September 2016
[2016] 71 Taxmann.com 351 (Delhi-Trib) ADIT(IT) vs. International Technical Services LLC A.Y.: 2009-10, Date of order: 11th July, 2016
By Geeta Jani, Dhishat B. Mehta; Chartered Accountants
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Sections 44BB , 44DA, 115A of the Act – Section 44BB of the Act does not mandate that the services should be provided directly by the party engaged in prospecting etc. of mineral oil; Provision of services of technical personnel for carrying out drilling activities is covered by Section 44BB of the Act.
Facts
The Taxpayer a non-resident (NR) provided services of highly specialized offshore personnel to a third party. The third party (also a non-resident) required these personnel for carrying out drilling operations in relation to its contract with an Indian company.
Taxpayer contended that provision of technical personnel is for carrying out drilling operations and hence would be covered by presumptive taxation provisions of section 44BB. However, the Assessing Officer (AO) argued that the income of the Taxpayer would be determined on net basis as per the provisions of section 44DA.
Aggrieved, the Taxpayer appealed before Dispute Resolution Panel (DRP), who subsequently directed the AO to compute income u/s 44BB.
The AO appealed before the Tribunal
Held
Taxpayer provided key technical personnel for conducting actual drilling operations. The service was an integral part of the drilling operations in connection with prospecting, extraction or production of mineral oil. Hence, it cannot be said that the activities of the Taxpayer were not “in connection with prospecting for or extraction or production of mineral oils”.
Section 44BB requires that the services/facilities provided by the Taxpayer should be “in connection with” prospecting etc. of mineral oil. It however, does not mandate that such services should be provided directly by the party engaged in prospecting etc. of mineral oil. Reliance in this regard was placed on the Mumbai Tribunal ruling in Micoperi S.P.A. Milano vs. DCIT (2002) 82 ITO 369 (Mum).
Section 115A was not applicable in the present case as payment was received from a NR. The decision in the case of CIT vs. Rolls Royce Pvt. Ltd. 170 Taxman 563 (Uttarakhand High Court) did not apply as in that case the services were rendered to an Indian company whereas in the present case services were rendered to a NR.
Thus services rendered by Taxpayer were covered by section 44BB.
