Receipts from prospecting for, or extraction, or production of mineral oils taxable u/s 44BB

Cameron (Singapore) Pte. Ltd. Vs DCIT (ITAT Delhi)

ITAT Delhi held that scope and ambit of section 44BB of the Income tax Act is wide enough to include receipts of assessee from Cairn India and ONGC in connection with activity of prospecting for, or extraction, or production of mineral oils.

Facts- The assessee is a non-resident corporate entity incorporated under the laws of Singapore and a tax resident of Singapore. The assessee has challenged the decisions of the departmental authorities in holding that receipts from services relating to Progressive Cavity Pump system (PCP) and rental of tools/equipments to Cairn Energy India Pty. Ltd. (in short ‘Cairn India’) and Oil and Natural Gas Corporation (ONGC) is not in the nature of business profits to be taxed under section 44BB of the Income-tax Act, 1961 but is Fee for Technical Services (FTS).

Further, the assessee has challenged the taxability of the receipts from repair services stated to have been rendered directly from head office to Cairn India and ONGC. The assessee pleaded that such services have been rendered from head office at Singapore without involvement of the project office. Hence, such receipts cannot be linked to the PE, therefore, not taxable in India.

Conclusion- In the facts of the present case, undisputedly, the service provided by the assessee to Cairn India is in connection with activity of prospecting for, or extraction, or production of mineral oils. Merely because the services provided are of technical nature, that by itself, would not make the receipts FTS when there is special provision in the shape of section 44BB of the Act engrafted in the Statute to bring such kind of receipts for the purpose of taxation in India under the head ‘profits and gains from business or profession’. Thus, in our view, the scope and ambit of section 44BB of the Act is wide enough to include the receipts of the assessee from Cairn India and ONGC. At this stage, it is relevant to observe, in assessee’s own case for assessment year 2019-20, the Assessing Officer, while considering similar nature of receipts from ONGC, has accepted assessee’s claim under section 44BB of the Act.

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