The scope of ‘services’ in the context of Section 44BB is not restricted and they need not be only those which are other than ‘technical services’ under Section 9(1)(vii).

The scope of ‘services’ in the context of Section 44BB is not
restricted and they need not be only those which are other than ‘technical
services’ under Section 9(1)(vii).

The applicant was a tax resident of Poland (“PolCo”). It was
in the business of providing geophysical services to the international oil and
gas industry. It conducted seismic surveys and provided onshore seismic data
acquisition and other associated services such as processing and interpretation
of such data to global and oil companies. Seismic surveys are used to identify
hydrocarbons, increase exploration success, maximise production, better target
the oil and gas reserves and to reduce the overall exploratory drilling risks.
The short question before AAR was whether income derived by PolCo in India was
covered under section 44BB of the Act.

Before the AAR, the tax authorities contested the
applicability of Section 44BB on the ground that the services contemplated in
Section 44BB were other than those coming within the purview of Explanation 2 to
Section 9(1)(vii) of the Act, whereas the services provided by PolCo were
covered under the said provision. Further, ‘fees for technical services’ under
Section 9(1)(vii) should be computed under Section 44DA where the service
provider has a PE in India. It was also contended that PolCo itself was not
undertaking any mining or like project (which was being undertaken by someone
else), and that Section 44BB would come into play only if the services were out
of the purview of Section 9(1)(vii).

The AAR observed that it was an undisputed and undeniable
fact that PolCo was engaged in business in India. The AAR then referred to
Sections 44BB, 44DA and 115A and proceeded to consider the meaning of the
expression ‘in connection with’.

Held

Having regard to the meaning of the expression ‘in connection
with’, it is clear that the services provided by PolCo were in connection with
the prospecting for or extraction of mineral oils and there was real, intimate
and proximate nexus between the services performed by PolCo in India and
prospecting for or extraction of mineral oils.

The expression ‘services’ should be understood in its plain
and ordinary sense and in the absence of any limitation or exclusion in the
statute. There was no reason to assign narrow and restricted meaning and confine
it to ‘services other than technical, consultancy or managerial services’.
Section 44BB and Section 44DA being competing provisions, and Section 44BB being
a more specific provision, it should prevail.