The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that repair work inextricably connected with prosecting, extraction or production of mineral oil are taxable under Section 44B of the Income Tax Act, 1961.
The assessee, Cameron (Singapore) Pte. Ltd. has challenged the taxability of the receipts from repair services stated to have been rendered directly from head office to Cairn India and ONGC.The aforesaid receipts were not offered to tax by the assessee pleading that such services had been rendered from head office at Singapore without involvement of the project office. Hence, such receipts cannot be linked to the PE, therefore, not taxable in India.
The Assessing Officer, was of the view that the services rendered were of the nature of technical service, hence, would fall within definition of FTS under Section 9(1)(vii) of the Income Tax Act as well as treaty. AO held that a major portion of services include training of personnel of ONGC and Cairn India, which means that the make available condition of Article 12(4)(b) was satisfied, Therefore the receipts were in the nature of FTS.
Salil Kapoor, on behalf of the assessee submitted that the receipts were intrinsically connected to the activity of exploration and extraction of mineral oil, they could be taxed under section 44BB of the Act. Sanjay Kumar, on behalf of the revenue, relied upon the observation of the Assessing Officer.
The two-member Bench of G.S. Pannu, (President) And Saktijit Dey, (Judicial Member) allowed this ground of appeal holding that, receipts from repair work were inextricably connected with prospecting, extraction or production of mineral oil, hence, such receipt has to be taxed under Section 44BB of the Income Tax Act.
“In case of ONGC Vs. CIT, the Hon’ble Supreme Court, while interpreting the provisions contained under section 44BB of the Act in the context of scope of work covered under the contract, has considered the entire gamut of work executed under the contract, including repair, training of personnel etc. and held that the pith and substance of each of the contracts is inextricably connected with prospecting, extraction or production of mineral oil. Thus, applying the ratio laid down in the aforesaid decision”, the bench further observed.
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