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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI A.T. VARKEY & SHRI PRASHANT MAHARISHI
O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
CO No.194/Del/2014 The appeal filed by the revenue and the cross objection filed by the assessee are directed against the order of the Commissioner of Income-tax (Appeals)-II, Dehradun dated 26.08.2013 for the assessment year 2010-11.
2. The assessee is engaged in the business of providing geophysical services to the oil and gas exploration industry. Draft assessment order for the year under consideration i.e. 2009-10 under section 143(3) / 144C (1) of the Income Tax Act, 1961 (hereinafter ‘the Act’) was passed on 11.03.2012 on a total income of Rs.57,24,29,240/-. The said draft assessment order was as under :-
"Return of income was filed by the assessee on 30.09.2011 declaring total income of Rs.22,96,37,533/-. The case was processed under section 143(1). The case was selected under scrutiny by CASS. Accordingly notice under section 143(2) was issued on 06.08.2012 and served upon the assessee. Subsequently notice under section 142(1) was issued on 20.11.2012 alongwith questionnaire. Further notice under section 142(1) was issued on 06.02.2013. In pursuance to the various notices and due opportunities of hearing, the authorized representative of the assessee, Shri R.P. Easwaran, FCA and Shri Itesh Dodhi, CA from Nangia & Co. attended the proceedings from time to time and submitted written replies dated 29.11.2012; 12.12.2012 & reply dt.08.03.2013. The submissions of the assessee were carefully perused and the case was heard.”
2.1 During the year under consideration, the assessee had entered into two contracts with Oil and Natural Gas Corporation Ltd. for the acquisition and processing of seismic data in respect of which the work was executed during the relevant assessment year. The AO has gone through the contracts entered into by the assessee and has reproduced the scope and object of the work to be performed in respect of the contracts in his order, which are reproduced as under :-
“Contract No.MR/WOB/MM/GP/3D-VESSEL/SC/37/2006EB-2131 with ONGC dated July 12, 2007 for Hiring of 3D Vessel on Time Charter Basis for offshore seismic surveys during field season 2007-08 & 2008-09. CONTRACTOR shall with his own personnel; and equipment plan and execute acquisition and processing of 3D seismic data in different survey areas of Western & Eastern Offshore. The scope of work and technical specification of offshore 3D seismic data processing is provided in Appendix AI of the contract. They are summarized as under :-
"AI.1. SEISMIC DATA PROCESSING The primary objective of the Processing of 3D seismic data, to be acquired in the survey areas of Western and Eastern offshore, is to obtain accurate high resolution imaging (free from geophysical significant errors) with geological objective in Appendix A.).
AI.2 GENERAL REQUIREMENTS
All necessary testing to determine optimum processing parameters consistent with good International Geophysical Industry practice will be performed prior to commencement of production processing. The data processing rates shall be inclusive of all the test processing, corresponding QC products (e.g. paper plots. screen dumps wherever required etc.) & preparation and submission of deliverables/outputs. The contractor will provide 3D seismic data processing facilities consisting of computers, software, tape drivers, printers and other required peripheral equipment. A competent team of seismic data processors in professional and efficient manner should deliver an output of high quality seismic data required for interpretation. The contractor is solely responsible for the quality for all aspects of the data processed.”
Contract No. PETROGAS/MBOSN/3D Acquisition /08-09 with Petrogas E&P LLC dated September 29, 2008 for Marine 3D Seismic and Gravity Magnetic Data Acquisition Services. The scope of work and technical specification of offshore 3Dseismic data processing (Appendix A) is provided in Section 3 of the contract. They are summarized as under :-
"Scope of work
2.1 The work shall mainly comprise contractor's provision of 790 sq. kms. of Marine 3D seismic data acquisition using 6 streamers and 2 guns arrays in exploration block MB-OSN-2004/2 (Mumbai Offshore) and Gravity-Magnetic data acquisition along the 3D seismic survey. Contractor will provide the instruments together with minimum two skilled personnel necessary to conduct the Gravity-Magnetic survey. The main objectives of the survey(s) are:
• To maximize visibility of the offshore horizons from 5000-2500 msecs • To maximize image quality of the faults and inter- compartmentalization within the main horizon.
CO No.194/Del/2014 • To retain the maximum bandwidth of the recorded data. • To deliver good quality, high fold data with few coverage gaps. 2.1.1 Contractor is to provide the seismic vessel, all support vessels e.g. minimum two Chase Boats/Guard Vessels and the crews including all necessary personnel, equipment and supplies, as more specifically detailed herein, to perform the survey."
2.2 During the year, assessee had offered gross receipts of Rs.228,52,78,062/- from the said contracts with M/s. ONGC Limited and M/s Petrogas E&P LLC and had applied provisions of 44BB thereon and computed income at DPR of 10% thereby arriving at income of Rs.22,85,27,806/- along with interest income of Rs.11,09,727/-. Before the AO, it was submitted that the nature of the services performed under both the above contracts clearly showed that assessee had carried out Geophysical Seismic Survey along with data interpretation of the data so collected along with Vessels and the crews including all necessary personnel, equipment and supplies necessary for execution of the scope of work mentioned above. Accordingly, the AO required the assessee to explain why the income of the assessee as "Fee for technical services" (FTS in short) since it had provided services of 3D Seismic Data Acquisition and Processing which is FTS in nature as per the above contracts.
The assessee filed written submissions dated 08.03.2013 which were considered and not found to be acceptable by the AO.
2.3 The AO observed that the above receipts of the assessee are covered under Section 9(1) (vii) of the Act. The AO further observed that Sections 5 & 9 are charging sections. He further observed that in order to bring any income
CO No.194/Del/2014 under the taxability of the Act, the same needed to be examined under the provisions of these two sections. He observed that Section 28 to 41 is computation sections and section 44BB is a presumptive section. The AO observed that it is important to analyze that when a presumptive section is introduced, it will start with a non-obstante clause with respect to Sections 28 to 41 which are the computation sections. The AO, after observing the aforesaid sections and considering the submissions of the assessee, held that, “In the light of discussion above, it is clear that provisions of section 44BB will not be applicable against FTS receipts of the assessee. It is obvious from the extracts of the Finance Bill 2010 referred earlier that the amendment in proviso to section 44BB (1) as well as in section 44DA are in the nature of clarificatory and as such, following the Hon'ble Supreme Court as mentioned above, the clarification brought in by the amendments must be read into the main provision with effect from time that the main provisions of section 44BB came into force. Thus, even though clarificatory amendments are made effective from 1st April 2011, in view of legislative intent, even prior to the said clarificatory amendments as mentioned above, the income in the nature of FTS or Royalties cannot be taxed under presumptive scheme of taxation under section 44BB(l) of Income Tax Act, 1961. The receipts of the assessee are covered under provisions of Section 44DA of I.T. Act and therefore income is to be computed as per the provisions of sec. 28 to 43C of I.T. Act. Since books of accounts have CO No.194/Del/2014 not been prepared by the assessee and accordingly not produced therefore, income of the assessee from the contract is to be estimated at 25% of gross receipts under the contract. The PE of the assessee in India is not disputed as the assessee has filed the return under section 44BB offering its income as taxable in India. Moreover assessee has also provided equipment and material along with services of carrying out 3D/2D Seismic Data through presence of its vessels in India and therefore has a PE in India. The assessee has in its written submission also accepted that it has a PE in India.” The AO further observed that the assessee had not filed its objections against the said draft order before the Dispute Resolution Panel. Accordingly, the AO completed the assessment under section 143(3) read with section 144C(3)(b) of the Act at total income of Rs.57,24,29,240/-.
3. The assessee filed an appeal before the first appellate authority against the order of the AO. The ld. CIT (A), after going through the submissions made by the ld. AR for the assessee, allowed the appeal of the assessee as under :-
“3.2 The findings of ld. AO and the averments of Ld. ARs have been considered. The plethora of cases cited and the scope of work as per the contracts makes it clear that the Appellant is engaged in activities covered under section 44BB of the Act. Also no retrospectivity can be read into the amendment to section 44BB and section 44DA of the Act following the case of B.J. Services reported in 339 ITR 169 (UK). Furthermore, following the case of CGG Veritas (Supra) the Appellant deserves to have his income computed u/s 44BB considering that there is a PE in existence in India. Due to these factors the income is to be assessed u/s 44BB of the Act.”
4. The revenue, being aggrieved, has filed the appeal before the Tribunal by taking the following grounds of appeal :-
“1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that the scope of work executed by the assessee under Contracts with ONGC and Petrogas E & P LLC for providing services of geophysical seismic surveys and acquisition and processing of seismic data ('services') was not in the nature of Fee for Technical Services ('FTS') squarely covered u/s 9( 1 )(vi i) of the IT Act, 1961 ("the Act").
2. Whether on the facts and in the circumstances of the case, the Ld 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 of the Act.
3. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that the income of the assessee was not taxable under the provisions of sec 44DA r.w.s 115A even though the nature of services rendered by the assessee were technical in nature liable to tax u/s 44DA of the Act.
4. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in interpretation of the legislative intent behind the scheme of taxation envisaged in 9(1)(vii) read with sections 44DA and 44BB of the Act, ignoring the decision in the case of CIT vs M/s ONGC As Agent of M/s Foramer France [(2008) 299 ITR 438 Uttarakhand] .
5. 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 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.
6. Whether on the facts and in the 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 Services, SA in (on the issue that once a PE is established to be in place then the income has to be treated as business profits and assessable u/s 44BB).
7. 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 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.
8. Whether on the facts and circumstances of the case, CIT(A) has erred in reversing the action of the AO who, having held that the assessee's revenues on account of services rendered under the Contracts are liable to be taxed u/s 44DA, rightly estimated the income of the assessee by applying 25%
CO No.194/Del/2014 rate of profit on gross receipts in the absence of books of accounts and details of expenses incurred in providing the services. 9. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.”
5. The above grounds are interconnected and thus will be adjudicated jointly. The short question before us is whether the income of the assessee is taxable u/s 44BB of the Act, or is u/s 44DA as held by the AO. And the other question is whether the Finance Bill 2010 is retrospective or not. In other words, the controversy revolves around computation of income as FTS (Fees for Technical Services) as against claim of taxability u/s 44BB of the Act. The AO is seen to have given a finding that the scope of work (copies of contract have been filed during appellate proceedings) executed by the assessee was not in the nature of building construction, mining or like project and thus was includible in the definition of FTS as per section 9(1)(vii) of the Act and it has also been held that the provision of 44DA apply and on this basis, the income has been determined after applying an estimated profit rate of 25% on the gross receipts.
6. The ld. DR relied on the order of the AO and also filed the synopsis of the oral submissions made, which are reproduced as under :-
“SYNOPSIS OF REVENUE'S ORAL SUBMISSIONS 1. The assessment order dated 10.05.2013 is emphatically relied upon. Following additional submissions are made. Legislative Intent: To exclude income in the nature of FTS / Royalties from 44BB
Amendment to proviso to sections 44DA & 44BB brought in by the Finance Act 2010 (relevant extract of Explanatory notes is annexed at Annexure 'A' which clearly bring out that the amendment was clarificatory) was clarificatory in nature and its application has to be read into the main provisions with effect from the time the main provision came in to effect.
In following decisions the Courts have held that despite a prospective date mentioned in the Finance Act, the amendment may have retrospective operation. While holding so, the Courts have held that sometimes legislature specifically mentions about the retrospective operation of an amendment and in some situations such retrospective operations has to be inferred by way of implication.
a. CIT v. Gold Coin Health Foods [304 ITR 308 (SC)] (Larger Bench)] b. K.Govindan & Sons v. CIT [2001] 247 ITR 192 (SC) c. CIT v. Shelly P. Products 261 ITR 367 (SC) d. Allied Motors v. CIT [1997] 224 ITR 677 (SC) e. Commissioner of Income-tax v. Apar Industries Ltd 323 ITR 411 (Bom.)
4. The Hon'ble Supreme Court in the case of Sedco Forex International Drilling vs. CIT [2005] 279 ITR 310 (SC) observed:
"An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force. But if it changes the law it is not presumed to be retrospective irrespective of the fact that the phrase used are 'it is declared' or 'for the removal of doubts". [Para 20]
5. Perusal of the above referred extracts from the Finance Bill 2010 show that, even before the amendment was introduced, the intention of the Legislature was to exclude income in the nature of Fees for Technical Services or Royalties from the purview of section 44BB irrespective of the business to which it relates. To summa rise, the extract from Finance Bill 2010 highlights the following:
a. Sections 44BB, 44DA and 115A read together provide that income of a non-resident, in the nature of fee for technical services, shall be taxable under the provisions of either section 44DA or section 115A irrespective of the business to which it relates. b. Judicial pronouncements having raised doubts regarding the scope of section 44BB vis-a-vis section 44DA as to whether FTS relating to exploration and, therefore, to remove doubts and clarify the distinct scheme of taxation of income by way of fee for technical services, the proviso to section 44BB was amended to exclude the applicability of 44BB to income covered u/s 44DA. Similarly, section 44DA was amended to provide that section 44BB shall not apply to income covered u/s 44DA.
6. A reference is also made to Heydon's rule and it is submitted that the amendments in the scheme of Section 44BB and 44DA, made vide Finance Act 2010 must be treated as clarificatory in nature.
Carve out in Section 9(1 )(vii) for FTS for assembly, 'mining or like project' undertaken by the recipient 7. In CGG Veritas Services SA [2012] 18 taxmann.com 13 (Delhi), the Hon'ble ITAT held that exception to definition of FTS as contained in Explanation 2 to section 9(1 )(vii) has two limbs: a. First, it should be construction, assembly, 'mining or like project' and b. Second, this project should be undertaken by the assessee (relying upon Delhi High Court Decision in Rio Tinto Technical Services [2012] 17 taxmann.com 70 (Delhi)).
8. Therein, Hon'ble ITAT Delhi also clarified that in Instruction No. 1862, question referred was regarding definition of 'mining or like project' only and second limb of the exception was not subject matter of said instruction. This position was corroborated in numerous decisions including MI Overseas (AAR), CAT Geodata Gmbh (AAR) etc.
9. DIT vs. Jindal Drilling and Industries Ltd ([2010] 320 ITR 104/182 Taxman 59 (Delhi)) and Geofizyka Torun sp Z.O.O, In re [2010] 320 ITR 268/186 Taxman 213 (AAR - New Delhi), relied upon by Delhi High Court in DIT v. OHM Ltd. ([2012] 28 taxmann.com 120/[2013] 212 Taxman 440 (Delhi)), did not adjudicate the aspect of eligibility in terms of second limb of the exclusionary proviso i.e. "for a project undertaken by the recipient" as confirmed in CGG Veritas (supra). Also decision of DIT V Jindal Drilling and Industries Ltd. (2010) 320 ITR 104, pertained to AYs 2000-01, 2001-02 and did not contain any reference to section 44DA as the said provision came on the Statute w.e.f., 1.4.2004.
Judgement of Hon'ble Supreme Court in ONGC v CIT (2015) 59 Taxmann.com 1 (SC) dated 01.07.2015
The issue that arose for consideration (pertaining to AY 1985-86 / 1986-87) may be summarized as follows:
"whether the amounts paid by the ONGC to the non-resident assesses/foreign companies for providing various services in connection with prospecting, extraction or production of mineral oil is chargeable to tax as "fees for technical services" under section 44D read with Explanation 2 to section 9(1)(vii) of the Income Tax Act or will such payments be taxable on a presumptive basis under section 44 BB of the Act ?"
The Hon'ble Supreme Court has held at para 13 that:
"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 List II of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 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 CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions "mining projects" or "like projects" occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. 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 .......”
"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 oil though there may the certain ancillary works contemplates thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assesses or foreign companies under the said contracts is more appropriately assessable under the provision of section 44 BB and not section 44 D of the Act."
Perusal of the above decision will show that the Hon'ble Supreme Court has held that drilling operations for the purpose of production of petroleum would amount to a mining activity or a mining operation and that the proximity of the works contemplated under an agreement, with mining activity or mining operations would be crucial for the determination of the question whether the payments made under such an agreement is to be assessed under Section 44BB or Section 440 of the Act. The test of pith and substance of the agreement has been held as reasonable.
13. It is humbly prayed that Hon'ble Supreme Court decision may not have precedential / binding value for the AY 2010-'11 since the case applies to the law as it stood in AY 1985-86 / 1986-87, when the provisions of S. 440A, and the corroborating amendments in 115A, 44BB of Income Tax Act 1961 had not come on to the Statute. Further, the aspect that the exception contained in Explanation 2 to section 9(1)(vii) is confined to the person who has undertaken a mining or like project, was not brought to the notice of the Hon'ble Court. The amendments brought about by Finance Act 2003 and 2010 and the explanatory notes thereunder were also not before Supreme Court since the case pertained to AY 1985-86/1986-87. It is very humbly submitted that the decision differs on fact and in law from the case on hand since the Hon'ble Supreme Court did not have the opportunity to address the following aspects:
(i) Examine second limb of the exception to definition of FTS as contained in Explanation 2 to section 9(1 )(vii)
(ii) Examine the legislative intent and the amendments brought about by Finance Act 2010
INTEREST u/s 2348
13. Without prejudice to Revenue's stand that interest u/s 234B is indeed chargeable in the present case, following additional / 'protective' submission is made:
It needs to be determined if the assessee had some role in having lower or no deduction of TDS u/s 197. It may be the case that the assessee itself may have approached the AD or would have insisted on the payer to deduct no TDS. [2010] 194 TAXMAN 495 (DELHI) Director of Income-tax v. Jacabs Civil Incorporated/ Mitsubishi Corporation: "It is stated at the cost of repetition that the liability to deduct or collect the tax at source is that of the payer. Therefore, for the purposes of section 234B of the Act, the question would be as to whether the payee, i.e., the assessee in this case, had any role in deducting or collecting the tax. Once that is in the negative, and it was not duty of the payee/assessee, the question of payment of any interest would not arise as it cannot be said, in such circumstances, that the assessee is in default for the purposes of section 234B of the Act. No doubt, as per the judgment in the case of Anjum M.H. Ghaswala (supra), if there is a default in making the payment of advance tax, the consequence which is to follow is that the interest becomes payable under section 234B of the Act. But in the instant case, the provisions of section 234 B of the Act would not be attracted at all." [Para 6]”
The ld. DR, on the basis of assessment order and the above submissions, prayed that the order of the ld. CIT (A) be reversed and that of the AO be restored.
7. On the other hand, the ld. AR reiterated the submissions made in the order of the ld. CIT (A) and also relied on the order of the ld. CIT (A). He also submitted a written submission and the same are reproduced hereunder :-
“Brief facts of the case: The assessee is foreign company incorporated under the laws of Norway. It is engaged in the activities relating to acquisition and processing of 3D seismic data under contracts with ONGC and Petrogas E & P LLC. For the year under consideration, the return of income was filed declaring income of INR 22,96,37,533 as per provision of section 44BB of the Act. The return was selected for scrutiny and AO passed assessment order, wherein, the assessee's claim for the being taxed u/s 44BB was rejected and its income has been taxed as fees from technical services. Aggrieved by the variation in its income, the assessee has filed before the Ld. CIT(A) wherein the Ld. CIT(A) has held that the benefit of provision 44BB shall be available to the assessee. Hence the revenue is in present appeal. In this regard our submissions are as under:
At the outset is submitted that the issue under consideration is squarely covered by decision of Hon'ble jurisdictional ITAT in Assessee's own case reported in 37 ITR (Trib) 46 wherein the Hon'ble Tribunal has held that assessee is entitled to declare its income under provision of section 44BB of the Act. Relevant observation of the Hon'ble ITAT is as under:
The Ruling of AAR in the case of Geophzika Torun Sp. Zo.o has been confirmed by the Hon'ble Delhi High Court in the case of Director of Income Tax-II Vs. OHM Ltd. [2012] 28 taxmann 120 (Del). The said judgment of the jurisdictional High Court in the case of Director of Income Tax-II Vs. OHM Ltd. (Supra) was followed by the Hon'ble jurisdictional High Court in the case of PGS Geophysical AS (Supra). In the light of the above judgments of Hon'ble jurisdictional High Court, we hold that for the relevant assessment year, assessee is entitled to declare its income under the provision of Section 44BB of the Act. It is ordered accordingly.
It is further submitted that the above order of Hon'ble ITAT was affirmed by the Hon'ble Uttarakhand High Court by dismissing the appeal of revenue at the very threshold vide order dated 06-08-2015 in ITA No. 28/2015. Relevant observations of the Hon'ble High Court are as under:
In the light of the judgment of the Hon'ble Apex Court in Civil Appeal No. 731 of 2007 and connected cases (Oil & Natural Gas Corporation Limited vs. Commissioner of Income Tax & another), the substantial questions of law relating to the assess ability of the amounts under Section 448B have to be answered against the appellant / revenue. Accordingly, we answer the said questions of law against the revenue in the light of the aforesaid judgment of the Hon'ble Apex Court. 5 ….. 6. In such circumstances, the appeals are disposed of as follows:
(i) We answer the questions of law relating to the assessability of the amounts under Section 44BB against the Revenue.
It is submitted that while disposing the appeal of the appeal of the revenue in High Court, the Hon'ble Court has relied upon the decision of Apex Court in case of ONGC Limited in of 2007 date of pronouncement July 1st, 2015.Relevant observation of the pronouncement is as under:
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 List /I of the 7th Schedule to the Constitution to understand the exclusion of mineral oils from the definition of minerals in Section 3(a) of the 1957 Act. Regard must also be had to the fact that mineral oils is separately defined in Section 3(b) of the 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of the 7th Schedule and had enacted an earlier legislation i.e. Oil Fields (Regulation and Development) Act, 1948. Reading Section 2(j) and 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 CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions "mining projects" or "like projects" occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/ foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. 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.
1. Civil Appeal No. 4321 - Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. ….. 3. ….. 4 . …..
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 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.
It is further submitted that the ld. Departmental Representative has taken following arguments during the course of hearing on 12-10-2015:
Amendment in section 44BB and 44DA should be read as retrospective 2. Benefit of section 44BB is not applicable on second leg contracts 3. Decision of Hon'ble Delhi High Court in case of PGS Geophysical AS Our submissions in respect of Argument no. 1 i.e. Amendment in section 44BB and 44DA should be read as retrospective It is submitted that the Hon'ble Uttarakhand High Court in case of BJ Services Company Middle East Limited Vs. DCIT 3391TR 169 date of pronouncement 20-08-2011 has held that the amendments proposed by Finance Bill, 2010, in ss. 44BB and 44DA were only prospective in nature. Relevant observations of the court are as under:
As stated earlier, the combined effect of the provisions of s. 44BB, 44DA and 115A of the Act will not have a bearing to the cases in hand in as much as the Explanatory Note to the Finance Bill, 2010 clearly indicates that the amendments proposed in s. 44BB and 44DA of the Act would take effect from 1st April, 2011 and would apply in relation to the asst. yr. 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.
It is submitted that the revenue has filed an special petition before the Hon'ble Uttarakhand High Court against the above case and same has been dismissed by the Hon'ble High Court vide order dated May 28th 2013 reported at 216 Taxman 190. Relevant observations of the court are as under:
"whereas section 44BB deals with a non-resident assessee providing, amongst others, services or facilities in connection with prospecting for, or extraction or production of, mineral oils, the sections mentioned in the proviso, referred to above, deal with fees received by non- resident assessees for providing, amongst others, services or facilities. Therefore, by adding the proviso with effect from 1st April, 2011, a clear cut distinction has been made between those non- resident assessees, who are engaged in the business of providing, amongst others, services or facilities in connection with prospecting for, or extraction or production of, mineral oils and other kind of non-resident assessees, who get fees for providing services or facilities. The Assessing Officer felt that, by reason of insertion of the said proviso, he can look into those completed assessments for the accounting years, which stood closed prior to 1st April, 2011 and, accordingly, exercised power under Section 148 of the Income Tax Act. By the judgment under appeal, the learned Judge has pointed out that there was no just reason for doing the same, inasmuch as, the distinction referred to above, according to the Income Tax Act, applies only since 1st April. 2011.
4. We, accordingly, refuse to admit the appeals. They are dismissed.”
It is submitted that the Hon'ble Delhi High Court in case of OIT vs. OHM Limited 352 ITR 406 has given a similar finding as of decision of BJ Services Middle East limited (Supra). Relevant observations of the Hon'ble High Court are as under:
“12. The second proviso to sub-section (1) of Section 44DA inserted by the Finance Act, 2010 w.e.f 01.04.2011 makes the position clear. Simultaneously a reference to Section 44DA was inserted in the proviso to sub-section (1) of section 44B8. It should be remembered that section 44DA also requires that the non-resident or the foreign company should carry on business in India through a permanent establishment situated therein and the right, property or contract in respect of which the royalty or fees for technical services is paid should be effectively connected with the permanent establishment. Such a requirement has not been spelt out in Section 44BB; moreover, a flat rate of 10 percent of the revenues received by the non-resident for the specific services rendered by it are deemed to be profits from the business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by the non-resident for the business of the permanent establishment in India and for expenditure towards reimbursement of actual expense by the permanent establishment to its head office or to any of its other offices is allowed from the revenues received by the non-resident. Because of the different modes or methods prescribed in the two sections for computing the profits, it apparently became necessary to clarify the position by making necessary amendments. That perhaps is the reason for inserting the second proviso to sub-section (1) of Section 44DA and a reference to section 44DA in the proviso below sub-section (1) of Section 44BB. A careful perusal of both the provisos shows that they refer only to computation of the profits under the sections. If both the sections have to be read harmoniously and in such a manner that neither of them becomes a useless lumber then the only way in which the provisos can be given effect to is to understand them as referring only to the computation of profits, and to understand the amendments as having been inserted only to clarify the position. So understood, the proviso to sub-section (1) of Section 44BB can only mean that the flat rate of 10 percent of the revenues cannot be deemed to be the profits of the nonresident where the services are of the type which do not fall under that section, but are more general in nature so as to fall under Section 44DA. Similarly, the second proviso to sub-section (1) of Section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section read with Explanation 2 to Section 9(l)(vii) of the Act, then an assessee rendering such services as provided in Section 44BB cannot claim the benefit of being assessed on the basis that 10 percent of the revenues will be deemed to be the profits as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w.e.f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions and their respective spheres of operation or to take away the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA.”
The above proposition has been followed in the case of Baker Hughes Asia Pacific Limited vs ADIT 167 TTJ 304 where in it has been held as under:
When viewed in the back drop of this objective, we find that section 44BB has been couched in such a manner so as to encompass within its ambit all services connected with oil exploration within its ambit. If a nonresident is engaged in the business of providing services or facilities in connection with or supplying plant or machinery on hire used, or to be used, in the prospecting for extraction or production of mineral oil then 10% of the aggregate of the amounts specified in sub- section (2) is deemed to be the profits and gains of such business chargeable to tax under the head "Profits and Gains of business or profession".
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 (Uttarakhand) in B.J. Services (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 (supra) and by the decision of the ITAT in CGG Veritas (supra) and Phonex (supra). Our submissions in respect of Argument no. 2 i.e. Benefit of section 44BB is not applicable on second leg contracts
It is submitted that the Hon'ble Delhi Tribunal in case of SBS Marine Limited vs. ADIT date of pronouncement 13-02-2015has held that benefit of section 44BB of the Act should not be denied to the second leg contract. Relevant extract of the pronouncement is as under:
Further, there is no requirement of a direct contract or agreement with the person actually engaged in prospecting for, or extraction or production of, mineral oils as canvassed by the revenue for the applicability of section 44B8. One may refer other provisions of the statue which insists on an agreement. For instance, section 42 deals with allowances allowable in computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation which the Central Govt. has entered into an agreement. Section 80IA(4)(i)(b) provides that the enterprise carrying on the business of developing, operating and maintaining any infrastructure facility has to enter into an agreement with the Central Government of a State Govt. or a local authority etc. In the absence of any requirement in section 4488 that the person providing services, facilities or plant and machinery on hire should have directly entered into a contract or agreement with the person actually engaged in prospecting for or extraction or production of mineral oils, one cannot curtail the scope or applicability of section 4488 to second leg contractors whose contracts or agreements are with first leg contractors but whose services or facilities or plant and machinery are used in connection with prospecting for or extraction or production of, mineral oils as required under section 44BB.The Hon'ble Supreme Court in ICDS Ltd v CIT [2013) 350 ITR 527 = 2013-TIOL-06- SC-IT held that the assessee leasing the vehicles to others who use the said vehicles in their business of running them on hire is entitled for higher rate of depreciation on the vehicles given on lease. It was held by the Hon'ble Supreme Court that the lessor need not himself use the vehicles in the business of running them on hire. The rationale of the aforesaid decision of the Supreme Court may be applied in the context of section 44BB in as much as section 44BB does not mandate that the assessee should directly enter into contract with the person engaged in the business of prospecting for or extraction or production of, mineral oils or the services or facilities or plant and machinery on hire should be directly provided to the said person alone. We have already given a finding of fact that the services and facilities provided by the assessee along with plant and machinery are used in offshore drilling operations i.e., the activity of prospecting for or extraction or production of mineral oils. Consequently, the requirements of section 44BB are satisfied in the present case.
In view of the above, there is no merit in the contentions of the revenue that the assessee is not an eligible assessee under section 4488 since it has not directly entered into contract with the ONGC and it is not undertaking the activities specified in section 44BB itself and being second leg contractors they are not eligible under section 44BB.
The Revenue has heavily relied on the judgment of the Hon'ble Supreme Court of India in Union of India vs. Gosalia Shipping Pvt. Ltd., 113 ITR 307 = 2002- TI/-40-SC-L8-INTL and the judgment of the Hon'ble Madras High Court in Poompuhar Shipping Corporation Ltd. vs. ITO, 360 ITR 257 = 2013-TII-37-HC-MAD-INTL in contending that the contracts entered into by the assessee with its customers are in the nature of a contract for hire of equipment. In Gosalia's case, the Hon'ble Supreme Court had to consider whether a hire charge paid under time charter was a payment on account of carriage of goods. In this context, the Hon'ble Supreme Court held at page-311 that in order that it may be said that amount was payable on account of the carriage of goods, it would be necessary to show that one is the consideration for other, that is to say, that the payment which the charterers had agreed to make to the owners of the ship was in consideration of the carriage of goods. It was observed that if the charterers were liable to pay the amount irrespective of whether they carry the goods or not, it would be difficult to say that the amount was payable on account of carriage of goods. It was held that the character of the payment cannot change according to the use to which the charterers put the ship or according as to whether the ship is loaded with goods in a port in India.
In the present case, the issue as to whether the payment made by the assessee's customers was on account of carriage of goods does not arise. The issue, that arises, is whether the assessee is rendering a service, providing a facility or giving a plant on hire. In fact, the Supreme Court observes at page-311 that one must have regard to the substance of the matter and, if necessary, tear the veil in order to see whether the true character of a payment is something other than what, by a clever device of drafting, it is made to appear. On a whole reading of the agreement entered into by the assessee with the charterers, we have already given a finding of fact that the assessee was providing
services or facilities in connection with the activity of prospecting for or extraction or production of mineral oils. The revenue's reliance of the above decision of the Supreme Court is therefore misplaced.
The judgment of the Hon'ble Madras High Court in Poompuhar Shipping Corporation Ltd. vs. ITO, 360 ITR 257 =2013- TI/-37-HC- MAD-INTL is not applicable since the said decision does not deal with the applicability or otherwise of section 44BB.The revenue's reliance on section 9(l)(vi) to categorize the assessee's income for hire of vessels as 'royalty' is also not correct since clause (iva) of section 9(l)(vi) excludes amounts referred to in section 44BB. The other arguments, decisions relied on by the learned DR including the one on 'Base erosion profit shifting' are also not relevant in the factual matrix of the present case and considering what we have already held. In view of the above, we hold that the income of the assessee for the year under consideration is to be computed in accordance with section 44BB of the Act. Consequently, Ground Nos. 1 and 2 are allowed.
It is further submitted that the above order of Hon'ble ITAT was affirmed by the Hon'ble Uttarakhand High Court by dismissing the appeal of revenue at the very threshold vide order dated 06-08-2015 in ITA No. 36/2015.
Similar view has been held in case of LOUIS DREYFUS ARMATEURES SAS in date of pronouncement 17.02.2015wherein it has been held that the provision of section 44BB does not distinguishes between the main contractor and a sub-contractor. Relevant extract of the pronouncement is as under:
A reading of the aforesaid judicial precedence clarify that sec. 44BB does not distinguish between the main contractor or a sub- contractor as has been interpreted by the AO and the DRP. The conclusions of the AO and the DRP are erroneous on account of the reason that the provision clearly envisages the non- resident assessee to be engaged in the business of supplying plant and machinery on hire. The only condition imposed, so to say, is that such plant and machinery has to be used or should be used for the purposes of prospecting for, or extraction or production of mineral oils. The language in section 44BB in our view is clear so also the legislative intention. It is a trite law that has already held by the Hon'ble Supreme Court in B. Parmannand vs. Mohan Koikal 2011 (4) see 266 that "the language employed in a statute is the determinative factor of the legislative intend. It is well settled principle of law that the Court cannot read anything into a statutory provision which is plan and unambiguous". If the legislatures intention as contended by the Revenue was to restrict the benefit of see. 44BB only to the main contractor or ONGC, then the words after 'the assessee engaged in the business of 'supplying plant and machinery on hire' or 'providing services or facilities' ought to have been omitted. Hence, where the provision does not create any discrimination between the person who
actually does the activity of prospecting for or extraction or production, and the person who supplies the plants and machinery, the narrow interpretation of the provision is thus not permitted. The basic condition to be satisfied in the said provision is that the plant or machinery supplied or lented on hire by the assessee, non-resident should be used in the prospecting for or extraction or production of minerals oils or where equipment has been supplied, such equipment should have been used for the purposes of prospecting for or extraction or production of mineral oils. Having regard to the above we are of the considered opinion that the fetter assumed by authorities below while interpreting the provisions of Section 44BB of the Act are manifestly absent and there is nothing in the said provision so as to disentitle a sub-contractor from invoking the said provision. Accordingly we do not find any fault in the claim of the assessee that revenues received under the charter agreements with CGG for providing two seismic survey vessels are in consideration with prospecting for, extractions or production of mineral oils and therefore taxable u/s 44BB of the Act.
It is submitted that the Hon'ble Delhi ITAT in case of AOIT vs. Baker Hughes Singapore Pte. Ltd date of pronouncement 20-04- 2015has held as under:
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 & ors Vs AOIT [34 ITR (Trib) 192J = 2014-TII-l04-ITAT-DEL-INTL and Baker Hughes Asia Pacific Limited Vs AOIT (ITA No. 6476/0el/12; order dated 5th September 2014) = 2014-Tl/-173-ITAT-DEL-INTL 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 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 4488 as it would be contrary to the decisions of Hon'ble jurisdictional High Court in the cases of Foramer France and Rolls Royce. It is contended that the provisions of Section 4400A, 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 440A, vide Finance Act 2010, though stated to be effective
from assessment year 2011-12 must be treated as c1arificatory in nature. A reference is made to the decision of Hon'ble Supreme Court, in the case of Union of India Vs Gosalia Shipping Pvt Ltd (113 ITR 307) = 2002-TII-40-SC-LB-INTLfor 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 Vs ADIT (269 CTR 433) = 2014-TII-35-HC-OEL- INTL contradicts the findings in the earlier Hon'ble Delhi High Court decision in the case of DIT Vs OHM Ltd (352 ITR 406), based on which the coordinate bench has decided this issue in favour of the assessee. 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 (supra) and Gosalia Shipping (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. We are thus urged to confirm the findings of the CIT(A) and decline to interfere in the matter.
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 -avis the party but also value neutral vis-a-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 vs. State of UP AIR 1980 se 1762 : (1980) 3 SCC 719 (p. 1764 of AIR 1980 SC), "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. vs. Union of India (1989) 3 see 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. Our submissions in respect of Argument no. 3 i.e. Decision of Hon'ble Delhi High Court in case of PGS Geophysical AS It is submitted that the decision of Hon'ble High Court in case of PGS geophysical AS 369 ITR 27 has recently been recalled by the Hon'ble Court vide order dated 01-05-2015.Relevant observations of the court are as under: "Learned Senior Counsel points out the relevant parts of the Assessing Officer's (AO) order, submissions made before the Income Tax Appellate Tribunal (ITAT), as well as the grounds of appeal to show that the consistent case of the appellant was that the services in question were excluded from the description of "technical services" by virtue of Section 9(1)(vii) Explanation 2 of the Income Tax Act, 1961. We have heard learned counsel for the parties and are of the opinion that since this question framed was part of the two questions originally framed but was subsequently recast, it would be appropriate in the interest of justice that the judgment disposing of the appeal dated 09.07.2014 is recalled; directed accordingly. ITA 612/2012 List the appeal on 17.07.2015 for further hearing on the substantial questions of law as formulated on 08.01.2013."
Thus, the Ld. AR prayed that the order of the ld. CIT (A) may be upheld.
We have heard both the sides and perused the material on record. The question whether the assessee is entitled to declare its income under the provision of section 44BB of the Act, has already been answered in the favour of the assessee vide order dated 21st November 2014 in in assessee’s own case for AY 2008-2009, we further find that the said order of the Tribunal was challenged by the Revenue before the Hon’ble jurisdiction Uttarakhand High Court, which was dismissed vide order dated 06.08.2015 in ITA NO28/Del/2015. The Hon’ble High Court while affirming the order of the Tribunal held as under:
“4. In the light of the judgment of the Hon'ble Apex Court in Civil Appeal No. 731 of 2007 and connected cases (Oil & Natural Gas Corporation Limited vs. Commissioner of Income Tax & another), the substantial questions of law relating to the assess ability of the amounts under Section 448B have to be answered against the appellant / revenue. Accordingly, we answer the said questions of law against the revenue in the light of the aforesaid judgment of the Hon'ble Apex Court. 5 …..
In such circumstances, the appeals are disposed of as follows: (i) We answer the questions of law relating to the assessability of the amounts under Section 44BB against the Revenue.”
9. In the light of the aforesaid order of the co-ordinate Bench which have been affirmed by the Hon’ble High Court, we respectfully follow the same and we hold that for the relevant assessment year i.e. AY 2010-11 the assessee is entitled to declare its income under the provision of section 44BB of the Act.