Issue before court:
- Whether the amounts paid by the ONGC to the non-resident assessees /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 44BB of the Act.
Brief facts:
- The appellant-ONGC has been assessed in a representative capacity on behalf of the different foreign companies with whom it had executed separate agreements for services to be rendered by such companies in connection with prospecting, extraction or production of mineral oils by ONGC.
- The assessing authority took the view that the assessments should be made under Section 44D of the Act and not Section 44BB of the Income Tax Act being engaged in mining activities.. CIT (A) and the ITAT allowed appeals in favour of assessee. Revenue took the matter before High Court of Uttrakhand.
- High Court overturned the view taken by the CIT (A) & ITAT and held the payments made to be liable for assessment under Section 44D of the Act. Aggrieved, the ONGC has filed the present group of appeals.
- Hon’ble High Court made an analysis of clauses of the contract made between ONGC and foreign company and it had come to light before the High Court that the contract between the parties visualized operation of the oil rigs including drilling operations by the personnel made available under the contracts/agreements, which fact was further stated on affidavit before the High Court by an authorized official of the ONGC in the following terms.
“That under the said agreement, Foramer was required, through its personnel listed in Exhibit-A to the said agreement, to carry out inter-alia the drilling operations specified in clause 4.3 to 4.10 of the said agreement.”
Contention of the revenue:
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