PGS Geophysical As Vs Income Tax Department (Delhi High Court)
Delhi High Court held that seismic survey services in connection with exploration of oil cannot be held to be in nature of Fees for Technical Services [FTS]/Royalty and hence not covered under section 44DA of the Income Tax Act. Accordingly, writ petition is allowed.
Facts- The petitioner is a non-resident company and is incorporated in Norway. It is engaged in the business of providing geophysical services to oil and gas industry. It conducts seismic surveys and provides offshore seismic data acquisition and other associated services such as processing and interpretation of such data.
The present petition has been filed seeking directions to quash a certificate and order dated 01.05.2025 passed by the respondent No.1/the Revenue u/s. 197 of the Income Tax Act, 1961 in the case of the petitioner for the Financial Year 2025-26, relevant to Assessment Year 2026-27, whereby a withholding tax of 7% of gross receipts has been imposed on the petitioner.
Conclusion- Held that offshore seismic survey has no construction, mining, assembly or any similar activity; thus, offshore seismic surveys and data acquisition does not fall under exceptions carved out from Explanation 2 to Section 9(1)(vii) of the Act. He stated that if the offshore seismic surveys and data acquisition is coupled with mining or drilling operation, then it may fall outside the scope of FTS. In the impugned order, the AO has merely stated that the services are in the nature of FTS/Royalty; hence the activities are covered under Section 44DA of the Act. There is no reason provided as to why there is a deviation from the earlier FY, wherein the receipts of the petitioner were held to be covered under Section 44BB of the Act. Further, the order does not specify as to whether the receipts (or parts thereof), are in the nature of FTS or in the nature of Royalty, to be covered under Section 44DA of the Act.
