Amit Arora
Stand of Company :
Assessee had offered gross receipts from the said contracts with M/s. ONGC Limited and M/s Petrogas E&P LLC and had applied provisions of 44BB thereon and computed income at DPR of 10%. Assessee has submitted that the nature of the services performed under both the above contracts clearly showed that assessee had carried out Geophysical Seismic Survey along with data interpretation of the data so collected along with Vessels and the crews including all necessary personnel, equipment and supplies necessary for execution of the scope of work mentioned in the contract.
Action of AO:
The Ld. AO taxed the income of the assessee as “Fee for technical services” (FTS in short) since it had provided services of 3D Seismic Data Acquisition and Processing which is FTS in nature as per the above contracts. While doing so the Ld. AO is of the view that the amendment made by the Finance Act 2010 is retrospective in nature.
Ld. CIT(A) has held as under:
“3.2 The findings of ld. AO and the averments of Ld. ARs have been considered. The plethora of cases cited and the scope of work as per the contracts makes it clear that the Appellant is engaged in activities covered under section 44BB of the Act. Also no retrospectivity can be read into the amendment to section 44BB and section 44DA of the Act following the case of B.J. Services reported in 339 ITR 169 (UK). Furthermore, following the case of CGG Veritas (Supra) the Appellant deserves to have his income computed u/s 44BB considering that there is a PE in existence in India. Due to these factors the income is to be assessed u/s 44BB of the Act.”
Before the Hon’ble ITAT
Argument of departmental representative before Hon’ble ITAT
- Amendment in section 44BB and 44DA should be read as retrospective
- Benefit of section 44BB is not applicable on second leg contracts
- Decision of Hon’ble Delhi High Court in case of PGS Geophysical AS
Argument of Authorized representative of Company before Hon’ble ITAT
Reg. Argument no. 1 i.e. Amendment in section 44BB and 44DA should be read as retrospective – In this regard reliance is placed on the decision of Hon’ble Uttarakhand High Court in case of BJ Services Company Middle East Limited Vs. DCIT 3391TR 169. It is submitted that the revenue has filed an special appeal before the Hon’ble Uttarakhand High Court against the above case and same has been dismissed by the Hon’ble High Court vide order dated May 28th 2013 reported at 216 Taxman 190. Further reliance placed on Hon’ble Delhi High Court in case of OIT vs. OHM Limited 352 ITR 406 and Baker Hughes Asia Pacific Limited vs ADIT 167 TTJ 304.
Reg. Argument no. 2 i.e. Benefit of section 44BB is not applicable on second leg contracts – In this regard reliance is placed on Hon’ble Delhi Tribunal in case of SBS Marine Limited vs. ADIT ITA No. 107/DEL/2012 date of pronouncement 13-02-2015, LOUIS DREYFUS ARMATEURES SAS in ITA No. 5814/DEL/2010 date of pronouncement 17.02.2015, ADIT vs. Baker Hughes Singapore Pte. Ltd ITA No.744/0EL/2013 date of pronouncement 20-04-2015.
Reg. Argument no. 3 i.e. Decision of Hon’ble Delhi High Court in case of PGS Geophysical AS – in this regard it is submitted that the decision of Hon’ble High Court in case of PGS geophysical AS 369 ITR 27 has recently been recalled by the Hon’ble Court vide order dated 01-05-2015.
The authorized representative heavily relied on the decision of Hon’ble Apex Court in case of ONGC Limited in ITA No. 731 of 2007 date of pronouncement July 1st, 2015.
Hon’ble ITAT has held as under:
8. We have heard both the sides and perused the material on record. The question whether the assessee is entitled to declare its income under the provision of section 44BB of the Act, has already been answered in the favour of the assessee vide order dated 21st November 2014 in ITA No.5823/Del/2011 in assessee’s own case for AY 2008-2009, we further find that the said order of the Tribunal was challenged by the Revenue before the Hon’ble jurisdiction Uttarakhand High Court, which was dismissed vide order dated 06.08.2015 in ITA NO28/Del/2015. The Hon’ble High Court while affirming the order of the Tribunal held as under:
“4. In the light of the judgment of the Hon’ble Apex Court in Civil Appeal No. 731 of 2007 and connected cases (Oil & Natural Gas Corporation Limited vs. Commissioner of Income Tax & another), the substantial questions of law relating to the assess ability of the amounts under Section 448B have to be answered against the appellant / revenue. Accordingly, we answer the said questions of law against the revenue in the
light of the aforesaid judgment of the Hon’ble Apex Court.
5 …..
6. In such circumstances, the appeals are disposed of as follows:
(i) We answer the questions of law relating to the assessability of the amounts under Section 44BB against the Revenue.”
9. In the light of the aforesaid order of the co-ordinate Bench which have been affirmed by the Hon’ble High Court, we respectfully follow the same and we hold that for the relevant assessment year i.e. AY 2010-11 the assessee is entitled to declare its income under the provision of section 44BB of the Act.
10. The next question is whether the Amendment in section 44BB and 44DA should be read as retrospective is also no longer Res-Integra as pointed out by the Ld. AR. In B J service company middle East Ltd vs DCIT 339ITR169 by order dated 20.08.2011, the Hon’ble Uttarakhand High Court, the jurisdiction High Court has held as under:
“55. As stated earlier, the combined effect of the provisions of s. 44BB, 44DA and 115A of the Act will not have a bearing to the cases in hand in as much as the Explanatory Note to the Finance Bill, 2010 clearly indicates that the amendments proposed in s. 44BB and 44DA of the Act would take effect from 1st April, 2011 and would apply in relation to the asst. yr. 2011-12 and subsequent years. The amendment is prospective in nature and would not apply to the cases in hand which is of the earlier assessment years.”
(Author is Direct Tax Manager with Nangia & Co)
