Foreign companies to pay tax on revenue earned under seismic data acquisition and processing contracts – AAR

OHM Limited Vs. DIT (AAR No. 935 of 2010) – Foreign firms operating in the country will have to pay tax at the existing rate of 4.223 per cent on revenue earned under seismic data acquisition and processing contracts, says a tribunal.  In a ruling, the Authority of Advanced Rulings (AAR) held that foreign firms would not enjoy any leeway even if their income falls under the label of royalties or is considered as fees for technical services.=

“The entire mobilization or demobilization revenues received by the applicant with respect to seismic data acquisition and/or processing contracts would be taxable in India at the effective rate of 4.223 per cent,” the AAR said.

Mobilization and demobilization revenues are the fees levied by a contractor for transporting the seismic equipment or vessel and personnel to and from a project site, as well as costs linked to establishment of site offices and other facilities.

The AAR”s ruling came in response an application filed by UK-based firm OHM Ltd, which provides geophysical services to oil and gas exploration industry.

OHM had sought to know whether revenues earned by it under seismic data acquisition and processing contracts in India are taxable under the Income Tax Act.

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