Income earned by a non-resident by providing offshore service vessels on time charter basis is covered under Section 44BB

Bourbon Offshore Asia Pvt. Ltd. Vs DIT (AAR No. 937 of 2010) dated 12 July 2011- The taxpayer is engaged in the business of providing offshore oil and gas marine sub sea services. It also offers range of offshore oil service vessels to global oil and gas industry. Under the contract with Trans ocean Offshore International Ventures Ltd., who in turn is providing various offshore drilling and support services to ONGC, the tax payer has provided four vessels to TOIVL to be used on the east and west coast of India. For the purposes of section 44BB of the Act, the vessels provided are covered under the definition of “plant”.

The consideration received for supply of “plant” i.e. the vessels on hire when used in the prospecting for or extraction or production of oil and gas is covered under the special provision for computing profits and gains under section 44BB of the Act. The intention to exclude construction, assembly and mining or like project from the purview of fees for technical services under Explanation 2 to section 9 (1 )(vii) is to draw a line of distinction between business activities and mere rendering of services. The nature of receipts on account of provision of supply of vessels on charter hire basis cannot have the character of fees for technical services within the meaning of Explanation 2 to section 9(1 )(vii). The services required by TOIVL are rendered by the applicant by leasing the vessels under its control and command which cannot bear the character of fees for technical services. It further held that Transocean Offshore International Ventures Ltd may withhold taxes @ 4.22%.

BEFORE THE AUTHORITY FOR ADVANCE RULINGS (INCOME TAX) NEW DELHI

12^th Day of July, 2011

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