ADIT, DEHRADUN vs M/S. HALLIBURTON OFFSHORE SERVICES INC., DEHRADUN

Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI

Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI

For Appellant: Mr. Amit Arora, Ca

Hearing: 10/05/016Pronounced: 30/06/2016

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No.1332/DEL/2012 (Assessment Year: 2005-06) ADIT, Halliburton Offshore Services International Taxation, Inc. , Vs. 13-A,Subhash Road, C/o. Nangia & Company, CA, Aayakar Bhawan, 75/7, Rajpur Road, Dehradun Dehradun PAN:AAACH5154M (Appellant) (Respondent)

ITA No.5284/De/2010 (Assessment Year: 2007-08) Halliburton Offshore Services Addl. CIT, Inc. , International Taxation, Vs. C/o. Nangia & Company, CA, Subhash Road, Suite-4A, Plaza M-6, Jasola, Dehradun New Delhi PAN:AAACH5154M (Appellant) (Respondent)

ITA No.242/De/2012 (Assessment Year: 2008-09) Halliburton Offshore Services Inc. , ADIT, C/o. Nangia & Company, CA, International Taxation, Vs. Suite-4A, Plaza M-6, Jasola, 13-A,Subhash Road, New Delhi Aayakar Bhawan, PAN:AAACH5154M Dehradun (Appellant) (Respondent)

ITA No.6161/De/2012 (Assessment Year: 2009-10)

Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

2 ADIT, Halliburton Offshore International Taxation, Services Inc. , Vs. 13-A,Subhash Road, C/o. Nangia & Company, Aayakar Bhawan, CA, Dehradun 75/7, Rajpur Road, Dehradun PAN:AAACH5154M (Appellant) (Respondent)

C.O.No.21/De/2013 (Assessment Year: 2009-10)

Halliburton Offshore Services ADIT, Inc. , International Taxation, Vs. C/o. Nangia & Company, CA, 13-A,Subhash Road, 75/7, Rajpur Road, Dehradun Aayakar Bhawan, Dehradun PAN:AAACH5154M (Appellant) (Respondent)

ITA No.6003/De/2012 (Assessment Year: 2009-10) Halliburton Offshore Services Inc. , ADIT, C/o. Nangia & Company, CA, International Taxation, Vs. Suite-4A, Plaza M-6, Jasola, 13-A,Subhash Road, New Delhi Aayakar Bhawan, PAN:AAACH5154M Dehradun (Appellant) (Respondent)

ITA No.5936/De/2013 (Assessment Year: 2010-11)

ADIT, Halliburton Offshore International Taxation, Services Inc. , Vs. 13-A,Subhash Road, C/o. Nangia & Company, Aayakar Bhawan, CA, Dehradun 75/7, Rajpur Road, Dehradun PAN:AAACH5154M (Appellant) (Respondent)

C.O.No.148/De/2014 (Assessment Year: 2010-11)

Assessee by : Mr. Amit Arora, Ca Revenue by: Sh. Anuj Arora, CIT DR Date of Hearing 10/05/016 Date of pronouncement 30/06/2016 O R D E R PER PRASHANT MAHARISHI, A. M.

These are the appeal filed by the parties on the issues arising out of taxation of assessee u/s 44 BB of the act for respective years.

ITA No.5284/Del/2010 (AY 2007-08)

This appeal is filed by assessee against the order of the ld Assessing Officer dated 26.10.2010 which was framed pursuant to the directions of Dispute Resolution Panel dated 30.09.2010. 3. The assessee has raised the following grounds of appeal in ITA No.5284/Del/2010 as under:- “Based upon the facts of the case, the assessee respectfully submits the following grounds which are without prejudice to and independent of each other:

4 Addition qua breakup of revenue against consolidated contract into equipment rental and services 1. That the assessing officer erred on facts and in law in holding that the provision of equipment and personnel under consolidated contracts were independent of each other; 2. That the assessing officer erred on facts and in law in holding that the contractual revenues were to be bifurcated into 'equipment rental1 and 'service charges'; 3. That the assessing officer erred on facts and in law in not accepting that the contracts executed by the assessee were in the nature of 'mining or like projects' as referred to in the Explanation to section 9(l)(vii) of the I.T. Act, 1961. Addition qua services in connection with exploration/prospecting/extraction of mineral oil 4. That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs.498942415/- as against the income of Rs.9,72,18,595/- returned by the appellant. 5. That the assessing officer erred on facts and in law in assessing income of Rs.34,88.95,710/- arising from services rendered by the appellant in connection with exploration/prospecting/extraction of mineral oil under section 9(l)(vii) of the Act as opposed to section 44BB of the Act. 6. That the assessing officer erred on facts and in law in adding a sum of Rs.5,72,87,305/-to the gross receipts of the appellant to be taxed as fees for technical services under section 9(l)(vii) without appreciating that the said amount represented service tax collected for and behalf of the Government of India. 7. That the assessing officer erred on facts and in law in adding a sum of Rs.9,02,736/- to the gross receipts of the appellant without appreciating that the said amount represented reimbursement of actual expenses incurred by the appellant. Addition qua hiring of equipment used in connection with exploration/ prospecting/ extraction of mineral oil 8. That the assessing officer erred on facts and in law in assessing income of Rs. 18,37,0487/- arising from letting out equipment, used in connection with the exploration/prospecting/extraction of mineral oil under section 9(l)(vi) of the Act as opposed to section 44BB of the Act. 9. That the assessing officer erred on facts and in law in alleging that the appellant had a permanent establishment in India without demonstrating the basis of arriving at such a conclusion.

5 10. That the assessing officer erred on facts and in law in alleging that the aforesaid income from letting out equipment was effectively connected with the alleged permanent establishment of the appellant. Addition qua income from alleged supply of software and hardware 11. That the assessing officer erred on facts and in law holding that income of Rs.104,615,993/- arising from supply of hardware outside India was to be assessed to tax under section 44BB of the Act. 12. That the assessing officer erred on facts and in law in assessing income of Rs. 835,021/-allegedly arising from supply of software as 'royalties' chargeable to tax under section 9(l)(vi)of the Act. Addition qua deductions made by customers not reduced from gross revenue 13. That the assessing officer erred on facts and in law holding that deductions of Rs. 47,406,341 made by customers from contractual receipts were not to be reduced from the gross revenue while computing the income chargeable to tax. Lew of interest 14. That the assessing officer erred on facts and in law in levying interest under section 234B and 234C of the Act especially when there was no liability on the assessee to pay advance tax under section 209(1 )(d) of the Income-tax Act, 1961.” 4. The brief facts of the case is that the assessee company incorporated in Cayman Island engaged in the providing the services of supply of plant and machinery and other services used in the business of prospecting for or extraction or production of mineral oils. The assessee has not claimed any benefit of the Double taxation Avoidance agreement. The nature of the services provided are coring services, perforation services, cementing services for oil wells, provision of hole enlargement tools, directional drilling, drill stem testing services, testing of deepwater exploratory wells, offshore supply of hardware and seismic software and installation and training of seismic software. The assessee has offered the revenues from these services contracts u/s 44BB of the Income Tax Act, however, the ld Assessing Officer was of the view that these income are assessable as fees for technical services in view of the decision of Hon’ble Uttrakhand High Court in case of ONGC as representative of Foramer France. Therefore, he brought to tax this sum received from non-resident companies u/s 9(1) (vii) by bringing the

6 same to tax @25%. Further, applying the provisions of section 115A some of the income received from Indian companies have been taxed @10%. He further taxed amount of service tax including it under the turnover and taxed it @25%. Further assessee did not include reimbursement of expenses in to the gross receipt for taxation u/s 44BB of the Act. The ld DRP held that the provisions of section 44BB do not apply to these receipts. Therefore, the assessee is in appeal before us. 5. The ground Nos. 1 to 5 of the appeal is against taxing of the receipts as fees for technical services. 6. The ld AR has submitted that the issue is squarely covered in favour of the assessee in view of the decision of the coordinate bench of ITAT in case of CGG Veritas Services SA, 50 SOT 335 wherein it has been held that services rendered in connection with contracts for prospecting etc. of mineral oil though effectively connected with the PE will fall outside the scope of section 44DA and would be assessed u/s 44BB of the Act. He further submitted that Hon’ble Supreme court in case of ONGC Vs. CIT 376 ITR 306 has held that services in connection with exploration, production of mineral oil shall fall within the purview of section 44BB of the Act and are not fees for technical services. He further submitted that coordinate bench in 167 TTJ 304 has held that renting of equipment in connection with services specified u/s 44BB are liable to be taxed under that section only. He further submitted that the decision of the Uttrakhand High Court relied upon by the Assessing Officer have been overruled by the Hon’ble Supreme Court. Therefore, according to him the services of the assessee are liable to be taxed u/s 44BB of the Act. 7. Ld DR relied on the orders of ld Assessing Officer and DRP. 8. We have carefully considered the rival contentions. We are of the view that the decision of the Hon’ble Supreme Court in case of ONGC Vs. CIT (supra)

7 covers the issue in favour of the assessee. Hon’ble Supreme Court has held as under:-

“2. The question whether prospecting for, or extraction or production of, mineral oil can be termed as 'mining' operations, was referred to the Attorney General of India for his opinion. The Attorney General has opined that such operations are mining operations and the expressions 'mining project' or 'like projects' occurring in Explanation 2 to section 9(1)(ii) of the Income-tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. 3. In view of the above opinion, the consideration for such services will not be treated as fees for technical services for the purpose of Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961. Payments for such services to a foreign company, therefore, will be income chargeable to tax under the provisions of section 44BB of the Income-tax Act, 1961, and not under the special provision for the taxation of fees for technical services contained in section 115A read with section 44D of the Income-tax Act, 1961. 4. A copy of the statement of the case dated March 16, 1990 (without annexures) and a copy of the Attorney General's opinion dated May 13, 1990, are enclosed. 5. These instructions may bring to the notice of all the officers in your region. [F. No. 500/6/89-FTD dated October 22, 1990, from the Central Board of Direct Taxes]" 10. Before us the opinion of the learned Attorney General has been placed by the learned counsel for the appellants at great length to contend that the views expressed by the learned Attorney General which had been accepted by the Central Board of Direct Taxes were based on an exhaustive consideration of the provisions of the Mines Act, 1952, and the Mines and Minerals (Regulation and Development) Act, 1957, read with the relevant entries in the Union and the State Lists in the Seventh Schedule to the Constitution of India. It is urged that the eventual test is one of pith and substance of the agreement, namely, whether the works contemplated or services to be rendered under the agreement is directly and inextricably linked with the prospecting, extraction or production of mineral oil. It is submitted on behalf of the appellants that the agreements in question satisfy the above test for which purpose the appellants have categorised the different contracts under eight heads which may be conveniently set out at this stage hereinbelow. 1. Carrying out seismic surveys and drilling for oil and gas. 2. Services starting/re-starting/enhancing production of oil and gas from wells. 3. Services for prospecting for exploration of oil and or gas. 4. Planning and supervision of repair of wells. 5. Repair, inspection or equipment used in the exploration, extraction or production of oil and gas. 6. Imparting training.

8 7. Consultancy in regard to exploration of oil and gas. 8. Supply, Installation, etc., of software used for oil and gas exploration." 11. It is also urged on behalf of the appellants that the Instruction/Circular dated October 22, 1990, issued by the Central Board of Direct Taxes was binding on the primary authority on the ratio of the decision of this court in K. P. Varghese v. ITO*. It has been further pointed on behalf of the appellants that even under the provisions of section 3D of the Oil Fields (Regulation and Development) Act, 1948, a "mining lease" means a lease granted for the purposes of searching for, winning, working, getting, making merchandisable, carrying away or disposing of mineral oils or for the purpose connected therewith and such a lease includes an exploring or * [1981] 4 SCC 173; [1981] 131 ITR 597 (SC).

prospecting lease. Reference has also been made to the Petroleum and Natural Gas Rules, 1959, framed under section 5 of the aforesaid Act. Under rule 4 of the said Rules no person can prospect for petroleum except pursuant to a petroleum exploration license (PEL) granted under the Rules and no person can mine petroleum except in pursuance of a petroleum mining license (PML) granted under the Rules. It is pointed out that under rule 7 of the Rules of 1959, a petroleum mining license (PML) entitles the licensee to carry out construction and maintenance in and on such land, works, buildings, plants, waterways, roads, pipelines, etc., as may be necessary for full enjoyment of the PML. On the said basis it is argued that rendering any service in connection with prospecting and extraction is an integral part of mining and that the expression "mining" in the Explanation 2 to section 9(1) of the Income-tax Act, in the absence of any definition under the Income-tax Act, has to be understood as per the provisions of the Oil Fields (Regulation and Development) Act, 1948, read with the Petroleum and Natural Gas Rules, 1959. 12. Opposing the contentions advanced on behalf of the appellants, Shri Gurukrishna Kumar, learned senior counsel for the Revenue, has urged that the opinion of the Attorney General relied upon and the Central Board of Direct Taxes Circular has no relevance to the present case inasmuch as the agreements between ONGC and the non- resident companies made it abundantly clear that what is paid to the non-resident company are fees for technical services rendered. Though such services may have some connection with the prospecting, extraction or production of mineral oils, the primary service rendered by the non-resident companies on the basis of the agreements is not for prospecting, extraction or production of mineral oil but various ancillary services like training of personnel, etc., which may have a somewhat remote connection with the business of prospecting, exploration or production of mineral oils. Learned counsel for the Revenue has even suggested that if it is held that the High Court ought to have examined each agreement or contract to find out its real purpose and intent the Revenue would have no objection if the matters are remanded for a complete exercise to be made on the above basis. 13. The Income-tax Act does not define the expressions "mines" or "minerals". The said expressions 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 Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

9 List II of the Seventh 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 Parliament has exclusive jurisdiction under entry 53 of List I of the Seventh Schedule and had enacted an earlier legislation, i.e., the Oil Fields (Regulation and Development) Act, 1948. Reading section 2(j) and section 2(jj) 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. 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 assessee 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 Central Board of Direct Taxes had accepted the said test and had in fact issued a circular as far back as October 22, 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 oils. Keeping in mind the above provision, we have looked into each of the contracts involved in the present group of cases and find that the brief description of the works covered under each of the said contracts as culled out by the appellants and placed before the court is correct. The said details are set out below :

S. No. Civil Appeal No. Work covered under

4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling.

740 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel.

731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel.

1722 Furnishing supervisory staff with expertise in operation and management of drilling unit.

729 Capping including subduing of well, fire fighting.

738 Capping including subduing of well, fire fighting.

1528 Analysis of data to prepare job design, procedure for execution and details regarding monitoring.

1532 Study for selection of enhanced oil recovery processes and conceptual design of pilot tests.

1520 Engineering and technical support to ONGC in implementation of cyclic steam stimulation in heavy oil wells.

10.

2794 Assessment and processing of seismic data along with engineering and technical support in implementation of cyclic steam stimulation.

11.

1524 Conducting reservoir stimulation studies in association with personnel of ONGC.

12.

1535 Laboratory testing under simulated reservoir conditions.

13.

1514 Consultancy for optimal exploitation of hydrocarbon resources.

14.

2797 Consultancy for all aspects of

coal bed methane.

15.

6174 Analysis of data of wells to prepare a job design.

16.

1517 Geological study of the area and analysis of seismic information reports to design 2 dimensional seismic surveys.

17.

7226 Opinion on hydrocarbon resources and foreseeable potential.

18.

7227 Opinion on hydrocarbon resources and foreseeable potential.

19.

7230 Opinion on hydrocarbon resources and foreseeable potential.

20.

6016 Opinion on hydrocarbon resources and foreseeable potential.

21.

6008 Evaluation of ultimate resource potential and presentations outside India in connection with promotional activities for joint venture exploration program.

22.

1531 Review of sub-surface well data, provide repair plan of wells and supervise repairs.

23.

733 Repair of gas turbine, gas control system and inspection of gas turbine and generator.

24.

741 Repair and inspection of turbines.

25.

737 Repair, inspection and overhauling of turbines.

26.

736 Inspection, engine performance evaluation, instrument calibration and inspection of far turbines.

27.

1522 Replacement of choke and kill consoles on drilling rigs.

28.

1521 Inspection of gas generators.

29.

1515 Inspection of rigs.

30.

2012 Inspection of generator.

31.

1240 Inspection of existing control system and deputing engineer to attend to any problem arising in the machines.

32.

1529 Inspection of drilling rig and verification of reliability of control systems in the drilling rig.

33.

2008 Expert advice on the device to clean insides of a pipeline.

34.

2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations.

35.

925 Engineering analysis of rig.

36.

1519 Imparting training on cased hold production log evaluation and analysis.

37.

1533 Training on well control.

38.

1518 Training on implementation of six sigma concepts.

39.

1516 Training on implementation of six sigma concepts.

40.

6023 Training on drilling project management.

41.

2796 Training in safety rating system and assistance in development and audit of safety management system.

42.

1239 To develop technical specification for 3D seismic API modules of work and to prepare bid packages.

43.

1527 Supply supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions.

44.

1523 Supply, installation and familiarization of software for processing seismic data.

The above facts would indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

14 foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal.”

Furthermore the coordinate bench in case of CGG Veritas Services Sa 50 SOT 335 ( Delhi) has held that

“46. On combined reading of section 44DA(1) and 115A(1)(b) it is clear that the provisions of section 44DA(1) are applicable in the case of a non-resident assessee who carries on business in India through a permanent establishment, or performs professional services from a fixed place of profession, and fees for technical services paid under the contract is effectively connected with such permanent establishment or fixed place of profession in India. In section 115A(1)(b ) the Finance Act, 2003 with effect from 1.4.2004 substituted words "a non-resident (not being a company) or a foreign company includes any income by way of royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA" for words "a foreign company, includes any income by way of royalty or fees for technical services". Therefore, w.e.f. 1.4.2004 fee for technical services which is not connected with permanent establishment of business or fixed place of profession in India, will be taxable u/s 115A(1)(b) of the Act. As observed earlier section 44DA was inserted in proviso to section 44BB (1) by the Finance Act, 2010 with effect from 1.4.2011 and simultaneously inserted second proviso to section 44DA applicable from assessment year 2011-12 according to which provisions of section 44BB (1) will not be applicable in respect of income referred to this section. On combined reading of proviso to section 44BB (1) and second proviso to section 44DA it is clear that the fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall not under section 44BB(1) and will be assessable under section 44DA of the Act. To make it more clear the fee for technical services can be divided in following categories: (i) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil having business PE or fixed place of profession (section 44DA); (ii) Fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil without having business PE or fixed place of profession " (section 115A); (iii) Other fee for technical services having business PE or fixed place of profession (section 44DA); (iv) Other fee for technical services without business PE or fixed place of profession (section 115A); Thus it is abundantly clear that with effect from assessment year 2011-12 fee for technical services whether rendered in connection with prospecting for or extraction or

15 production of mineral oil or otherwise will be assessable either u/s 44DA or section 115A of the Act depending on fact whether such receipts are effectively connected with PE or fixed place of profession, or not. However, for assessment year 2004-05 to 2010- 11 the consideration received for fee for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with PE or fixed place of profession will fall outside the scope of section 44DA and will be assessable under section 44BB (1) of the Act for the simple reason that proviso to section 44BB(1) does not contain section 44DA for these years.”

10.

Furthermore coordinate bench in baker Hughes Asia pacific Limited in 151 ITD 079 has held that :-

“65. The department's contention is that section 44DA inserted by the Finance Act, 2010 w.e.f. 1-4-2011 in section 44BB is retrospective and, therefore, royalty and fees for technical service should be taxed u/s 44DA and not u/s 44BB. In our opinion, the amendment cannot be held to be retrospective particularly because it brings substantial change in the taxability of assessee. It is well settled law that an amendment to the taxing statute if results in higher tax burden on assessee then it is prospective in nature and not retrospective. We find that this issue has been dealt elaborately by Hon'ble Jurisdictional High Court (Uttrakhand) in B.J. Services Co. Middle East Ltd. (supra). We are not inclined to accept the contentions advanced on behalf of the revenue, reproduced earlier, for the simple reason that the issue is squarely covered by the decision of Hon'ble Jurisdictional High Court, decision of Hon'ble Delhi High Court in the case of OHM Ltd. (supra) and by the decision of the ITAT in CGG Veritas Services S.A. (supra) and Phonex (supra). 66. As far as ground no. 8 regarding income arising from letting out equipment, used in connection with the exploration/ prospecting/ extraction of mineral oil taxed u/s 9(1)(vi) by assessing officer is concerned, we are of the opinion that in view of explanation (iv-a), the income is to be assessed u/s 44BB.”

11.

Therefore we hold that services rendered by the assessee falls within the ambit of provision of section 44BB of the act and not as Royalty or fees for technical services. In view of this ground Nos. 1 to 5 of the appeal of the assessee are allowed. 12. Ground No. 6 of the appeal is with respect to the service tax of Rs. 57287305/- which is also taxed by revenue as FTS. 13. Ld AR submitted that the issue is now squarely covered by the decision Hon’ble Delhi High Court in case of Mitchell Drilling International PTY Ltd. dated 28.09.2015.

16 14. Ld DR relied on the orders of the lower authorities. 15. We have carefully considered the rival contentions. The issue is whether services tax being statutory leaving shall be included in the gross receipts as per provision of section 44BB of the Income Tax Act or not. the issue is now squarely covered now in favour of the assessee in view of the decision of DDIT V Mitchell Drilling International PTY Ltd. 380 ITR 130 (Delhi) dated 28.09.2015, wherein, Hon’ble High Court held as under:- “14. In the considered view of the Court, both the aforementioned decisions were rendered in the specific contexts in which the questions arose before the Court. In other words the interpretation placed by the Court on the expression 'trading receipt' or 'turnover' in the said decisions was determined by the context. The later decision of the Supreme Court in Lakshmi Machine Works (supra) which sought to interpret the expression 'turnover' was also in another specific context. There the question before the Supreme Court was "whether excise duty and sales tax were includible in the 'total turnover' which was the denominator in the formula contained in Section 80HHC(3) as it stood in the material time?" The Supreme Court considered its earlier decision in Chowringhee Sales Bureau (supra) and answered the question in the negative. The Supreme Court noted that for the purposes of computing the 'total turnover' for the purpose of Section 80HHC(3) brokerage, commission, interest etc. did not form part of the business profits because they did not involve any element of export turnover. It was observed: "just as commission received by an assessee is relatable to exports and yet it cannot form part of 'turnover', excise duty and sales-tax also cannot form part of the 'turnover'." The object of the legislature in enacting Section 80HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, "turnover" was the requirement. "Commission, rent, interest etc. did not involve any turnover." It was concluded that 'sales tax and excise duty' like the aforementioned tools like interest, rent etc. 'also do not have any element of 'turn over''. 15. In Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court inSudarshan Chemicals Industries Ltd. (supra) which in turn considered the decision of the Supreme Court inGeorge Oakes (P.) Ltd. (supra). In the considered view of the Court, the decision of the Supreme Court inLakshmi Machines Works (supra) is sufficient to answer the question framed in the present appeal in favour of the Assessee. The service tax collected by the Assessee does not have any element of income and therefore cannot form part of the gross receipts for

17 the purposes of computing the 'presumptive income' of the Assessee under Section 44BB of the Act. 16. The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd. (supra) which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44BB of the Act. 17. The Court accordingly holds that for the purposes of computing the 'presumptive income' of the assessee for the purposes of Section 44BB of the Act, the service tax collected by the Assessee on the amount paid to it for rendering services is not to be included in the gross receipts in terms of Section 44BB(2) read with Section 44BB(1). The service tax is not an amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The Assessee is only collecting the service tax for passing it on to the government. 18. The Court further notes that the position has been made explicit by the CBDT itself in two of its circulars. In Circular No. 4/2008 dated 28th April 2008 it was clarified that "Service tax paid by the tenant doesn't partake the nature of "income" of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Therefore, it has been decided that tax deduction at source under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax.' In Circular No. 1/2014 dated 13th January 2014, it has been clarified that service tax is not to be included in the fees for professional services or technical services and no TDS is required to be made on the service tax component under Section 194J of the Act.”

16.

In view of this ground No.6 of the appeal of the assessee is allowed holding that the service tax does not form part of gross receipts for the purpose of taxing income of the assessee u/s 44BB of the Act. In the result the ground No. 6 of the appeal is allowed. 17. Ground NO. 7 of the appeal is against the addition of Rs. 902736/- to the gross receipt of the appellant, though the said amount is reimbursement of actual expenditure incurred by the assessee.

18 18. Ld AR fairly admitted that this issue is covered against the assessee in view of the decision of Hon’ble Delhi High Court in assessee’s own case in 300 ITR 265. 19. Ld DR supported the order of the lower authorities. 20. We have carefully considered the rival contentions and we are of the view that this is covered against the assessee in 300 ITR 265 wherein it has been held as under:- “5. Section 44BB provides that the deemed profits and gains under sub-section (1) shall be at the rate of 10 per cent of the aggregate amount specified in sub-section (2). We proceed to analyze sub-section (2). Clause (a) of sub-section (2) refers to the amounts, (A) paid to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India, and (B) payable to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India. Clause (b) of sub-section (2) refers to the amounts, (A) received by assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India, and (B) deemed to be received by the assessee in India on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. 6. Thus, it is clear from the perusal of section 44BB that all the amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive. This amount is the basis of determination of deemed profits and gains of the assessee at the rate of 10 per cent. Therefore, in our view, the Tribunal fell into error in not appreciating the difference between the amount and the income. Amount paid or received refers to the total payment to the assessee or payable to the assessee or deemed to be received by the assessee, whereas income has been defined under section 2(24) of the Income-tax Act and section 5 and section 9 deal with the income and accrued income and deemed income. Section 4 is the charging section of the Income-tax Act and definition as well as the incomes referred in sections 5 and 9 are for the purpose of imposing the income-tax under section 143(3). Section 44BB is a complete code in itself. It provides by a legal fiction to be the profits and gains of the non-resident assessee engaged in the business of oil exploration at the rate of 10 per cent of the aggregate amount specified in sub-section (2). It is not in dispute that the amount has been received by the assessee-company. Therefore, the Assessing Officer added the said amount which was received by the non-resident company rendering services as per provisions of section 44BB to the ONGC and imposed the income-tax thereon. 7. Accordingly, for the reasons recorded above, we set aside the judgment and order of the Tribunal and order of the CIT(A). The order of Assessing Officer is confirmed. The question is answered in favour of revenue and against the assessee.”

21.

In view of this respectfully following the decision of the Hon’ble High Court gr0ound No.7 of the appeal is dismissed.

19 22. Ground No. 8 of the appeal is against the revenue of second leg contracts are also covered under the provision of section 44BB of the Income Tax Act or not. 23. The ld Assessing Officer has taxed this income as equipment royalty and ld DRP held that revenue from PSC contract to second leg contract are taxable u/s 44BB of the Act whereas, in respect of non-PSC contract same are chargeable to tax as equipment royalty. 24. Ld AR submitted that this issue is now squarely covered in favour of the assessee by the decisions of the coordinate bench as under:-  SBS Marine Ltd. ITA No. 107/2012  Louis Dreyfus Armateures SAS, ITA No. 5714/Del/2010 date of pronouncement 17.02.2015  ADIT Vs. Baker Hughes Singapore Pte. Ltd. ITA No.744/Del/2013 date of pronouncement 20.04.2015  ADIT Vs. Tidewater Marine International Inc. ITA No. 592/Del/2013 date of pronouncement 07.02.2016 25. Ld DR relied on the orders of lower authorities. 26. We have carefully considered the rival contentions and also perused the relevant orders of coordinate bench cited before us. Cordinate bench in case of ADIT Vs. Baker Hughes Singapore Pte. Ltd.41 ITR (T) 12 ( Delhi ) it is held as under :- 6. We have heard the rival contentions at considerable length, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. Learned Commissioner (DR) has, even while accepting that the same issue came up for consideration before coordinate benches in the cases of Baker Hughes Asia Pacific Ltd. v. Addl. DIT (Int. Tax.) [2014] 47 taxmann.com 1/151 ITD 79 (Delhi) and Baker Hughes Asia Pacific Ltd. v. ADIT [ITA No. 6476/Del/12; order dated 5th September 2014] and this issue was decided in favour of the assessee, contended that "no case can be held to be covered, standing as it does on own facts which are distinguishable". She has elaborate arguments in support of

20 the stand of the Assessing Officer and urged us to take an independent view of the matter. Her line of reasoning, in broad terms, is like this. It is pointed out that the payments for use and hire of equipment and personnel is equipment royalty/ fees for technical services, and that the income being in nature of royalty/ FTS, and not for a project undertaken by the appellant, is not eligible for benefit of Section 44BB as it would be contrary to the decisions of Hon'ble jurisdictional High Court in the cases of Foamer France and Rolls Royce. It is contended that the provisions of Section 44DDA, as in force with effect from 1st April 2011, are clarificatory in nature and have to be read into the provisions of the Act. Its her contention that the provisions of Section 44BB are meant for the first leg contractors engaged in prospecting, extracting and producing mineral oils, and that the benefit of these provisions cannot be extended to the vendors and suppliers of such first leg contractors. It is submitted that doing so would amount to base erosion and profit shifting from developing countries. A reference is then made Heydon's rule and submitted that the amendments in the scheme of Section 44BB and 44DA, vide Finance Act 2010, though stated to be effective from assessment year 2011-12 must be treated as clarificatory in nature. A reference is made to the decision of Hon'ble Supreme Court, in the case of Union of India v. Gosalia Shipping (P.) Ltd [1978] 113 ITR 307 for the proposition that when payment is made to a shipping company for time charter, its payment for hire of shipment and not for the purpose of carrying goods, and by the same logic, when payment is made by the first leg contractor to the supplier of equipment or personnel, the payment is for such equipment or personnel and not for the purposes in which the equipment or personnel are put to use. It is then submitted that the decision of PGS Geophysical AS v. Addl. DIT [2014] 369 ITR 27/[2015] 55 taxmann.com 394 (Delhi) contradicts the findings in the earlier Hon'ble Delhi High Court decision in the case of DIT v. OHM Ltd. [2013] 352 ITR 406/212 Taxman 440/[2012] 28 taxmann.com 120, based on which the coordinate bench has decided this issue in favour of the assesse. It is submitted that the decision of the coordinate bench in the case of Baker Hughes Asia Pacific Ltd. (supra), by which this issue in appeal is stated to be covered in favour of the assessee, did not take account the binding judicial precedents in the cases of PGS Geophysical AS (supra) and Gosalia Shipping (P.) Ltd. (supra) as also many other relevant decisions, we should not be guided by the same. 8. Learned counsel for the assessee, on the other hand, submits that as the issue is squarely covered in favour of the assessee by decisions of the coordinate benches and these decisions are not yet overturned by the Hon'ble Courts above, there is no occasion to deviate from the same.

21 We are thus urged to confirm the findings of the CIT(A) and decline to interfere in the matter. 9. We have noted that the issue is directly covered by the decisions of the coordinate benches and there are no direct decisions on the issue by any higher forums. The meticulous research done by the learned Commissioner (DR), as also her erudite arguments, are of not of any practical effect at this stage. As for the BEPS considerations, as so strenuously argued by the learned counsel, base erosion and profit shifting is a tax policy consideration which is relevant for the process of law making, but it cannot have a role in the judicial decision making process because judicial process will infringe neutrality if it is to be swayed by such policy consideration. The judicial neutrality must not only be neutral vis-à-vis the party but also value neutral vis-à-vis competing ideologies. Judicial authorities are to interpret the law as it exists and not as it ought to be in the light of certain underlying value notions. As for the legal arguments advanced by the learned Commissioner (DR), as was laid down by Hon'ble Supreme Court in the case of Ambika Prasad Mishra v. State of UP AIR 1980 SC 1762, "Every new discovery nor argumentative novelty cannot undo or compel reconsideration of a binding precedent... A decision does not lose its authority merely because it was badly argued, inadequately considered or fallaciously reasoned....". Similarly, in the case of Kesho Ram & Co. v. Union of India [1989] 3 SCC 151, Hon'ble Supreme Court had observed that "(t)he binding effect of a decision of this Court does not depend upon whether a particular argument was considered or not, provided the point with the reference to which the argument is advanced subsequently was actually decided in the earlier decision " In view of these discussions, we see no reason to take any other view of the matter than the view taken by the coordinate benches and respectfully following the views of the coordinate bench, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter.”

27.

On the basis of the above, following the decision of the coordinate bench we held that the revenue of the second leg contracts are also eligible for benefit of preferential tax treatment provided in section 44BB of the Income Tax Act and therefore, ground No. 8 of the appeal is allowed. 28. Ground No. 9 and 10 of the appeal are supporting the ground No. 8 of the appeal. As we have already decided ground No. 8 in favour of the assessee

22 we do not find any necessity for deciding Ground 9 and 10 of the appeal. In view of this same are treated as infructous and dismissed. 29. Ground Nos. 11 and 12 of the appeal are against the order of the Assessing Officer that income of Rs. 104615993/- arising from supply of hardware outside India was to be assessed to be taxed u/s 44BB of the Act and Rs. 835021/- received from supply of software as royalty was chargeable to tax. During the year the assessee has earned total revenue of Rs. 279092096/- on account of supply of software out of which a sum of Rs. 173641082/- has already been offered for taxation @10%. The contention of the assessee is that it is received for the grant of license on software and cannot be taxed as royalty. However, ld Assessing Officer has held that according to section 9(1) (vi) of the Act software is included in the definition of royalty and therefore, same is chargeable to tax in India. Accordingly, same was brought to tax @25% instead of 10%. Regarding the taxability of software ld DRP discussed this issue in detail and held that software receipts are royalty and are taxed @10%. Regarding the sale of hardware the assessee himself has voluntarily admitted by taking receipts chargeable to tax u/s 44BB of the Act but later on before ld DRP it was contested that such hardware is sold outside India and therefore not taxable. Ld DRP directed the AO to tax the receipts as u/s 44BB of the Income Tax Act and taxed it @10%. 30. The ld AR submitted that offshore supply of hardware and software are not taxable in India and he further stated that such supplies are also not connected with the permanent establishment. He further stated that section 44BB does not deal with sales and therefore, the profit cannot be attributed to this transaction. For this the ld AR relied on the order of the ld Assessing Officer and DRP and submitted that enough reasons have been given to show that sale of software is a royalty and further sale of hardware is also considered for the turnover u/s 44BB.

23 31. We have carefully considered the rival contentions. The supply of software and hardware has been held to be chargeable as royalty and receipt u/s 44BB respectively. It is apparent that provisions of section 9(1)(vii) has been retrospectively amended by introduction of explanation 4 w.e.f. 01.04.1976 by a Finance Act 2012. According to that transfer of all or any right or use or right to use of computer software including granting of a license irrespective of a medium there is a transfer of such right. Further explanation 5 and 6 were also inserted with retrospective effect. Further regarding the sale of the software the assessee himself has included this receipt by offering income u/s 44BB of the Act. In view of this the matter is set aside to the file of ld Assessing Officer to determine the taxability of hardware and software sales, therefore ground Nos. 11 and 12 of the appeal are set aside to the file of ld Assessing Officer. 32. Ground No. 13 of the appeal is against not granting deduction of Rs. 47406341/- made by customers from contractual receipts. 33. We have perused the objections raised by the assessee before the ld DRP, and , we did not find any such objection raised by the assessee before the ld DRP. In view of this the above ground does not arise from the order of the ld Assessing Officer or ld DRP. Further, no evidences are also placed before us. Further, the ld AR submitted that these are the deduction made by the customers on invoices raised by the assessee and for this he stated that assessee has already submitted reconciliation of revenue with form No. 26AS. The ld AR further stated that this issue may kindly be remanded back to the Assessing Officer for confirming such amount of deduction from its gross receipt. 34. Ld DR relied on the orders of ld Assessing Officer and ld DRP and stated that there is no such objection before them. 35. We have carefully considered the matter. We have also perused the orders of lower authorities as well as the ground of objections raised before ld DRP.

24 We are of the view that as this issue has not been agitated before the lower authority and without making an application for submitting the additional ground of appeal same cannot be adjudicated. As the issue does not arise from the orders of lower authority and further no evidences have been placed before us on this issue , we dismiss ground No. 13 of the appeal. 36. Ground No. 14 is against the charging of interest u/s 234B of the Income Tax Act. 37. Ld AR submitted that there was no liability on the assessee for payment of advance tax u/s 234B of the Act. He submitted that income received by the assessee if held to be chargeable to tax in India the assessee was not required to pay any advance tax in view of tax deductible for it u/s 195 of the Act by the payer. He further relied on the decision of Hon’ble Delhi High Court in DIT Vs. GE Package Power Incorporation 373 ITR 65. 38. The ld DR relied on the order of the lower authorities and submitted that interest u/s 234B-C is consequential and is rightly charged. 39. We have carefully considered the rival contentions. The Hon’ble Delhi High Court in DIT Vs. GE Package Power Incorporation 373 ITR 65 (Delhi) has held as under:-

“7. The question that arises for consideration is whether interest should be levied on the assessee under Section 234B, on the ground of non-payment of advance tax. The case of the Revenue, in short, is that the position of law in Alcatel Lucent USA Inc (supra) is applicable, since the assessee, having denied tax liability during reassessment, caused the payer to erroneously refrain from deducting tax under Section 195; it must thus suffer an interest for non-payment of advance tax. The case of the assessees on the other hand is that the position of law in Jacabs Civil Incorporated/Mitsubishi Corporation (supra) must apply, and that the obligation was upon the payer to deduct tax at source before making remittances to them; the payer's failure to do so cannot invite an interest upon the payees. 8. Section 195(1) envisages deduction of tax at source by "any person responsible for paying" to a foreign company, "any other sum

25 chargeable" under the provisions of the Act, at the time of credit of such income to the account of the payee. The Court, in Jacabs Civil Incorporated/Mitsubishi Corporation (supra), interpreted this obligation of the payer to deduct tax as absolute, in these terms: "8. …The scheme of the Act in respect of non residents is clear. Section 195 of the Act puts an obligation on the payer, i.e. any person responsible for paying to a non-resident, to deduct income tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head "Salaries". Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non-resident. Section 201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and therefore can take action against the payer under the provisions of Section 201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non- resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of Section 191 of the Act along with Section 209 (1) (d) of the Act. For this reason, it would not be permissible for the Revenue to charge any interest under Section 234B of the Act." 9. To understand whether Section 234B may be had recourse to, for failure to pay advance tax, one must understand the scheme of advance tax payment. One obligation is imposed upon the payer of a sum to a foreign company, requiring a deduction of tax at source under Section 195. A second obligation is directly imposed upon the assessee, by requiring it to compute its advance tax liability as stipulated under Section 209. However, a foreign company assessee that receives remittances that are attributable as business profits to a PE in India, is permitted a tax credit while computing its advance tax liability under Section 209, since a tax is deductible at source under Section 195.Section 209(1)(d), prior to the Finance Act, 2012, read: "Section 209. Computation of advance tax

26 (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely:- d. the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the amount of income-tax, which would be deductible [or collectible] at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable:" 10. The position in law, therefore, was that the assessee was entitled to, in its computation of its advance tax liability, take a tax credit of that amount which was deductible or collectible, regardless of whether the amount was actually deducted or collected. As Jacabs Civil Incorporated/Mitsubishi Corporation (supra) noted, the reason for this was because, advance tax is to be computed either based on the previous year's assessment, or on an estimate of the income to be earned that year-which is to be made much before the final assessment. There is no possible way in which the provision could allow a tax credit of the amount deducted or collected, because the actual deduction takes place at a later point in time i.e. at the point at which the payment is actually made to the assessee. 11. This provision unsurprisingly opened the window for the assessee to take tax credit of an amount that was deductible, even if it was not actually deducted. There were several reasons why the amount actually deducted could be less than the amount deductible by the payer. Despite not suffering deduction, the position of law permitted the assessee to take credit of the amount deductible. Of course, such amount which was not actually deducted could later be brought to tax under Section 191. Nonetheless, in recognition of this anomalous situation, Parliament inserted a proviso in the Finance Act, 2012, - with prospective effect from 1.4.2012, to Section 209 (1) in the following terms:

27 "Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax." 12. This Court is of the opinion that the law prior to the 2012 amendment must be read to prevent such anomalies from arising. With this background, this Court has to examine the applicability of the position of law in Alcatel Lucent USA Inc (supra). The facts in Alcatel Lucent USA Inc (supra) were that the assessee was a non- resident company which supplied some equipment to Indian consumers, and received payment for it in the AY 2007-08. Based on the materials found in the survey at the premises of Alcatel Lucent India Ltd., the Indian subsidiary, the AO for Alcatel Lucent France concluded that the assessee had a PE in India. Reassessment proceedings were initiated against the assessee for AYs 2004-05 to 2007-08. The assessee maintained the position that it was not liable to tax in India, as it did not have a PE in India. Consequently, it filed NIL returns. However, the AO found that a percentage of its income was taxable in India, attributable to its PE, and levied interest under Section 234A, 234B and 234C. In the appeal to the CIT(A), the assessee claiming inter alia, first, that the computation of income, by attributing business profits to a PE, was incorrect, and second, that the interest levied under Section 234B was incorrect, since the whole consideration received by it was liable to tax deduction at source under Section 195, thus precluding any advance tax liability on its part. However, it did not press the first ground in the proceedings. The CIT(A) ultimately deleted the interest under Section 234B, on the ground that while the non-resident assessee was liable to tax, it could not be held to be liable to advance tax, as first, the obligation was absolute upon the payer to deduct tax at source, under Section 195, read with Section 201 (which permitted recovery from the payer, as assessee-in-default, of both the tax as well as interest, for not deducting tax) and second, whether or not any tax was actually deducted, the assessee was allowed a tax credit of that amount of tax that was deductible or collectible at source, by the pre-amended Section 209(1)(d), thus negating the assessee's liability to pay advance tax. The ITAT, on appeal by the Revenue, confirmed the view of the CIT(A).

28 13. The Division Bench of this Court however, held in favour of the Revenue, reasoning: "20. The other argument on behalf of the assessee that the liability of the payer under Section 201 is absolutely different from the liability of the non-resident assessee under Section 234B need not be examined and for the purpose of the present case it would not make any difference, on account of the peculiar facts of the present case. It may be recalled that the argument put forth by the revenue before the Income Tax Appellate Tribunal was that at the time of the receipt of monies from India, the assessee took the plea that it did not have any PE in India and, therefore, the payment was not chargeable to tax in India, with the consequence that Section 195(1) was not applicable, whereas in the appeals before the CIT (Appeals), a contradictory stand was adopted by the assessee, by accepting the fact that it had a PE in India and by admitting that the income earned in India was chargeable to tax. It was further argued by the revenue that such a contradictory plea cannot be permitted to be taken by the assessee. It was pointed out that consistent with the stand taken in the return, the assessee would have told the Indian payer that no tax should be deducted from the remittance and it was, therefore, not open to the assessee, merely because at the first appeal stage it chose not to contest the assessment of the income attributable to the Indian PE, to turn around and say that since it has now accepted its liability to pay tax on the Indian income, it was for the Indian payers to have deducted the tax and if they had not done so the assessee cannot be held liable for the interest. This argument of the revenue was rejected by the Tribunal on the ground that there was no material in support of the plea that the assessee represented to the Indian payers not to deduct tax, nor did any such facts or circumstances emerged from the impugned orders. 21. We are unable to uphold this part of the decision of the Tribunal. It must be remembered that in the note appended to the return the assessee was quite categorical in denying its liability to be assessed in India. It relied on the double taxation avoidance agreement between India and USA and pointed out that there was no permanent establishment in India. It further stated that the telecom equipments were sold outside India and the payments were also received outside India and thus the assessee did not have any taxable presence in India so as to be liable for tax on its Indian income. If this was the stand of the assessee, it is not impermissible or unreasonable to visualise a situation where, the assessee would have represented to its Indian telecom dealers not to deduct tax from the remittances made to it. On the contrary it would be surprising if the assessee did Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

29 not make any such representation; such a representation would only be consistent with the assessee's stand regarding its tax liability in India. Moreover, no purpose would have been served by the assessee taking such a categorical stand regarding its tax liability in India and at the same time suffering tax deduction under Section 195(1). Therefore, in our opinion, even though there may not be any positive or direct evidence to show that the assessee did make a representation to its Indian telecom dealers not to deduct tax from the remittances, such a representation or informal communication of the request can be reasonably inferred or presumed. The Tribunal ought to have accorded due weightage to the strong possibility or probability of such a request having been made by the assessee to the Indian payers since otherwise the denial of its tax liability on its Indian income would have served little purpose for the assessee. … 23. The Tribunal, keeping in mind the above observations, underlined by us, ought to have drawn the inference that the Indian payers did not deduct the tax under Section 195(1) because of the request made by the assessee, consistent with its stand that it was not liable to be taxed in India." [Emphasis added] 14. The Court went on to state in para 25: "25. …It is open to the assessee to deny its liability to tax in India on whatever grounds it thinks fit and proper. Having denied its tax liability, it seems unfair on the part of the assessee to expect the Indian payers to deduct tax from the remittances. It is also open to the assessee to change its stand at the first appellate stage and submit to the assessment of the income. When it does so, all consequences under the Act follow, including its liability to pay interest under Section 234B since it would not have paid any advance tax. Such liabilities would arise right from the time when the income was earned. Advance tax was introduced as a PAYE Scheme - "pay as you earn". It is not open to the assessee, after accepting the assessment at the first appellate stage to claim that the Indian payers ought to have deducted the tax irrespective of the fact that the assessee itself claimed the Indian income to be not taxable. We can understand an assessee who admits its tax liability right from the beginning to contend that it was the responsibility of the payers to deduct the tax and if they did not, even then the tax which ought to have been deducted by them should be set off against the assessee's advance tax liabilities." [Emphasis added]

30 15. Apparently, it is this part of the decision that the Revenue seeks to rely upon, in arguing that the view inAlcatel Lucent USA Inc (supra) did not turn on the volte face by the assessee as to its PE status, but instead on the fact that, at the time of assessment, the assessee denied its tax liability altogether. This Court, upon consideration, is of the view that the fact that was central to the decision of this Court in Alcatel Lucent USA Inc (supra) is the assessee's initial denial of PE status, and consequently of its tax liability, that was aggravated by its subsequentvolte face by way of its admission that it was a PE liable to tax in India. This resulted in the Court's view that the assessee had played a role in influencing the payer's non-deduction of tax at source, and was thus required to compensate for such a volte face, by paying interest under Section 234B. 16. This Court respectfully cannot apply the view taken in Alcatel Lucent USA Inc (supra) to this case. This is because if the payer deducts tax at source only when the assessee admits tax liability, then deductions would not be made in cases where the assessee either falsely or under a bona fide mistake denies tax liability. Tax obligations cannot be founded on assertions of interested parties. In such cases, the payer's obligation to deduct tax would depend on the payee's opinion of whether it is liable to tax, which may differ from its actual liability to tax as determined by the A.O's final order. This effectively authorizes the assessee and the payer to contract out of the statutory obligation to deduct tax at source, which in this case, is located in Section 195(1). Surely this could not be the Parliamentary intent. If such were the case, there would have been no need to treat the payer as an assessee-in-default for failure to deduct tax at source, under Section 201.This Court is thus in agreement with the position of law in Jacabs Civil Incorporated/Mitsubishi Corporation (supra), that the obligation of the payer to deduct tax is absolute 17. The implication of an absolute obligation upon the payer to deduct tax at source under Section 195(1) is that it becomes the responsibility of the payer to determine the amount it ought to deduct from the remittance to be paid to the assessee, towards tax. This determination would depend directly on the income of the assessee that is taxable in India on account of being attributable to its PE in India. That this determination is the responsibility of the payer is provided for, in the statute, in Section 195(2), which reads: '(2) Where the person responsible for paying any such sum chargeable under this Act other than salary to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to

31 determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.' Thus, the assessee's liability to tax does not depend on its own view of its PE status, or its admission or denial of tax liability. If an assessee files NIL returns at the stage of assessment, and maintains that it is not liable to tax in India, the payer is obliged to apply to the AO to determine what portion, if any, of its remittance to the assessee, is liable to be deducted at source towards tax. 18. The view of this Court finds confirmation in the position of law as it stands at present, after the Finance Act, 2012; should a situation akin to that in Alcatel Lucent USA Inc (supra) arise, the payer would be treated as the assessee-in-default according to Section 201, and the payee/assessee would not be permitted a tax credit under the proviso in Section 209(1)(d). Clearly, the anomaly of an assessee denying tax liability (whether under a bona fide mistake or by deceit), thereby not suffering a tax deduction at source, and still being permitted a tax credit for the tax deductible, is remedied after the Finance Act, 2012. 19. Alcatel Lucent USA Inc (supra), in any event, can be distinguished on the ground that the Court was persuaded to confirm the levy of interest under Section 234B, only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability. This is evident from the following words of the Court: "26. It further seems to us inequitable that the assessee, who accepted the tax liability after initially denying it, should be permitted to shift the responsibility to the Indian payers for not deducting the tax at source from the remittances, after leading them to believe that no tax was deductible. The assessee must take responsibility for its volte face. Once liability to tax is accepted, all consequences follow; they cannot be avoided. After having accepted the liability to tax at the first appellate stage, it is unfair on the part of the assessee to invoke section 201 and point fingers at the Indian payers. The argument advanced by the learned counsel for the assessee that the Indian payers failed to deduct tax at their own risk seems to us to be only an argument of convenience or despair. As we have pointed out earlier, it is difficult to imagine that the Indian telecom equipment dealers of the assessee would have failed to deduct tax at source except on being prompted by the assessee. It may be true that the general rule is that equity has no place in the interpretation of tax laws. But we are of the view that when the facts of a particular case Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

32 justify it, it is open to the court to invoke the principles of equity even in the interpretation of tax laws. Tax laws and equity need not be sworn enemies at all times. The rule of strict interpretation may be relaxed where mischief can result because of the inconsistent or contradictory stands taken by the assessee or even the revenue. Moreover, interest is, inter alia, compensation for the use of the money. The assessee has had the use of the money, which would otherwise have been paid as advance tax, until it accepted the assessments at the first appellate stage. Where the revenue has been deprived of the use of the monies and thereby put to loss for no fault on its part and where the loss arose as a result of vacillating stands taken by the assessee, it is not expected of the assessee to shift the responsibility to the Indian payers. We are not to be understood as passing a value-judgment on the assessee's conduct. We are only saying that the assessee should take responsibility for its actions." [Emphasis added] This Court finds that no need is made out in these facts to balance any equities in these facts, as the assessee has not vacillated in its stand as to the existence of a PE in India or otherwise. In any event, as observed earlier, the position of law itself requires that the tax be deducted at source, whatever may be the assessee's stance, failing which the payer is treated as an assessee-in-default under Section 201, and the payee is required to discharge its liability to pay the tax that was not deducted under Section 191. 20. This court also notices that the Madras High Court decision in Madras Fertilizers Ltd. (supra) and that of the Uttarakhand High Court in Sedco Forex International Drilling Co. Ltd. (supra) was considered and affirmed by the Bombay High Court in NGC Network Asia LLC (supra) that "We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee." An important decision is that of the Karnataka High Court in CIT v. Samsung Electronics Co. Ltd. [2012] 345 ITR 494/[2011] 203 Taxman 477/16 taxmann.com 141, which also considered the same issue, i.e. the obligation under Section 195 (1). The High Court in the first instance had rejected the Revenue's appeal; the Supreme Court remitted the matter - for determination as to whether income by way of royalty had been made out in the facts of the case. The High Court decision first set out the order of the Supreme Court inter alia, as to the nature of obligation cast upon the payer under Section 195:

33 'While remanding the matter, Hon'ble Supreme Court has made certain observations while analysing the provisions of Section 195 of the Act as follows: "7. Under Section 195(1), the tax has to be deducted at source from interest (other than interest on securities) or any other sum (not being salaries) chargeable under the I.T. Act in the case of non-residents only and not in the case of residents. Failure to deduct the tax under this Section may disentitle the payer to any allowance apart from prosecution under Section 276B. Thus, Section 195 imposes a statutory obligation on any person responsible for paying to a non- resident, any interest (not being interest on securities) or any other sum (not being dividend) chargeable under the provisions of the I.T. Act, to deduct income tax at the rates in force unless he is liable to pay income tax thereon as an agent. Payment to non-residents by way of royalty and payment for technical services rendered in India are common examples of sums chargeable under the provisions of the I.T. Act to which the aforestated requirement of tax deduction at source applies. The tax so collected and deducted is required to be paid to the credit of Central Government in terms of Section 200 of the I.T. Act read with Rule 30 of the I.T. Rules, 1962. Failure to deduct tax or failure to pay tax would also render a person liable to penalty under Section 201 read with Section 221 of the I.T. Act. In addition, he would also be liable under Section 201(1A) to pay simple interest at 12 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. The most important expression in Section 195(1) consists of the words "Chargeable under the provisions of the Act". A person paying interest or any other sum to a non-resident is not liable to deduct tax if such is not chargeable to tax under the I.T. Act. For instance, where there is no obligation on the part of the payer and no right to receive the sum by the recipient and that the payment does not arise out of any contract or obligation between the payer and the recipient but is made voluntarily, such payments cannot be regarded as income under the I.T. Act. It may be noted that Section 195 contemplate not merely amounts, the whole of which are pure income payments, it also covers composite payments which has an element of income embedded or incorporated in them. Thus, where an amount is payable to a non-resident, the payer is under an obligation to deduct TAS in respect of such composite payments. The obligation to deduct TAS is, however, limited to the appropriate proportion of income chargeable under the Act forming part of the gross sum of money payable to the non-resident. This obligation being limited to the appropriate proportion of income flows from the words used in Section

34 195(1), namely, "chargeable under the provisions of the Act". It is for this reason that vide Circular No. 728 dated October 30, 1995 the CBDT has clarified that the tax deductor can take into consideration the effect of while deducting TAS. It may also be noted that Section 195(1) is in identical terms with Section 18(3B) of the 1922 Act, In CIT v. Cooper Engineering [1968] 68 ITR 457 (Bom.) it was pointed out that if the payment made by the resident to the non-resident was an amount which was not chargeable to tax in India, then no tax is deductible at source even though the assessee had not made an application under Section 18(3B) (now Section 195(2) of the I. T. Act). The application of Section 195(2) pre-supposes that the person responsible for making the payment to the non-resident is in no doubt that tax is payable in respect of some part of the amount to be remitted to a non-resident but is not sure as to what should be the portion so taxable or is not sure as to the amount of tax to be deducted. In such a situation, he is required to make an application to the ITO (TDS) for determining the amount. It is only when these conditions are satisfied and an application is made to the ITO (TDS) that the question of making an order under Section 195(2) will arise. In fact, at one point of time, there was a provision in the I. T. Act to obtain a NOC from the Department that no tax was due. That certificate was required to be given to RBI for making remittance. It was held in the case of Czechoslovak Ocean Shipping International Joint Stock Company v. ITO [1971] 81 ITR 162 (Calcutta) that an application for NOC cannot be said to be an application under Section 195(2) of the Act. Which deciding the scope of Section 195(2) it is important to note that the tax which is required to be deducted at source is deductible only out of the chargeable sum. This is the underlying principle of Section195. Hence, apart from Section 9(1), Sections 4, 5, 9, 90, 91 as well as the provisions of DTAA are also relevant, while applying tax deduction at source provisions. Reference to ITO (TDS) under Section 195(2) or 195(3) either by the non-resident or by the resident payer is to avoid any future hassles for both resident as well as non-resident. In our view, Sections 195(2) and 195(3) are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation (supra) in which this safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as to whether the tax was deductible at source and, if so, what should be the amount thereof.'

35 The Supreme Court after considering the submissions of learned counsel appearing for the parties regarding the validity of the order passed by this Court dated 24-9-2009 has observed as follows: '9. One more aspect needs to be highlighted. Section 195 falls in Chapter XVII which deals with collection and recovery. Chapter XVII-B deals with deduction at source by the payer. On analysis of various provisions of Chapter XVII one finds use of different expressions however, the expression "sum chargeable under the provisions of the Act" is used only in Section 195. For example, Section 194C casts an obligation to deduct TAS in respect of "any sum paid to any resident". Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of "any amount" referred to in the specified provisions. In none of the provisions we find the expression "sum chargeable under the provisions of the Act", which as stated above, is an expression used only in Section 195(1). Therefore, this Court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct TAS arises only when there is a sum chargeable under the Act. Section 195(2) is not merely a provision to provide information to the ITO(TDS). It is a provision requiring tax to be deducted as source to be paid to the Revenue by the payer who makes payment to a non-resident. Therefore, Section 195 has to be read in conformity with the charging provisions, ie., Sections 4, 5 and 9. This reasoning flows from the words "sum chargeable under the provisions of the Act" in Section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe Section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all We cannot read Section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression "sum chargeable under the provisions of the Act" from Section 195(1). While interpreting a Section one has to give weightage to every word used in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging Sections of that Act de hors the machinery Sections. The Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of C.I.T v. Eli Lilly & Co. (India) (P.) Ltd. [2009] 312 ITR 225 (SC) the previsions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the I.T Act form one single integral, inseparable

36 Code and, therefore, the provisions relating to TDS applies only to those sums which are "chargeable to tax" under the I.T. Act. It is true that the judgment in Eli Lilly (supra) was confined to Section 192 of the I.T. Act. However, there is some similarity between the two. If one looks at Section 192 one finds that it imposes statutory obligation on the payer to deduct TAS when he pays any income "chargeable under the head salaries". Similarly, Section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any sum 'chargeable under the provisions of the Act', which expression, as stated above, do not find place in other Sections of Chapter XVII. It is in this sense that we hold that the I.T. Act constitutes one single integral inseparable Code. Hence, the provisions relating to TDS applies only to those sums which are Department that any person making payment to a non-resident is necessarily required to deduct TAS then the consequence would be that the Department that any person making payment to a non-resident is necessarily required to deduct TAS then the consequence would be that the Department would be entitled to appropriate the moneys deposited by the payer even if the sum paid is not chargeable to tax because there is no provision in the I.T. Act by which a payer can obtain refund. Section 237 read with Section 199 implies that only the recipient of the sum. i.e., the payee could seek a refund. It must therefore follow, if the Department is right that the law requires tax to be deducted on all payments. The payer, therefore, has to deduct and pay tax, even if the so-called deduction comes out of his own pocket and he has no remedy whatsoever, even where the sum paid by him is not a sum changeable under the Act. The interpretation of the Department, therefore, not only requires the words "chargeable under the provisions of the Act" to be omitted, it also leads to an absurd consequence. The interpretation placed by the Department would result in a situation where even when the income has no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect tax. In our view, Section 195(2) provides a remedy by which a person may seek a determination of the "appropriate proportion of such so chargeable" where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department's contention is based on administrative convenience in support of its interpretation. According to the Department huge seepage of revenue can take place if persons making payments to non-residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that Section 195(2), as interpreted by the High Court, would plug the loophole as the said interpretation requires the payer to make a declaration before the ITO(TDS) of payments made to non-residents. In other words, according to the Department Section 195(2) is a provision

37 by which payer is required to inform the Department of the remittances he makes to the non-residents by which the Department is able to keep track of the remittances being made to non-residents outside India. Section 195(1)uses the expression "sum chargeable under the provisions of the Act". We need to give weightage to those words. Further, Section 195 uses the word 'prayer' and not the word "assessee". The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfil the statutory obligation under Section 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default. The above mentioned contention of the Department is based on an apprehension which is ill founded. The payer is also an assessee under the ordinary provisions of the I.T. Act. When the payer remits an amount to a non-resident out of India he claims deduction or allowances under the Income Tax Act for the said sum as an "expenditure". Under Section 40(a)(i), inserted vide Finance Act, 1988 w.e.f. 1.4.89, payment in respect of royalty, fees technical services or other sums chargeable under the Income Tax Act would not get the benefit of deduction if the assessee fails to deduct TAS in respect of payments outside India which are chargeable under the IT. Act. This provision ensures effective compliance of Section195 of the I.T. Act relating to tax deduction at source in respect of payments outside India in respect of royalties, fees or other sums chargeable under the I.T. Act. In a given case where the payer is an assessee he will definitely claim deduction under the I.T. Act for such remittance and on inquiry if the AO finds that the sums remitted outside India comes within the definition of royalty or fees for technical service or other sums chargeable under the I.T. Act then it would be open to the AO to disallow such claim for deduction. Similarly, vide Finance Act, 2008, w.e.f. 1.4.2008 sub-section (6) has been inserted in Section 195 which requires the payer to furnish information relating to payment of any sum in such form and manner as may be prescribed by the Board. This provision is brought into force only from 1.4.2008. It will not apply for the period with which we are concerned in these cases before us. Therefore, in our view, there are adequate safeguards in the Act which would prevent revenue leakage.' The Karnataka High Court first addressed this question and stated that: "17. It is clear from the scrutiny of the material on record and the contentions of the parties viz., revenue and the respective respondent in these cases that the fact that payments have been made by the respondent herein to non-resident for having imported shrink wrapped Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

38 software/off-the-shelf software is not disputed. There is also no dispute that no tax was deducted at source by the respondent under Section 195(1) of the Act in respect of such payments on the ground that the same were made for the purpose of purchase of shrink wrapped software/off-the-shelf software. It is contended by the respondent that since there is no permanent establishment of the non- resident in India, the said payments have to be treated as income from business and is not taxable under the Income Tax Act in India and consequently, there is no obligation on the part of the respondent to deduct the advance tax under Section 195 of the Act and also consequential proceedings would not be attracted. Therefore, the dispute between the revenue and the respondent in these cases is whether payments made by the respondent to the non-resident would constitute 'royalty' or 'Income from Business' and if it is to be treated as 'Income from Business', whether the non-resident is required to have a permanent establishment in India. Further, in the absence of any permanent establishment of the non resident in India, is there no obligation on the part of the payee, the respondent herein to deduct tax at source under Section 195 of the Act. Therefore, the fact that the payments made by the payee, the respondent herein to the non- resident would constitute income of the non-resident is indisputable. However, the dispute is as to whether such income in the hands of the non-resident is to be treated as sale and income from business covered under Article 7 of the DTAA with respective countries or whether the payments would amount to royalty in the hands of the non-resident, for which no permanent establishment is required for making payment in India. There is also no dispute that if the payments made by the respondent are held to be royalty and not 'Income from Business', there is an obligation on the part of the payee, the respondent herein to deduct the tax at source and in default, the respondent herein would be considered as a default assessee. Once there is an obligation to deduct tax at source under Section 195 of the Act, which imposes a statutory right on any person responsible for paying to a non-resident, any interest (not being interest on securities) or any other sum (not being dividend) chargeable under the provisions of the Act, to deduct income-tax at the rates in force unless he is liable to pay income-tax thereon as an agent. Payment to non-residents by way of royalty and payment for technical services rendered in India are common examples of sums chargeable under the provisions of the Act to which the aforestated requirement of TDS applies. The tax so collected and deducted is required to be paid to the credit of Central Government in terms of Section 200 of the Act read with rule 30 of the Income Tax Rules, 1962. Failure to deduct tax or failure to pay tax would also render a person liable to penalty under Section 201 read

39 with Section 221 of the Act. In addition, he would also be liable under Section 201(1A) to pay simple interest at 12 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Therefore, if the amount is held to be royalty, the other consequences as referred to above would follow." After holding that the transaction in that case amounted to royalty and, therefore, taxable, the Court ruled that the obligation to deduct tax was with the payer: "In any view of the matter, in view of the provisions of Section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the non-resident Companies would amount to 'royalty' within the meaning of Article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 of the Act and consequences would follow as held by the Hon'ble Supreme Court while remanding these appeals to this Court." 21. A Court's task is to unravel the legislative intent, if it is not discernable. Where, however, the provisions are clear, the Court's duty is to administer the law in its terms. It is bound to adhere to its precedents; yet its devotion to a previous holding cannot blind it to the clear terms of the statute, wherever found. If Alcatel Lucent USA Inc(supra) is correct and is to be applied in all situations, there would be dissimilar and asymmetrical results entirely dependent on the facts presented in each case. It is unclear what would be the outcome where the payee is, in fact, under the bona fide belief that it does not have a PE, or how the payer is to discern that a payee's assertion is intended to defeat the law. This Court therefore, notes that this precise question was addressed in Samsung Electronics Co. Ltd. (supra) by the Supreme Court, while remitting the matter for reconsideration by the High Court. The Court perceptively held that: "Hence, apart from Section 9(1), Sections 4, 5, 9, 90, 91 as well as the provisions of DTAA are also relevant, while applying tax deduction at source provisions. Reference to ITO (TDS) under Section 195(2) or 195(3) either by the non-resident or by the resident payer is to avoid any future hassles for both resident as well as non resident. In our view, Sections 195(2) and 195(3) are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation(supra) in which Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

40 this safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as to whether the tax was deductible at source and, if so, what should be the amount thereof." 22. This Court, therefore, holds that Jacabs Civil Incorporated/Mitsubishi Corporation (supra) applies in such situations; Alcatel Lucent USA Inc (supra) can be explained as a decision turning upon its facts; its seemingly wide observations, limited to the circumstances of the case. This Court, therefore, holds that the view taken by ITAT was correct; the primary liability of deducting tax (for the period concerned, since the law has undergone a change after the Finance Act, 2012) is that of the payer. The payer will be an assessee in default, on failure to discharge the obligation to deduct tax, under Section 201 of the Act. 23. For the above reasons, this Court finds that no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether the assessees were liable to tax under Section 195(1), and to what extent, by taking recourse to the mechanism provided in Section 195(2) of the Act. The failure of the payers to do so does not leave the Revenue without remedy; the payer may be regarded an assessee-in-default under Section 201, and the consequences delineated in that provision will visit the payer. The appeal of the Revenue is accordingly dismissed without any order as to costs.”

40.

Therefore accordingly any income of a non-resident on which tax is deductible u/s 195 of the Income Tax Act then non resident assessee is not required to pay advance tax u/s 209(1)(d) of the Income Tax Act and consequently he is not liable to pay interest u/s 234B-C of the Act. In view of the decision of Hon’ble High Court we hold that assessee is not subject to pay interest u/s 234B and 234C of the Act. Ground No. 14 of the appeal is allowed. 41. In the result appeal of the assessee is partly allowed. ITA No.1332/De/2012 (Assessment Year: 2005-06)

41 42. This appeal is preferred by revenue against the order of the ld CIT(A) dated 10.01.2012. The following grounds of appeal were raised:- I. Whether on the facts and circumstances of the case, the C1T(A) has erred in holding that the nature of services provided by the assessee for installation of software and imparting training to various entities as mentioned in the assessment order were not in the nature of fees for technical services as defined in sec 9(l)(vii) of the Act. II. Whether on the facts and circumstances of the case, the CIT(A)4fas erred in holding that the income of the assessee was not taxable under the provisions of sec 44DA r.v.s. 1 15A even though the nature of services rendered by the assessee were technical in nature. III. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the income of the assessee was taxable under the presumptive provisions of sec 44BB and ignoring the fact that taxability u/s 44BB shall not apply in respect of income referred to in section 44DA in view of the clarificatory proviso to sec. 44BB and sec 44DA. IV. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the revenues earned by the assessee on account of installation of software and training to the entities as mentioned in the assessment order were covered under the provision of section 44BB of the Act by wrongly relying upon the CBDT's instruction No. 1862 and ignoring that the second limb of the exception i.e. project "undertaken by the recipient" was not considered in the said instruction and the services which were in the nature of services falling under the provisions of section 44D/44DA read with section 1 15A could not be covered under the provisions of section 44BB of the Act. V. Whether on the facts and circumstances of the case, the CIT(A) has erred in not appreciating the fact that proviso to section 44DA brought by the Finance Act 2011 was only clarificatory in nature and its application has to be read in to the main provisions with effect from the time the main provision came in to effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex. International Drilling v/s Commissioner of Income-tax

43.

The ground Nos. 1 to 4 are against the installation of seismic software and imparting training thereof for exploration of mineral oil whether comes within the ambit of provision of section 44BB of the Act. The ld Assessing Officer has held that these services are falling under the definition of fees for technical services. The ld CIT(A) on appeal has held that same are falling under the purview section 44BB of the Act.

42 44. Before us the ld DR relied on the orders of lower authorities where as ld AR stated that these services are falling u/s 44BB of the Act relying on the decision of Hon’ble Supreme Court in case of ONGC Vs. CIT (supra). 45. We have carefully considered the rival contention and we are of the view that Hon’ble Supreme Court in case of ONGC Vs. CIT ( supra) has held that when the pith and substances of the each of the contracts is inextricably connected with prospecting extraction or production of mineral oil and dominant purpose is for that object the receipts will u/s 44BB of the Act. Therefore, in view of the above decision of the Hon’ble Supreme Court we confirm the finding of ld CIT(A) in holding that the gross receipt from installation and training of seismic software is chargeable to tax u/s 44BB of the Act. In view of this ground No. 1 to 4 of the appeal are dismissed. 46. Ground No.5 of the appeal is against the decision of the ld CIT(A) holding that whether the amendment made by the Finance Act 2010 including the provisions of section 44BA in the first proviso is prospective or retrospective in nature. 47. We have carefully considered the above issue and in view of the decision of Hon’ble High Court of Uttrakhand in B.J. Services Company Middle East Ltd. v. Deputy Director of Income-tax (International Taxation), Dehradun* 339 ITR 169 wherein it has been held that the amendment to the proviso to section 44BB is prospective in nature as under:- “Section 44DA was amended w.e.f. 1-4-2011 by Finance Act, 2010, and a proviso was added indicating that the provisions of section 44BB shall not apply in respect of income referred to in this section. After the insertion of section 44DA in the Act, the combined effect of the provisions of sections 44BB, 44DA, 115A and Explanation 2 of section 9(1)(vii) of the Act as per the stand of the revenue is that if the income of a non-resident is in the nature of a fee for technical services, it would be taxable under the provisions of either section 44DA or section 115A read with Explanation 2 to section 9(1)(vii) irrespective of the business to which it relates and that section 44BB would apply only in a case where consideration was for services and other facilities relating to exploration activity which are not in the nature of technical services.

43 Inspite of the insertion of section 44DA in the Act, a grey area remained regarding the scope of section 44BB and section 44DA, namely, whether the fee for technical services relating to the exploration sector would be covered under section 44BB of the Act. In order to remove the grey area, section 44DA and 44BB was amended w.e.f. 1-4-2011 so as to exclude the applicability of section 44BB to the income which is covered under section 44DA. The aforesaid was provided in the Explanatory Note to the Finance Bill, 2010, which was ultimately amended in the relevant section 44BB and 44DA w.e.f. 1-4- 2011. In the light of the aforesaid, the contention of the revenue is, that the services contemplated under section 44BB are services other than those coming within the purview of Explanation 2 to section 9(1)(vii) of the Act. The services extended by the petitioner falls under Explanation 2. Consequently, the income by way of fees for technical services chargeable under section 9(1)(vii) has to be computed under section 44DA of the Act. To recapitulate, the reasons given for initiating proceeding under section 148 of the Act is : (a)that the services rendered are technical in nature and is liable to be taxed as a fee for technical services in view of the decision of the Uttarakhand High Court in the Case of CIT v. O.N.G.C. (Foramer France) [2008] 299 ITR 438 , and (b)Explanatory Note to the Finance Bill indicating that the combined effect of the provision of sections 44BB, 44DA and 115A is that the income of a non-resident is in the nature of fee for technical services, and that it is taxable under the provision of section 44DA or section 115A irrespective of the business to which it relates. In view of the decision of this Court in 259 ITR 33 and that of the Gujarat High Court in 312 ITR 70, this Court is of the view that subsequent pronouncement by a Court or a Superior Court does not entitle the Assessing Officer to reopen the assessment proceedings on the ground that the Assessing Officer has reasons to believe that income has escaped assessment or that the assessee has not fully and truly disclosed all the material facts. The claim of the assessee could not be termed to be either lacking in material particulars nor could it be termed to be untrue. The assessee has disclosed all material facts and no false facts have been stated. The reasons recorded shows that the Assessing Officer has reasons to believe that income has escaped assessment on the basis of a subsequent decision rendered by this Court. In the opinion of the Court, this reasoning amounts to a change of opinion by the Assessing Officer. Further, there is no failure on the part of the assessee in disclosing fully and truly all material facts. In so far as the second reason is concerned, the Court finds that the primary facts had been disclosed by the petitioner, namely, the agreement/contracts were placed before the Assessing Officer. The Court further finds that the Assessing Officer had discussed the contracts in the assessment order passed under section 143(3) of the Act. The Court finds that the Assessing Officer had applied its mind, made necessary enquiry and upon verification of facts rejected the stand of the revenue and concluded that the income was liable to be charged under section 44BB of the Act and not under section 44D read with Explanation 2 of section 9(1)(vii) of the Act. The Assessing Officer was of the Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

44 opinion that the services provided by the petitioner falls under section 44BB of the Act. The Full Bench of the Delhi High Court in the case of Kelvinator (supra) has held that where as assessment order has been passed under section 143 (3) of the Act, a presumption can be drawn that such an order had been passed on due application of mind. The Supreme Court in Calcutta Discount’s case (supra) has held that primary facts has to be disclosed by the assessee and thereafter, it is for the Assessing Officer to draw inferences from the facts and apply the law and determine the liability. Once the Assessing Officer has framed an assessment on the facts and documents placed before it, the Assessing Officer, could not, at another point of time, by forming another opinion on the primary facts, arrive at a conclusion that he had committed an error in computing the taxable income of the assessee and reopen the assessment proceedings. This view of the Court is fortified by a decision of the Delhi High Court in Jindal Photo Films Ltd. v. Dy. CIT [1998] 234 ITR 170 /[1999] 105 Taxman 386 . As stated earlier, the combined effect of the provisions of sections 44BB, 44DA and 115A of the Act will not have a bearing to the cases in hand inasmuch as the Explanatory Note to the Finance Bill, 2010 clearly indicates that the amendments proposed in section 44BB and 44DA of the Act would take effect from 1st April, 2011 and would apply in relation to the assessment year 2011-12 and subsequent years. The amendment is prospective in nature and would not apply to the cases in hand which is of the earlier assessment years. Under the existing provisions contained in section 44BB, 44D, section 115A andExplanation II of section 9(1)(vii) of the Act, it was open to the Assessing Officer to tax the petitioner either under section 44BB or 44D or under section 9(1)(vii ) of the Act on the basis of the material produced before him. The primary facts were placed by the assessee before the Assessing Officer, who after due enquiry and verification, applied its mind to the facts of each case and came to the conclusion that the assessee was liable to be taxed under section 44BB of the Act. The Explanatory Note to the Finance Bill has removed the doubts, which had been raised regarding the scope of section 44BBvis-à-vis section 44DA has only been made prospectively and cannot be used or applied for reopening the case under sections 147 and 148 of the Act. In any case, the explanatory note does not mean that there was failure on the part of the assessee as envisaged by the provisions of section 147 or in any manner the assessee suppressed the material facts or failed to disclose fully and truly all material facts necessary for the assessment.” [ Underline supplied by us]

48.

In view of the above decision of Honourable high court where the amendment is held to be prospective in nature ground NO. 5 of the appeal of the revenue is dismissed. 49. In the result ITA NO. 1332/Del/2012 for AY 2005-06 is dismissed.

ITA NO.242/Del/2012 (AY 2008-09) 50. This appeal is filed by the assessee against the order of the ld Assessing Officer dated 11.11.2011. The assessee filed its return of income on 06.10.2008 declaring income of Rs. 159732393/-. The draft assessment order was framed and assessee filed objection before ld DRP who issue direction vide their order dated 29.09.2011. 51. The assessee has raised the following grounds of appeal in ITA No.242/Del/2012 as under:- “Addition qua breakup of revenue against consolidated contract into equipment rental and services 1. That the assessing officer erred on facts and in law in holding that the provision of equipment and personnel under consolidated contracts were independent of each other; 2. That the assessing officer erred on facts and in law in holding that the contractual revenues were to be bifurcated into 'equipment rental' and 'service charges'; 3. That the assessing officer erred on facts and in law in not accepting that the contracts executed by the assessee were in the nature of 'mining or like projects' as referred to in the Explanation to section 9(l)(vii) of the IT. Act, 1961. Addition qua services in connection with exploration/prospecting/extraction of mineral oil 4. That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs.855,500,474/- as against the income of Rs. 159,732,3937- returned by the appellant. 5. That the assessing officer erred on facts and in law in assessing revenue of Rs.478,654,860/- arising from services rendered by the appellant in connection with exploration/prospecting/extraction of mineral oil under section 9(l)(vii) of the Act as opposed to section 44BB of the Act. 6. That the assessing officer erred on facts and in law in adding a sum of Rs.47,518,164/- to the gross receipts of the appellant to be taxed as fees for technical services under section 9(l)(vii) without appreciating that the said amount represented service tax collected for and behalf of the Government of India.

46 7. That the assessing officer erred on facts and in law in adding a sum of Rs.24,514,0657- to the gross receipts of the appellant to be taxed as fees for technical services under section 9(l)(vii) without appreciating that the said amount represented reimbursement of custom duty collected for and behalf of the Government of India. 8. That the assessing officer erred on facts and in law in adding a sum of Rs.14,022,993/- to the gross receipts of the appellant to be taxed as fees for technical services under section 9(l)(vii) without appreciating that the said amount represented reimbursement of actual expenses incurred by the appellant. Addition qua hiring of equipment used in connection with exploration/prospecting/extraction of mineral oil 9. That the assessing officer erred on facts and in law in assessing revenue of Rs. 196,093,2187- arising from letting out equipment, used in connection with the exploration/prospecting/extraction of mineral oil under section 9(l)(vi) of the Act as opposed to section 44BB of the Act. Addition qua income from alleged supply of software 10. That the assessing officer erred on facts and in law holding that revenue of Rs.5,867,7107- arising from supply of software to be taxed as royalty under section 9(l)(vi)oftheAct. Addition qua deductions made by customers not reduced from gross revenue 11. That the assessing officer erred on facts and in law holding that deductions of Rs. 1,473,415 made by customers from contractual receipts were not to be reduced from the gross revenue while computing the income chargeable to tax. Levy of Interest 12. That the assessing officer erred on facts and in law in levying interest under section 234B and 234C of the Act especially when there was no liability of the assessee to pay advance tax under section 209(1)(d) of the Income Tax Act, 1961.” 52. Grounds Nos. 1 to 5 of the appeal are against taxing revenue of the assessee as fees for technical services instead of provisions of section 44BB of the Income Tax Act. 53. We have already decided ground No. 1 to 5 of the appeal in assessee’s own case for AY 2007-08 where this ground of appeal has been allowed relying on the decision of Hon’ble Supreme Court in case of ONGC Vs. CIT 376 ITR 306. The facts and circumstances agreed by both the parties are similar and

47 therefore in this appeal we allow the ground Nos. 1 to 5 of the assessee holding that the income received by the assessee shall not be chargeable to tax as royalty but will be subject to taxation under provisions of section 44BB of the Income Tax Act. In the result ground Nos. 1 to 5 of the appeal are allowed. 54. Ground No. 6 of the appeal is against inclusion of service tax in receipt for taxation u/s 44BB of the Act. 55. We have already decided ground No. 6 of the appeal of the assessee for AY 2007-08 wherein relying on the decision of the Hon’ble Delhi High court in Mitchell Drilling Internnational PTY Ltd. we have held that service tax is a statutory levy should not form part of gross receipt for computing income u/s 44BB of the Act. Therefore, as the facts and circumstances of the case agreed by both the parties to be similar we allow ground No. 6 of the appeal of the assessee. 56. Ground No. 7 of the appeal of the assessee is against the exclusion of custom duty from the gross receipt. 57. Ld Assessing Officer has considered the same as fees for technical services and ld DRP has confirmed the action of the ld Assessing Officer. Ld AR of the appellant submitted that this issue is covered by the decision of Hon’ble Uttrakhand High Court in 317 ITR 156 wherein it is held that custom duty being statutory levy shall not be included in gross receipt for the purpose of section 44BB of the Act. Ld DR relied on the orders of the ld Assessing Officer. 58. We have carefully considered the rival contentions. Hon’ble Uttrakhand High Court has dealt with the similar issue in DDIT V Schlumberger Asia Services Ltd. 317 ITR 156 wherein it has been held as under:- “4. Brief facts giving rise to this appeal are that respondent/assessee M/s. Schlumberger Asia Services Ltd. (for short SASL), is a company incorporated under the laws of Hongkong, which filed its return of income on 31-10-2002, declaring income of Rs. 19,60,06,200. The Assessing Officer (for short Assessing Officer) noticed that SASL has not offered for tax on certain amounts, received by it towards the reimbursement of expenses, which included customs duty, and accordingly assessed the income to Rs. 19,72,63,659. Aggrieved by said order, the assessee filed appeal before the Commissioner of Income-tax

48 (for short CIT). The said authority vide its order dated 11-10-2006, partly allowed the appeal holding that the customs duty, paid in importing the equipments for rendering services, cannot form part of the amount taxable under section 44BB of the Act. Thereafter, the revenue filed ITA No. 4180(Delhi)/2006 (assessment year 2002-03), before the ITAT, which has dismissed said appeal, vide its impugned order dated 13-4-2007. 5. Learned counsel for the respondents drew attention of this Court to sub-section (2) of section 44BB of the Act, which reads as under :— "(2) The amounts referred to in sub-section (1) shall be the following, namely:— (a)The amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b)The amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India." 6. Attention of this Court is also drawn to the principle of law laid down by this Court in CIT v. Halliburton Offshore Services Inc. [2008] 169 Taxman 138,Sedco Forex International Inc. v. CIT [2008] 170 Taxman 459 , CIT v. B.J. Services Co. Middle East [2008] 170 Taxman 286 , CIT v. Trans 429 , CIT v. Enso Ocean Offshore Inc. [2008] 173 Taxman Maritime Ltd. [2009] 181 Taxman 46 and CIT v. RBF Rig Corpn. [2009] 313 ITR 3691. Relying on these cases, it is contended on behalf of the appellant/revenue that all kinds of amount are to be included for the purposes of calculating amount on which 10 per cent profits under sub-section (1) of section 44BB of the Act. Perusal of the aforesaid case laws, show that these relate to freight and transportation charges, mobilization charges, supply of spare parts, catering charges and fuel charges. None of these cases refer to the reimbursement of the customs duty to the assessee. 7. Learned counsel for the respondent submitted that for import of the machinery or equipment, liability to pay the customs duty was on the Oil and Natural Gas Corporation (for short ONGC), who has hired the services of the assessee in contract. It is further submitted that there cannot be element of profit in reimbursement of the customs duty, paid by the assessee. As such, it is contended on behalf of the respondent/assessee that CIT(A) and ITAT, has rightly held that said amount, received by the assessee is to be excluded in computing profits under section 44BB of the Act. 8. Having considered submissions of learned counsel for the parties, we are of the view that reimbursement towards the customs duty, paid by the assessee, being statutory in nature, cannot form part of amount for the purposes of deemed profits unlike the other amounts received towards reimbursement. Therefore, we do not find any sufficient reason to interfere with the impugned orders, passed by the ITAT, which has affirmed the view taken by the CIT(A). Question of law stands answered accordingly.”

59.

Therefore respectfully following the decision of Hon’ble High Court we held that custom duty should not included in gross turnover for the purpose of computation of income u/s 44BB of the Income Tax Act. Therefore ground No. 7 of the appeal is allowed. 60. Ground No. 8 of the appeal is against the reimbursement of actual expenses included in the gross receipt for the purpose of section 44BB of the Act. 61. We have already decided this issue vide ground No. 7 of the appeal of the assessee for AY 2007-08, wherein relying on the decision of assessee own case in 300 ITR 265 we have dismissed the ground of appeal holding that

49 reimbursement is taxable as per provisions of section 44BB of the Act. In view of this we also dismiss ground No. 8 of the appeal of the assessee. 62. Ground No. 9 of the appeal of the assessee is against the deletion of addition of Rs. 196093218/- arising from letting out equipment used in connection with the projects covered u/s 44BB of the Act. We have decided the issue in ground No. 8 of the appeal of the assessee for AY 2007-08 wherein relying upon the decision of ITAT in SBS Marine Ltd. and other decisions of coordinate benches, we have held that second leg contract are eligible for preferential tax treatment u/s 44BB of the Act. Therefore, we allow ground No. 9 of the appeal of the assessee for the similar reasons. 63. Ground No. 10 of the appeal is against taxing offshore supply of software as royalty. 64. The identical issue has been decided by us in ground No. 11 and 12 of the appeal of the assessee for AY 2007-08 wherein we have set aside the issue of taxation of offshore supply of hardware and software back to the file of Assessing Officer. Similarly, we also set aside ground No. 10 to the file of Assessing Officer with similar direction. 65. Ground No. 11 of the appeal is against the deduction which were made by the customers on invoices claimed by the assessee has deduction. 66. We have dismissed ground NO. 13 of the appeal of the assessee for AY 2007-08. There is no change in the facts and circumstances of the case. Similarly we also dismiss ground No. 11 of this appeal. 67. Ground No. 12 of appeal is against charging of interest u/s 234B of the Income Tax Act. 68. We have already decided ground No. 14 of the appeal of the assessee for AY 2007-08 wherein we have decided the issue in favour of the assessee relying on the decision of Hon’ble Delhi High Court in case of DIT Vs. GE Packaged Power Incorporation Ltd. 373 ITR 65. Similarly, we also allow this ground of appeal of the assessee with similar direction.

50 69. In the result ITA No. 242/Del/2012 for AY 2008-09 is partly allowed.

ITA No.6161/Del/2012 AY 2009-10 70. This appeal has been filed by the revenue against the order of the CIT(A)-II, Dehradun dated 18.09.2012 for AY 2009-10. 71. The revenue has raised the following grounds of appeal in ITA No.6161/Del/2012 for the Assessment Year 2009-10 as under:- “1. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the income of the assessee was taxable under the provisions of section 44BB even though the nature of services rendered by the assessee were technical in nature, and covered by a decision of jurisdictional High Court in the case of CIT vs. ONGC as an agent of Foramer France wherein it has been held that FTS falls outside the purview of section 44BB. 2. Whether on the facts and circumstances of the case, the CIT(A) has erred in relying on the decision of the ITAT in the case of M/s CGG Veritas ignoring that the said decision of the ITAT has not been accepted by the department and 260A has not been filed only on account of tax effect but against which a miscellaneous petition has been filed. 3. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the income of the assessee was taxable under the presumptive provisions of section 44BB even though the nature of services rendered by the assessee were technical in nature and not for a project undertaken by the assessee. 4. Whetheron the facts and circumstances of the case, the CIT(A) has erred in not appreciating the fact that insertion of proviso in section 44BB by the Finance Act 2011 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came on the statute in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT. 5. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that "Services through Personnel" are not in the nature of FTS and assessable u/s 44BB of the I.T. Act,

51 6. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that equipment rental taxed u/s 9(l)(vi) by the AO as Royalty are eligible for 44BB even though the scope of work in the contracts does not cover specifically exploration, prospecting, and production of mineral oil but is supplied on hires to an entity which again hires it out for exploration, prospecting, and production of mineral oil. 7. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the issue of second leg contracts for services in the nature of FTS are also eligible for the benefit of section 44BB on the reasoning since this issue is without any precedent ignoring the jurisdictional High Court decision and detail reasoning provided by AO. 8. Whether on the facts and circumstances of the case, the CIT(A) action in admitting a ground which did not flow from the impugned order and concluding that the existence of PE was admitted by the AO at Para 5.14 at page 21 of his order, which contains no such admission, is not perverse. 9. Whether on the facts and circumstances of the case, the CIT(A) findings at Para 4.2 regarding distinction between revenues accruing from PSU‟s and Non PSU‟s being without reasonable basis is wholly incorrect, and perverse, since the reference by the AO in the assessment order is to PSC i.e. (Production Sharing Contract) and Non PSC partners, a distinction germane to the exclusion from the definition of FTS in section 9(1)(vii), explanation 2, there under for mining of like projects, “undertaken by the recipient”. 10. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that software sale should be taxable as per the provision of section 44BB of the IT Act and not as royalty u/s 9(1)(vi) due to existence of PE in India, a finding unsupported by any finding or facts at Para 5.1. 11. Whether on the facts and circumstances of the case, the CIT(A) has erred in falling to take note of the amendments inserted by finance Act 2012, bringing in explanation 4 and 5 w.e.f. 01.06.2012, clarifying the issue of taxability of income from sale of software, maintenance and support service as royalty. 12. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that service tax reimbursements are covered under the provision of section 44BB of the IT Act when the reimbursable items are only of account of execution of provision of services and contract which have been held to be in the nature of FTS and would therefore take their characterization from FTS only.

52 13. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that „other reimbursable items‟ are covered under the provision of section 44BB of the Act when the reimbursable items are only of account of execution of provision of services and contract which have been held to be in the nature of FTS and would therefore take their characterization from FTS only. 14. Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that interest u/s 234B was not chargeable in the case of relying upon the decision of Hon‟ble Uttrakhand High court in the case of Maersk (334 ITR 79) where as the department has contested the issue and has filed SLP before the Apex Court against in the case of Jacobs Civil Incorporated/ Mitsubishi involving similar issue.

72.

The first ground of the appeal of the revenue is that the though the nature of services are technical in nature till CIT(A) has held that they are not FTS but are taxable u/s 44BB of the Income Tax Act. 73. The ld Assessing Officer has held so relying on the order of Hon’ble Uttrakhand High Court in case of ONGC as agent of Foramer France. However, the Hon’ble Supreme Court has reversed the decision of Hon’ble Uttrakhand High Court in Civil Appeal No. 731/2007, therefore this ground of appeal is dismissed. 74. Ground NO. 2 of the appeal and Ground No. 8 of the appeal were on the reliance of decision of coordinate bench of Delhi ITAT in case CGG Veritas Services SA 50 SOT 335. We do not find any infirmity in the order of ld CIT(A) in relying on the above decision when the same decision remains unchallenged till now. Revenue could not produce before us any evidence showing that decision of the coordinate bench is no longer a good law. In view of this ground No. 2 and 8 of the appeal of the revenue are dismissed. 75. Ground No. 3 to 6 of the appeal are on the issue of whether the services rendered by the assessee fall within the ambit of section 44BB of the Act and the amendment made by the Finance Act 2010 are prospective or retrospective in nature.

53 76. While deciding the appeal of the assessee for AY 2007-08 in ground No. 1 to 5 we have already held that the services rendered by the assessee are falling within the ambit of provision of section 44BB of the Act and further, while deciding ground No. 2 and 5 of the appeal of the assessee for AY 2005-06 in ITA No. 1332/Del/2012 we have already held relying on the decision of Hon’ble Uttrakhand High Court in 339 ITR 169 that the amendment to the provision of section 44BB made by the Finance Act 2010 are prospective in nature. Accordingly, we dismiss ground No. 3 to 6 of the appeal of the revenue. 77. Ground No. 7 and 9 are against allowing the benefit of provision of section 44BB to second leg contracts or non PSC contracts. 78. The above issue has already been decided by us vide ground No. 8 of the appeal of the assessee for AY 2007-08 wherein relying on the decision of coordinate bench in SBS Marine Ltd. ITA No. 107/Del/2012, we have held that benefit of preferential tax treatment provided u/s 44BB of the Act are also available to the second leg contracts. In view of this we dismiss ground No. 7 and 9 of the appeal. 79. Ground No. 10 and 11 of the appeal are against whether the sale of software is taxable as per the provision of section 44BB of the Act or as royalty in view of retrospective amendment by the Finance Act 2012 by inserting explanation 4 and 5 to section 9(1) of the Income Tax Act. While deciding the ground No. 11 and 12 of the appeal of the assessee for AY 2007-08 we have already set aside the issue back to the file of Assessing Officer. Therefore, in the interest of justice we also set aside ground No. 10 and 11 of this appeal back to the file of Assessing Officer with similar direction. In the result ground No. 10 and 11 of the appeal is allowed. 80. Ground No. 12 of the appeal is regarding whether the service tax shall form part of receipt as per provision of section 44BB of the Act or not.

54 81. While deciding the appeal of the assessee for AY 2007-08 we have similarly decided ground No. 6 wherein relying on the decision of Hon’ble Delhi High Court in case of Mitchell Drilling International PTI Ltd. we have held that service tax being statutory levy should not form part of gross receipt for the purpose of section 44BB of the Act. Similarly, we also held for ground No. 12 of this appeal and dismiss the same. 82. Ground No. 13 of the appeal is against whether the reimbursement is taxable u/s 44BB of the Act. We have already decided ground No. 7 in appeal of the assessee for AY 2007-08, wherein relying on the assessee’s own case reported at 300 ITR 265 we have held that reimbursement is taxable u/s 44BB of the Act. Similarly, we allow ground No. 13 of the appeal of the revenue holding that such reimbursement shall be included for the purpose of section 44BB of the Act. 83. Ground No. 14 of the appeal is against chargeability of interest u/s 234B of the Income Tax Act. 84. We have already decided identical issue in cased of the assessee while deciding ground No. 14 of appeal for AY 2007-08 wherein relying on the decision of Hon’ble Delhi High Court we have held that interest u/s 234B is not chargeable in case of the assessee. Similarly, we dismiss ground No. 14 of the appeal of the revenue. 85. In the result ITA No. 6161/Del/2012 for AY 2009-10 of revenue is partly allowed.

55 ITA No.6003/Del/2012 AY 2009-10 86. This appeal is preferred by the assessee against the order of the ld CIT(A) dated 18.09.2012 for AY 2009-10. 87. The assessee has raised the following grounds of appeal in ITA No.6003/Del/2012 as under:- “Based on the facts and circumstances of the case, your appellant respectfully submits the following grounds which are without prejudice to each other: Ground No. 1 That based on the facts and circumstances of the case, the Ld. Commissioner of Income-tax, Appeals-ll, Dehradun (CIT) erred holding that receipts of Rs. 24,449,367 on account of offshore supply of software was chargeable to tax in India under section 44BB of the Act as opposed to the appellant's claim that the same was not chargeable to tax in India as the income from these supplies had accrued and arisen to the appellant outside India. Ground No. 2 That based on the facts and circumstances of the case, the Ld. Commissioner of Income-tax, Appeals-ll, Dehradun (CIT) erred in holding that receipts of Rs. 369,092,914 on account of service tax were includible in the gross receipts for the purpose of determining income under section 44BB of the Income-tax Act, 1961. Ground No. 3 That based on the facts and circumstances of the case, the Ld. CIT erred in not following the judgment of the jurisdictional Income-tax Appellate Tribunal, Delhi 'G' Bench in ITA No. 5284/Del/2011 in the case of Sedco Forex International Drilling Inc Vs. Addl. Director of Income-tax wherein it was held that service-tax receipts were not includible in the gross Ground No. 4 That based on the facts and circumstances of the case, the Ld. CIT erred upholding the action of the AO to tax receipts of Rs. 2,182,089 on account of reimbursement of expenditure as fees for technical services as opposed to the appellant's claim that the same did not constitute income of the appellant at all. Ground No. 5 That based on the facts and circumstances of the case and without prejudice to any of the grounds raised above, the Ld. CIT erred in not holding that even

56 if the reimbursement of expenditure was to be taxed in India, the same could only be taxed under section 44BB and not as fees for technical services. 88. The first ground of appeal is against the decision of ld CIT(A) in holding that receipt of Rs. 24449367/- on account of offshore supply of software chargeable to tax in India u/s 44BB of the Act. This is connected to ground No. 10 and 11 of the appeal of the revenue which has been set aside back to the file of AO for deciding the issue afresh. Being the ground connected to those grounds it is also set aside back to the file of AO. In the result ground No. 1 of the appeal is allowed accordingly. 89. Ground No. 2 and 3 of the appeal are with respect to whether service tax amounting to Rs. 369092914/- is includible in gross receipt while determining income u/s 44BB of the Act. Identical issue has been decided by us in assessee’s appeal for AY 2007-08 following the decision of Hon’ble Delhi High court in case of Mitchel Drilling International PTY Ltd, wherein it is held that service tax is not includible in gross receipt. Similarly, we allow ground NO. 2 and 3 of the appeal of the assessee. 90. Ground No. 4 and 5 of the appeal are against decision of ld CIT(A) holding that reimbursement of expenditure amounting to Rs. 2182089/- on account of reimbursement of expenditure is fees for technical services and whether such sum would be taxed u/s 44BB of the Act. In ground No. 7 of the appeal of the assessee for AY 2007-08 it has been held relying on assessee’s own case reported in 300 ITR 265 wherein it has been held that reimbursement as per provision of section 44BB of the Act. Accordingly, we hold that reimbursement of expenditure is not fees for technical services but is chargeable to tax u/s 44BB of the Act. Similarly ground No. 4 and 5 of the appeal are allowed accordingly. 91. In the result appeal of the assessee in ITA NO. 6003/Del/2012 is partly allowed.

57 C.O. No.21/Del/2013 in ITA No.6161/Del/2012 AY 2009-10 92. The assessee has filed C.O. No.21/Del/2013 in ITA No.6161/Del/2012 raised the following grounds of appeal:- “1. That the Ld. Commissioner of Income-tax, Appeals-ll, Dehradun [CIT(A)] erred in not upholding the claim of the appellant that its nature of operations in India, i.e. the work performed by the appellant in India under the various contracts with its customers, was not fees for technical services as defined in Explanation (2) to section 9(1)(vii) of the Income-tax Act, 1961. 2. That the Ld. CIT(A) has erred in not upholding that the activities performed by the appellant are in the nature of a building, construction, installation and/or a mining or like project and for this reason, excluded from the ambit of the definition of fees for technical services as defined in Explanation (2) to section 9(1)(vii). 3. That the Ld. CIT(A) has erred in not holding that the scope of operations of the assessee are squarely covered by the decision of the jurisdictional High Court of Uttarakhand in the case of CIT Vs. ONGC as agent of Scan Drilling Company in ITR No. 2 of 2001. 4. That without prejudice to the assessee's claim that reimbursement of expenditure is not chargeable to tax at all, the Ld. CIT(A) has erred in upholding the order of the assessing officer that other reimbursements were to be taxed as fees for technical services under section 9(1)(vii) as opposed to section 44BB.” 93. Before us the ld AR of the appellant did not press the CO therefore the same is dismissed as infructuous.

58 ITA No 5936/ Del/2013 A .Y. 2010-11 94. This appeal is preferred by the revenue against the order of the ld CIT(A) dated 27.08.2013 for the AY 2010-11 which was subsequently rectified vide order dated 20.09.2013. 95. The revenue has raised the following grounds of appeal in ITA No.5936/Del/2013 as under:- 1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that no distinction can be made between receipts from Production Sharing Participants ('PSC Partners') and Non- Production Sharing Participants ('Non-PSC Partners'), ignoring the fact that the receipts from non-PSC partners on account of supply of plant & machinery on hire ('equipment rental'), provision of technical services including supply of personnel ('services'), supply & re-imbursement of service tax etc. are in respect of contracts which are entered into with companies not directly engaged in Oil Production and Exploration and, therefore, liable to tax u/s 9(l)(vi)/ 9(l)(vii) read with section 44DA and not section 44BB of the IT Act, 1961 ('Act'). (a) The Ld CIT(A) has erred in holding that the receipts from 'non-PSC partners' on account of equipment rental are not in the nature of Royalty u/s 9(l)(vi) of the Act, 1961 read with section 44DA of the Act and are eligible for treatment under presumptive provisions of section 44BB of the Act. (b) The Ld CIT(A) has erred in holding that the receipts from non-PSC partners on account of provision of services are not in the nature of Fee for Technical Services ('FTS') u/ s 9(l)(vii) read with section 44DA of the Act and are eligible for treatment under presumptive provisions of section 44BB of the Act. (c) The Ld CIT(A) has erred in holding that the receipts from non-PSC partners on account of supplies and reimbursable items are not in the nature of FTS/Royalty u/s 9(l)(vii)/ 9(l)(vi) read with section 44DA of the Act and are eligible for treatment under section 44BB of the Act, not appreciating the findings of the AO that supplies & reimbursements are intrinsically linked with the performance of contracts for equipment rental & services with recipients of services. 2. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that all revenues arising from equipment rental & services connected with extraction of mineral oils would be assessable u/s 44BB of the Act if rendered through a Permanent Establishment Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

59 (PE) in India, ignoring the fact that once the payments are characterized as royalty/FTS u/s 9(l)(vi)/ 9(l)(vii), they go outside the purview of section 44BB and have to be taxed as Royalty/FTS at applicable rates. 3. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in ignoring the distinct scheme of taxation of FTS/Royalty and disregarding the insertion of provisos in section(s) 44BB/44DA/115A and the rationale behind the introduction of said clarificatory provisos in the Finance Bill 2010 while holding that the income of the assessee company was covered under the presumptive provisions of section 44BB. 4. Whether on the facts and circumstances of the case, the Ld.CIT(A) has erred in not appreciating the fact that proviso to section 44DA brought about by the Finance Act 2010 was only clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came into effect in view of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drilling v/s CIT. 5. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in holding that receipts on account of service tax are not includible in gross receipts of the assessee (whether from PSC or non- PSC partners) chargeable to tax, ignoring the fact that such receipts partake the character of related receipts liable to tax u/s 44BB in the case of PSC Partners and FTS/Royalty in the case of Non-PSC Partners. 6. Whether on the facts and circumstances of the case, the Ld CIT(A) has erred in ignoring the decision of jurisdictional High court in the cases of ONGC as Agent of Foramer France and M/s Rolls Royce Pvt Ltd [2007- TII-03-HC-UKHAND-INTL] 7. Whether on the facts and circumstances of the case, the Ld.CIT(A) has erred in reversing the action of the AO who, having held that the assessee' revenues under the Contracts with Non-PSC partners are liable to be taxed u/s 44DA, rightly estimated the income by applying 25% rate of profit on gross receipts, in the absence of books of accounts and details of expenses incurred in providing the services.” 96. The ground No. 1 is effectively on the issue whether the benefit of the provision of section 44BB of the Income Tax Act shall be available to second leg contracts or not. Further ground No. 7 of the above appeal is also on the issue whether the revenue from non production sharing contracts are also liable to tax u/s 44BB of the Act or u/s 44DA of the Act. Identical issue has been decided by us in ITA No. 5284/Del/2010 for AY 2007-08 in ground No. Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

60 8 of that appeal. There is no change in the facts and circumstances of the case which is confirmed by the parties before us. 97. We have carefully considered the rival contentions and ground No. 8 of that appeal for AY 2007-08 has been decided by us relying on the decision of the coordinate bench in case of SBS Marine Ltd. ITA No. 107/2012 wherein I has been held even second leg contracts are eligible for beneficial tax treatment provided in section 44BB of the Income Tax Act. Therefore, respectively this ground of the appeal is also decided accordingly, holding that second leg contracts are eligible for preferential tax treatment u/s 44BB of the Act. In view of this we dismiss ground No. 1 and ground No. 7 of the appeal. 98. Ground No. 2 of the appeal is on the issue that whether the revenue arising from equipment rentals and services connected with extraction of mineral oil would be assessable u/s 44BB of the Act or not. Further, whether they are assessed as royalty or fees for technical services. Identical issue has been decided by us while deciding appeal of the parties for AY 2009-10 whereas in ITA NO. 6161/Del/2012 of the department while deciding ground No. 2 and 8 of the appeal relying on the decision of the coordinate bench in case CGG Veritas Services SA 50 SOT 335, we have held that the consideration received for fees for technical services rendered in connection with prospecting for or extraction or production of mineral oil though effectively connected with the permanent establishment, we fall outside the scope of section 44DA and would be assessed u/s 44BB of the Act. Therefore, in ground No. 2 of the appeal of the revenue we hold accordingly. In the result ground no. 2 of the appeal of the revenue is dismissed. 99. Ground No. 3 and 4 of the appeal are with respect to the amendment made in the section 44BB, 44DA and section 115A by Finance Bill 2010 are applicable prospectively or retrospectively. This issue has already been decided by the Hon’ble Uttrakhand High Court in case of BJ Service Co.

61 Middle East Ltd. Vs. DDIT 339 ITR 169, wherein it has been held that such amended provisions are prospective in nature. Therefore respectfully following the decision of Hon’ble High Court we also hold that amended provision to section 44BB is prospective in nature. Resultantly, ground NO. 3 and 4 of the appeal are dismissed. 100. Ground No. 5 of the appeal is against whether the receipts on account of service tax are includible in gross receipts chargeable to tax u/s 44BB of the Act. 101. This issue has already been answered by Hon’ble Delhi High court in case of Mitchel Drilling International PTY Ltd. in ITA No. 403/2013 dated 28.09.2015 wherein it has been held that service tax being statutory levy should not form part of gross receipt for the purpose of computation of tax u/s 44BB of the Act. Following the decision of Hon’ble High Court we have decided ground No. 6 of the appeal of the assessee for AY 2007-08. Similarly, we hold that service tax cannot be part of the gross receipt u/s 44BB of the Act. In view of this ground No. 5 of the appeal is dismissed. 102. Ground No. 6 of the appeal is placing of the reliance by the ld Assessing Officer on the decision of jurisdictional High Court in case of ONGC Ltd as agent of Foramer France and Rolce Royce. Ld CIT(A) has ignored these decisions and there the revenue has raised this ground. The above decision relied on the ld AO have been overruled by the Hon’ble Supreme Court in case of Civil Appeal NO. 731/2007 and 1240/2008. In view of this decision of Hon’ble Supreme Court ground No. 6 of the appeal of the revenue is dismissed. 103. In the result all the seven grounds of the appeal of the revenue are dismissed.

62 CO No.148/Del/2014 In ITA No. 5936/Del/2013 AY 2010-11

104.

This cross objection is filed by assessee vide CO No.148/Del/2014 in ITA No. 5936/Del/2013 for AY 2010-11 and raised following grounds of appeal:- 1. That the Ld. Commissioner of Income-tax, Appeals-ll, Dehradun [CIT(A)] erred in not upholding the claim of the appellant that its nature of operations in India, i.e. the work performed by the appellant in India under the various contracts with its customers, was not fees for technical services as defined in Explanation (2) to section 9(1}(vii) of the Income-tax Act, 1961. 2. That the Ld. CIT(A) has erred in not upholding that the activities performed by the appellant are in the nature of a building, construction, installation and/or a mining or like project and for this reason, excluded from the ambit of the definition of fees for technical services as defined in Explanation (2) to section 9(1)(vii). 3. That the Ld. CIT(A) has erred in not holding that the scope of operations of the assessee are squarely covered by the decision of the jurisdictional High Court of Uttarakhand in the case of CIT Vs. ONGC as agent of Scan Drilling Company in ITR No. 2 of 2001. 4. That the CIT(A) ought to have held that the aforementioned receipts of Rs. 9,789,008 (under contract no. 40464102 and 5010041852 with ONGC Videsh Limited) on account of "AMC of Software" rendered in the absence of a permanent establishment in India, were not taxable in India under the provisions of Article 7 and Article 12 (Royalty and Fees for Included Services) of the Double Taxation Avoidance Agreement between India and the United States of America. 5. That without prejudice to the above, the Ld. CIT(A) has erred in holding that the aforementioned receipts of Rs. 9,789,008 were taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act and that income from these receipts was to be estimated at a profit rate of 25 per cent as opposed to the claim of the appellant that these receipts were includible in the gross receipt for the purpose of determination of income under section 44BB of the Income-tax Act, 1961. 6. That the Ld. CIT(A) has erred in holding that receipts of Rs. 5,579,301 on account of reimbursement of expenditure incurred on behalf of the customer is to be included in the gross receipts for the purpose of determination of income under section 44BB of the Income-tax Act, Halliburton Offshore Services Inc. VS DDIT (International taxation) ITA No.1332/DEL/2012 A.Y.: 2005-06 ITA No 5284/Del/2010 A Y 2007-08 IAT no 242/Del/2010 A Y 2008-09 ITA No 6161/Del/2012, 6003/DEL/2012 CO 21/Del/2013 A Y 2009-10 ITA No 5936/DEL/2013 & CO No 148/Del/2014 A Y 2010-11

63 1961 as opposed to the claim of the appellant that these receipts were not chargeable to tax at all.” 105. Ground Nos. 1, 2 and 3 of the cross objection are general in nature and same are also covered by the decision of Hon’ble Supreme Court in case of ONGC Vs. CIT 376 ITR 306 wherein it has been held that all services in connection with exploration and production of mineral oil shall fall within purview of section 44BB of the Act and are not chargeable to tax as fees for technical services as per explanation 2 to section 9(1)(vii) of the Act. Therefore, ground No. 1 to 3 of the CO is dismissed. 106. Ground No. 4 and 5 of the cross objection are on the issue whether revenue on account of maintenance of software shall fall within the provisions of section 44BB of the Act or not. This issue is also covered by the decision of Hon’ble Supreme Court in case of ONGC Vs. CIT 376 ITR 306 wherein it has been held that all services in connection with exploration and production of mineral oil shall fall within purview of section 44BB of the Act. Hon’ble Supreme Court has also considered that supply and installation and familiarization for software for processing seismic data is also covered as the dominant purpose of such agreement is for specified activities of mineral oil therefore it is inextricably connected with that. In view of the decision of Hon’ble Supreme Court we allow ground NO. 4 and 5 of the cross objection of the assessee holding that revenue from maintenance of seismic software shall fall within the provisions of section 44BB of the Act. 107. Ground No. 6 of the cross objection is whether the reimbursement of expenses from part of the receipt as per provision of section 44BB of the Act or not. The above issue in the assessee’s own case reported at 300 ITR 265 wherein it has been held that reimbursement of expenses shall form part of the receipt for section 44BB of the Act. Therefore, following the decision of assessor’s own case we dismiss ground No. 6 of the cross objection of the assessee.

64 108. In view of this CO NO. 148/Del/2014 in ITA No. 5936/Del/2013 is partly allowed. Order pronounced in the open court on 30/06/2016. -Sd/- -Sd/- (I.C.SUDHIR) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/06/2016 A K Keota Copy forwarded to

Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi

ADIT, DEHRADUN vs. M/S. HALLIBURTON OFFSHORE SERVICES INC., DEHRADUN