CIT(A) observed that the assessee had during the course of the P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. assessment proceedings submitted before the A.O that since both the supply/sale of spare tools and the repair works were carried outside India, thus, the same were not taxable in India. However, the A.O declined to accept the said claim of the assessee. It was noticed by the A.O that there was only one contract awarded by ONGC in respect of all the activities undertaken by the assessee and the same did not specify the scope of work according to the nature of activity. It was observed by the A.O that the ONGC contract did not specify the scope of work according to the nature of activity like product supply, repair work etc., but according to the requirement of a particular work. The CIT(A) observed that the A.O was of the view that all the activities provided in the ONGC contract were inextricably interlinked and interwoven. It was further observed by him that the assessee had a permanent establishment (for short „PE‟) in India. The CIT(A) further noticed that the A.O on the basis of the aforesaid observations, being of the view that the revenue received by the assessee for executing the work as per the ONGC contract was in the nature of royalty and fees for technical services (for short „FTS‟), had thus brought the same to tax under Sec. 44DA of the Act, observing as under:

“6.1 Taxability of aggregate income i) There is only one contract awarded by ONGC in respect of all the above activities. ii) The contract does not provide for specific items of equipment list to be supplied, but what is to be supplied is the items which are required to execute the works entrusted to the assessee. Similar is the case with repairs. iii) This is evident from the 3rd para of contract which is as under- Whereas Corporation is desirous of services for “Inspection and R e f u r b i s h m e n t o f S u b S e a E q u i p m e n t , S u p p l y o f W e l l Completion Tools and Technicians for Completion of Balance Work of the G -1 and G-15 Fields Development Projects” for carrying out corporation's operations conforming to specification as set forth in the Scope of Work at Annexure-II of this agreement.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. iv) The contract does not classify the scope of work according to the nature Of activity, like product supply, repair work etc., but according to requirement of a particular work, like „Refurbishment of HXT retrieved from well G-1 DB‟, 'Testing of other 4 HXTs (includes EFAT/SIT) and entire subsea system' etc. V) All the activities as classified by assessee are related with each other. For example Item No.1.1 of scope of work which is in respect of „Refurbishment of HXT retrieved from well G-1 DB‟. The activities to be performed by assessee are given as under: “This requires complete stripping of the tree, QA/QC check of all components, replacement of damaged components, Assembly and testing to make it installation worthy and proposed to be taken up in Cameron's works in Melbourne. This work can be further divided into: i) Fixed Scope a) Cleaning, dismantling of tree into components, carry out QA/QC checks on the components and f irm up the requirement of repair/ replacement of components, if any. b) Reassembling and testing of tree. ii) Variable Scope: Replacement/ refurbishment of components based on QA / QC checks and jointly decided by Cameron, ONG, DNV” Perusal of above scope shows that this scope of work includes Products supply, repairs, e q u i p m e n t , r e n t a l , i n s t a l l a t i o n a n d c o m m i s s i o n i n g a c t i v i t i e s a n d a l s o p r o j e c t m a n a g e m e n t a c t i v i t i e s . Further, the fact that para 1.7 provides for „Co-ordination and service support personnel‟ mandates providing of project Manager and project team for all the activities under the subject contract, shows that the contract is one only. Even, the training to be provided by assessee, supply of installation and commissioning spares is in respect of all the items of scope of work and indivisible. vi) Merely because assessee has segmented these activities artificially to suit its own objectives, when the f acts tell otherwise cannot be accepted. vii) As already stated supra, the activities performed by assessee are not separate and independent but rather related, interdependent and connected with each other. The contract being one, the project being' one, the scope of work being one (though bifurcated), the activities being related to each other, interdependent and forming part of one whole activity, is to be construed as one activity. 6.2. As it is the aggregate income which is chargeable to tax, what is to be seen is whether the whole of activity is taxable and not the individual leg of the activity. In this light, the income is found to be taxable as under:

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. i) Under para 3 of Article 12 of DTAA the amounts consist of Royalty under following sub clauses of said para 3 – a) the use of, or right to use, any industrial, commercial or scientific equipment b) the supply of scientific, technical, industrial or commercial knowledge or information c) the rendering of any service (including those of technical or other personnel) which make available technical knowledge, experience, skill, know how or processes or consist of the development and transfer of a technical plan or design… ii) Even under I.T. Act the services involved get covered under clause (iv), (iva) and (vi) of 9(1)(vi) and also under Explanation 2 to Section 9(1)('vii). iii) T h e r e i s a P E o f a s s e s s e e i n I n d i a . A s a l l o f t h e a c t i v i t y i s o n e o n l y i t cannot be said that it is not effectively connected with PE. iv) Though clause (iva) of section 9(1) provides exclusion of amount referred to in section 44BB, section 44BB provides for exclusion of amounts relating to 44DA. Since, the subject amounts fall under 44DA, this exclusion in (iva) does not take the case out of purview of Royalty.

V) All above facts show that assesse's case falls under 44DA."

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. contemplated separate, divisible and independent scope of work, submitted before the CIT(A), as under:

“2.6 the appellant wishes to mention that the scope of work under the contract clearly identifies following broad separate independent and distinct activities;  Products supply: - Supply of isolation sleeve (refer para 1.5 of scope of work) - Supply of pressures cap and protective covers (refer para 1.9 of scope of work) - Supply of insurance items (refer para 1.10 of scope of work) - Supply of spool tree (refer para 1.11 of scope of work)  Repairs services - Refurbishment of HXT (refer para 1.1 of scope of work) - Testing of other four HXTs (refer para 1.2 of scope of work) - Storage and transportation iii relation to same (refer para 1.3 of scope Of work) - Removing and re-torque of pup joints (refer para 1.6 of scope of work)  Equipment rentals (refer para 1.4(b) of scope of work)  Project management services (refer para 1.7 of scope of work)  Installation commissioning activities (not rendered during the year under/ consideration) - Personnel/technician support (refer para 1.4(a) of scope of work) - Training (refer par 1.8 of scope of work) T h e a p p e l l a n t w i s h e s t o m e n t i o n t h a t , a s d i s c u s s e d a b o v e i s separately indentified. However, for commercial reasons and to better explain the broad nature of the activities it is aligned and mentioned in different chronological order in the contr act. However, in essence, each of the above referred activities are separate, independent and distinct from each other t h o u g h t h e y p e r t a i n t o a s i n g l e . 2.7 The appellant further wishes to submit that separate consideration is also identified for the above referred separate and distinct acitivities. In relation to the same the appellant raises separate invoices on ONGC for each activity mentioned above and receives separate consideration for the same accordingly.” The assessee in order to drive home its contention that the revenue received from separate, independent and divisible work provided under the ONGC contract were to be independently taxed, relied on a host of judicial pronouncements.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. streams of revenues earned by it under the ONGC contract from each separate, independent and divisible work was to be considered independently, was found in order. In the backdrop of the aforesaid observations the CIT(A) directed the A.O to independently determine the taxability of revenue in the hands of the assessee from the aforementioned separate, independent and divisible works under the ONGC contract.

(B) Taxability of revenue from offshore supplies under the contract with ONGC:

The CIT(A) observed that the assessee had during the year under consideration supplied certain products which were ordered by ONGC on need basis from its foreign location. The A.O had held that the income from supply of equipments was liable to be brought to tax in India as per the provisions of Sec. 44DA of the Act. The contention advanced by the assessee that since supply/sale of products were carried out offshore, and the repairs also carried out outside India, therefore, the same could not be taxed in India, did not find favour with the A.O. The A.O observing that the assessee had a PE in India, thus, was of the view that as the contract awarded by ONGC in respect of all the above activities did not specify the scope of work according to the nature of activity but according to the requirements of a particular work, therefore, the receipts in the hands of the assessee keeping in view the nature of the work was liable to be brought to tax as royalty and FTS. The CIT(A) observed that in the backdrop of the aforesaid observations the A.O had brought the receipts under the contract to tax under Sec.44DA of the Act. During the course of the appellate proceedings, it was submitted by the assessee before the CIT(A) that it had as per the terms of the agreement supplied certain products which were ordered by ONGC on need basis from its foreign location. The assessee in order to drive home its contention that the receipts from such offshore supply of products could not be taxed in India relied on the broad terms of arrangement of such offshore supply of products made to ONGC viz. (i) the products supplied by the assessee were manufactured outside India; (ii) the sale was executed on FOB

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. basis outside India; (iii) the title to the property in the products (i.e risk and ownership) was transferred to ONGC outside India; (iv) the consideration for such sale was received outside India; and (v) all the activities in relation to the supply of spares were carried on outside India. It was further submitted by the assessee that its Indian PE had no role to play in effectuating such transactions either pre or post such offshore supply. On the basis of the aforesaid submissions, it was the claim of the assessee that the receipts from such offshore supply of products were not liable to be brought to tax in India.

(C) Taxability of revenue from repairs (and related activities) under the contract with ONGC:-

The CIT(A) deliberating on the taxability of revenue from repairs (and related activities) under the contract with ONGC, observed that income in respect of the said activities was received by the assessee during the year under consideration as per the terms of the contract with ONGC. The CIT(A) observed that the A.O was of the view that the repair activities carried out by the assessee amounted to FTS and royalty and satisfied the „make available‟ criteria. It was noticed by the CIT(A) that the A.O was of the view that when a product is to be repaired, the same required dismantling, which involved personnel, technical expertise and knowledge to do the same. Still further, he held a conviction that the repair of the product, installation, testing and running also involved technical expertise. On the basis of his aforesaid observations the A.O had concluded that the repair activities clearly fell within the sweep of the definition of FTS. The CIT(A) further observed that the A.O was also of the view that when a product supplied is used to repair, refurbish, enable operation, activation, make fit for being used through personnel or otherwise, it amounted to FTS, Royalty as not only a right to use an equipment was given, but the same also involved supply of technical, Industrial and commercial knowledge. The A.O held a conviction that even the placing, installing, commissioning of such equipment satisfied the „make available‟ criteria, as the operator was able to operate the system much after the service provider had left. The assessee rebutting the aforesaid observations of the A.O submitted viz. (i) that ONGC availed the services of the assessee to repair its existing equipment which required overhaul/maintenance; (ii) the entire repair services were rendered at the overseas work stations of the assessee (i.e outside India); (iii) the equipment

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. identified by ONGC was transported to Australia/Malaysia depending upon the type of equipment and nature of services to be rendered; (iv) that after initial inspection the spares required to be replaced were identified and ONGC would make necessary requests for the supply of the same to the assessee; (v). the assessee would replace the spares in the course of repairing the overall equipment; (vi) the Indian PE of the assessee had no role to play in its aforesaid activities; (vii) that separate invoices were raised by the assessee for the repair activities and the consideration for the same was received outside India; (viii) that the activities of installation and commissioning of equipment was separately covered under the installation and commissioning activities; and (ix) that as during the year under consideration no installation/commissioning activities were carried out by the assessee, thus the taxability of income from such activities did not arise. The assessee further rebutting the observations of the A.O that as the repairs itself involved technical expertise, thus the income from such activities would fall within the sweep of the definition of FTS, submitted that the A.O while concluding as hereinabove had lost sight of the host of judicial pronouncements which were relied upon during the course of the hearing before him. The assessee further dislodging the claim of the A.O that the receipts of the assessee from the aforesaid repair activities were to be construed as royalty, submitted that as the assessee did not „make available‟ any technical knowledge, experience, skill or know how to ONGC, thus, the receipts from rendering of the aforesaid activities could not be brought within the scope and gamut of the term royalty as defined under the Article XII(3) of the India-Australia Tax Treaty.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. „make available‟ as contemplated in Article XII(3)(g) of the India-Australia DTAA, observed that ONGC for availing the services of the assessee to repair its existing equipment which required overhaul/maintenance, would identify and transport the same to Australia/Malaysia. After initial inspection the spares required to be replaced would be identified and ONGC would make the necessary requests for supply of the same to the assessee. The assessee would then replace the spares in the course of repairing the overall equipment. The CIT(A) observed that the entire repair work was undertaken by the assessee at its overseas work stations located outside India and after the repair work would be completed, the equipment would again be transported to India. The CIT(A) rebutting the observations of the A.O that the installation and commissioning of equipment would involve technical expertise, observed that not only the said activities were separately covered under the ONGC contract, but even otherwise as during the year under consideration no installation/commissioning activities were carried out by the assessee, hence the issue of taxability of income from such activities did not arise. It was further observed by the CIT(A) that while rendering the repair work, no right to use the equipment was provided by the assessee to ONGC as the said equipment was owned by ONGC itself, hence the question of characterising the receipts as Royalty on the basis of conferring a right to use of such equipment did not arise. The CIT(A) further dislodging the claim of the A.O that the repair services rendered by the assessee brought the same within the sweep of FTS observed that undoubtedly the repairs carried out by the assessee involved technical expertise, however, the said repair work (and related activities) undertaken by the assessee under the ONGC contract did not „make available‟ any technical knowledge, experience, skill or processes etc. to ONGC. Still further, it was observed by the CIT(A) that as the repair work was undertaken by the assessee at its overseas work stations, therefore, the question of taxability of such receipts from repair work as attributable to the PE of the assessee was also not warranted.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. (C) Taxability of Revenue from equipment rental under the contract with ONGC:-

The assessee had also assailed before the CIT(A) the order passed by the A.O, on the ground that he had erred in holding that the revenue from equipment rental was liable to be brought to tax under Sec. 44DA and as such had wrongly declined the applicability of Sec.44BB of the Act. The CIT(A) observed that the assessee as per the terms of the contract had provided certain equipments on hire basis to ONGC, in lieu whereof it was in receipt of rental income. Such equipments were used by ONGC in installation of certain equipment used in extraction, exploration of mineral oil from the exploration sites.

9. On the basis of the aforesaid deliberations as regards the scope and gamut of Sec.44DA, it was observed by the CIT(A) that Explanation 2 to Sec. 9(1)(vi), which defined the term “royalty”, though included the consideration received by a non-resident for use of any industrial, commercial or scientific equipment, but the same specifically excluded the amounts referred to in Sec.44BB. The CIT(A) further adverting to Sec.44BB which contemplates the special provisions for computing profit and gains in connection with the business of exploration etc. of mineral oils, observed that the same provided a presumptive basis for taxation of a non- resident engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire, used or to be used, in the prospecting for or the extraction or production of mineral oils. In the backdrop of the aforesaid facts, it was observed by the CIT(A) that since the equipments supplied by the assessee to ONGC on hire basis were used in the prospecting for, or extraction of, mineral oils, therefore, the consideration thereof would be covered under Sec.44BB of the Act.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. of the Act from the definition of “royalty”, thus the rental receipts in the hands of the assessee by providing the equipment on hire basis to ONGC for prospecting or extraction or production of mineral oil would fall under the exclusion provided in the royalty definition, and as a result thereof the applicability of the provisions of Sec. 44DA would stand excluded. The CIT(A) further adverting to the observations of the A.O that as it was not the assessee which was carrying on mining or like projects to be eligible for exclusion in terms of Explanation 2 to Sec.9(1)(vii), as it was the ONGC which was carrying on such mining or like projects, observed that in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of Oil and Natural Gas Corporation (2015) (59 taxaman.com 1), the said observations of the A.O were not tenable. The CIT(A) on the basis of his aforesaid deliberations concluded that the claim of the assessee that the income earned from renting of equipment would be taxable as per the provisions of Sec.44BB of the Act and not under Sec.44DA of the Act, was found to be in order. Thus, the CIT(A) directed the A.O to determine the taxability of revenue earned by the assessee from equipment rental as per the provisions of the Sec. 44BB of the Act.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. and the other activities had taken place in India. We find that the CIT(A) after deliberating at length on the issue under consideration, had observed that the activities carried out by the assessee under the ONGC contract were clearly separate, divisible and independent to each other. The CIT(A) further in support of his observation that the aforementioned activities carried out by the assessee under the ONGC contract were not inextricably interwoven or inter dependant, observed that the assessee had raised separate invoices on ONGC in respect of the aforesaid activities. It was further observed by the CIT(A) that the employees working on the respective activities carried out in India were distinct and separate from the employees working for the activities carried outside India. We find that on the basis of the aforesaid deliberations, the CIT(A) held a strong conviction that the taxability of revenue generated by the assessee from separate, independent and divisible scope of work carried out in terms of the contract were required to be independently determined for the purpose of taxability of the same.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. therefore, the CIT(A) in the backdrop of the settled position of law as laid by the Hon‟ble Supreme Court in the aforementioned judgments rendered in the case of Ishikawajima-Harima Heavy Industries Limited (supra) and Hyundai Heavy Industries Company Ltd. (supra), had rightly concluded that the taxability of the revenues received there from by the assessee from such separate, independent and divisible activities were required to be undertaken independently. We thus, finding ourselves to be in agreement with the view taken by the CIT(A), uphold the same. The Ground of appeal No. 1 raised by the revenue is dismissed.

14. We shall now advert to the sustainability of the view of the CIT(A) that taxability of revenue received by the assessee from offshore supply of equipments under the ONGC contract, being a case of outright transfer of title in the products by the assessee to ONGC outside India, thus, cannot be construed to be FTS or Royalty and brought to tax in India. We find that the CIT(A) after concluding that the taxability of the revenue received by the assessee from its various streams of separate, independent and divisible activities under the ONGC contract were required to be undertaken independently, had thus, in the backdrop of his said observations deliberated on the independent taxability of the revenue received by the assessee from offshore supplies made under the ONGC contract. The CIT(A) observed that as the products identified by ONGC are requested on need basis as per their requirements, therefore, the interconnection of the revenue received by the assessee from offshore supply of goods with other activities under the ONGC contract was unwarranted. We find that the CIT(A) had observed that in case of offshore supplies made under the ONGC contract, the property in goods were transferred by the assessee to ONGC outside India and the entire sale was executed outside India. The CIT(A) had further observed that no part of the activities of the offshore supply of equipments were carried out in India. Further, the PE of the assessee in India also had no role to play in effectuating such transactions either pre or post such offshore supply. We find that the CIT(A) relying on the judgment of the Hon‟ble Supreme Court in Ishikawajima Harima Heavy Industries ltd.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. Vs. DIT (2007) 288 ITR 408 (SC) and CIT Vs. Hyundai Heavy Industries Company Ltd. (2007) 291 ITR 482 (SC), had observed that as in the case of the assessee no part of the activities of offshore supply of equipments by the assessee were undertaken in India, hence the revenue received by the assessee there from could not be taxed in India. We have deliberated at length on the aforesaid observations of the CIT(A) and find ourselves to be in agreement with the view arrived at by him that the revenue received by the assessee from offshore supply of goods to ONGC could not be taxed in India. We thus finding no infirmity in the order of the CIT(A) in context of the issue under consideration uphold the same to the said extent. The Ground of appeal No. 2 raised by the revenue is dismissed.

15. We shall now advert to the observations of the CIT(A) that the revenue received the assessee from repair work (and related activities) undertaken by the assessee under the ONGC contract, not falling either within the sweep of FTS as provided in Explanation 2 to Sec.9(1)(vii) or Royalty as per Article XII(3) of the India-Australia DTAA, thus would not be taxable in India. We have perused the order of the CIT(A) and deliberated on his observations in context of the issue under consideration. We are of the considered view that for adjudicating the issue under consideration, it would be relevant to have an insight on the nature of the repair activities carried out by the assessee. We find that the repair work is undertaken by the assessee at its overseas work stations located outside India. The equipment which is identified by ONGC requiring overhauling/maintenance is transported at the latters responsibility to Australia/Malaysia (depending upon the type of equipment and nature of services to be rendered). After initial inspection, the spares required to be replaced are identified and ONGC makes necessary requests for the same to the assessee. The assessee replaces the spares in the course of repair of the overall equipment. After the repair work is completed, the equipment is again transported to India. We shall now, in the backdrop of the aforesaid repair activities provided by the assessee to ONGC adjudicate as regards the scope of the taxability of the receipts received there from by the assessee.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd.

“[Explanation [2]- for the purpose of this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy service (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “salaries”. It is clearly discernible from a perusal of Explanation 2 to Sec. 9(1)(vii), that where the consideration is received by the recipient for any “mining or like project” undertaken by him, the same would be excluded from the sweep of FTS. We are of the considered view that as the consideration received by the assessee for providing the repair work (and related activities) to ONGC are in context of the business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used, in the prospecting for, or extraction or production of mineral oils, thus, the receipts in the hands of the assessee from providing such services would clearly fall within the sweep of the exclusion contemplated in Explanation 2 to Sec. 9(1)(vii) of the Act. We thus, in terms of our aforesaid observations are of the considered view that the revenue received by the assessee from providing repair services to ONGC would not fall within the sweep of FTS under Sec.9(1)(vii) of the Act.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. of services (including provision of technical or other personal) would result in royalty, if such services make available technical knowledge, expertise, skill, know how or process, which enables the person acquiring the service to apply the technology contained therein. In other words, if the service provider does not make available the technical knowledge, experience, skill know how or process etc., then the consideration received for rendering of such services cannot be characterised as royalty for the purpose of Article XII(3)(g) of India-Australia DTAA.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd. from rendering of the repair services to ONGC cannot be brought within the sweep of FTS or Royalty, uphold the same. Before parting, we may further observe that as the repair works are undertaken at the overseas work stations of the assessee, therefore, the question of taxability of such receipts from rendering of the repair work as attributable to PE of the assessee in India does not arise. We thus, in terms of our aforesaid observations conclude that the A.O had erred in holding that the revenue from repair activities rendered by the assessee to ONGC was taxable in India under Sec. 44DA of the Act. The Ground of appeal No. 3 raised by the revenue is dismissed.

C.O No. 315/Mum/2017 A.Y. 2011-12

“1. On the facts and in the circumstances of the case and in law, if the question numbers 1, 2 and 3 raised in the grounds of appeal of the Department are held in the affirmative, then the income, if any, ought to be computed as per the provisions of Section 44BB of the Income-tax Act, 1961 („the Act‟).

2. On the facts and in the circumstances of the case and in law, without prejudice to cross-objection (i) and if income is not computed as per the provisions of Section 44BB of the Act, then the income, if any, shall be computed based on the global profitability after considering all the expenses provided in the global financial statements.

3. The respondent craves leave to add to, alter, amend, vary, omit or substitute the aforesaid grounds of cross objections.”

22. That as we have already dismissed the appeal of the revenue, therefore, the cross objection raised by the assessee having been rendered as infructuous are thus dismissed.

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd.

Order pronounced in the open court on 13.07.2018

Sd/- Sd/- (G.S. PANNU) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER भुंफई Mumbai; ददनांक 13.07.2018 Ps. Rohit आदेश की प्रनिलऱपि अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. 2. प्रत्मथी / The Respondent. 3. आमकय आमुक्त(अऩीर) / The CIT(A)- आमकय आमुक्त / CIT 4. ववबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, 5. ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रतत //True Copy// आदेशधिुसधर/ BY ORDER, उि/सहधयक िंजीकधर (Dy./Asstt. Registrar) आयकर अिीऱीय अधर्करण, भुंफई / ITAT, Mumbai

P a g e | And C.O No. 315/Mum/2017 A.Y 2011-12 DCIT (IT)-2(1)(1) Vs. M/s Cameron Australasia Pty. Ltd.