The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that amount received for services rendered by non-residents in connection with prospecting for mineral oil charged to tax u/s 44BB.
The assessee, M/s. Technip France SAS is a non-resident corporate entity incorporated under the laws of France and a tax resident of the said country. The assessee is engaged in engineering, procurement, and construction business for oil production- off-shore and on-shore, refining petrochemicals, fertilizers, chemical fertilizers, non-conventional energy and submarine pipelines, etc. The assessee had earned income from the contract entered with Reliance Industries Limited (RIL).
The Assessing officer observed that the amount received by the assessee from the RIL contract can also qualify as FTS under Article 13 of India – France Double Taxation Avoidance Agreement (DTAA) and proceeded to compute the income of the assessee under section 44DA of the Act. The DRP while considering the objection raised by the assessee observed that the services rendered by the assessee are in connection with prospecting for mineral oil, such income of the assessee has to be taxed by applying the presumptive rate as per section 44BB of the Act.
The counsel appeared on behalf of the revenue submitted that the RIL engaged the assessee as a second-line contractor for providing certain services about repair/replacement of certain parts of plants/machinery used in prospecting for or extraction of mineral oils. Therefore, the provisions of section 44BB of the Act would not apply to the assessee.
The Tribunal observed that the amount received by the assessee does not fall in the category of FTS under section 9(1)(vii) of the Act, as it comes within the exception provided under explanation 2 to section 9(1)(vii) of the Act. Thus, the amount received cannot be regarded as FTS, under Article 13 of the India – France DTAA as the ‘make available’ condition is not satisfied.
The Coram of Mr. G.S. Pannu, President, and Mr. Saktijit Dey, Judicial Member has held that “we have no hesitation in holding that the amount received by the assessee has to be charged to tax under section 44BB of the Act. Therefore, we do not find any valid reason to interfere with the decision of learned DRP. Grounds raised are dismissed”.
Mr. Ajay Vohra and Smt. Sapna Bhatia appeared on behalf of the appellant and respondent respectively.
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