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
12th Day of July, 2011
A.A.R. No. 937 of 2010
Mr. Justice P.K. Balasubramanyan (Chairman) Mr. V.K. Shridhar (Member)
|Name & address of the applicant||Bourbon Offshore Asia Pte. Ltd
21 UBI Road 1
|Commissioner concerned||Director of Income-tax
(International Taxation)- II, Delhi
|Present for the applicant||Dr. Anitha Sumanth, Advocate
Mr. Akhil Sambar, ACA
Mr. Taranpreet Singh, FCA
Mr. Upvan Gupta, ACA
Mr. Sanjay Agarwal, FCA
|Present for the Department||Mr. Y D Sharma
Addl. DIT(Intl Tax.), Dehradun
(By V K Shridhar)
The applicant, Bourbon Offshore Asia Pte Ltd (BOA), is a company formed and registered under the laws of Singapore and is a tax resident of Singapore. The applicant states that it offers a comprehensive range of highly productive and new generation innovative offshore service vessels to global oil and gas industries. The vessels assist and support offshore drilling and marine operations. The applicant has entered into a time charter vessels hiring agreement on 26 April, 2006 for provisions of its offshore service vessels to Transocean Offshore International Ventures Ltd. (TOIVL) in India. TOIVL is providing various offshore drilling and support services to Oil and Natural Gas Corporation Ltd. (ONGC). For execution of the contract, TOIVL has entered into a uniform time charter vessel agreement with the applicant. Being a time charter agreement, the entire operation, navigation and management of the vessel provided on hire is under the exclusive command and control of the applicant. The vessel is operated and services are rendered as requested by TOIVL but are subject to exclusive rights of the applicant.
1. Whether on the stated facts and in law the income derived by BOA ought to be computed in accordance with the computation mechanism under section 44BB of the Act?
2. If the answer to question 1 is in affirmative, what would be the rate at which tax is to be withheld from payments made by Trans ocean to BOA towards time charter of service vessel?
“If he business is of the pecific nature envisaged under 44BB, the computation provision therein would prevail over the computation provision in section 44DA. In other words the income received by a non-resident businessman for the technical services provided in relation to prospecting and extraction of mineral oil will be governed by S.44BB for the purposes of computation. If all the services that are in the nature of technical services within the meaning of Explanation 2 to section 9(1) (vii) are to be computed in accordance with 44 DA, very little purpose will be served by incorporating special provision in 44BB for computing the profits in relation to the services connected with the exploration and extraction of mineral oils. The provision will then operate in a very limited field.”
8. The nature of receipts on account of provision of supply of vessels on 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 using the vessels under its control and command which cannot bear the character of fees for technical services.
9. Question no.1 is answered in the affirmative and in favour of the applicant.
Question no.2: The rate at which tax is to be withheld from payments made by Trans ocean to BOA towards time charter of service vessels will be 4.22%.
Accordingly, ruling is given and pronounced on 12th day of July,2011.