Revenue Received for Seismic Data Acquisition, Mining Projects are not FTS, Taxable u/s 44B of Income Tax Act: ITAT [Read Order]

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT), observed that the revenue received on account of provision of facilities and services of seismic data acquisition and mining services are not Fees for Technical Services (FTS) taxable under Section 44B of the Income Tax Act, 1961.

On account of difference of opinion between the Accountant Member and Judicial Member of the ITAT Bench New Delhi, the matter has been referred to PM Jagthap, Vice President as Third Member by the President, ITAT for consideration and disposal under Section 255(4) of the Income Tax Act, 1961.

The issue in the present matter is whether the revenue received by the assessee on account of provision of facilities and services of seismic data acquisition, planning and carrying out of pre-survey study, taking marine data and confirming prospects, maintenance / upgradation/support of software licenses, etc, is taxable as FTS under Sections 44DA r.w.s. 9(1)(vii) or is taxable under Section 44BB of the Income Tax Act, 1961?

The assessee, Western Geco International Ltd, is a non-resident company having Permanent Establishment in India. During the year under consideration, the assessee generated revenue from 16 contracts which, as admitted by the Assessing Officer himself, were continuing from earlier years except for contract with BHP Billiton Petroleum [International Exploration] Pty. Ltd. The income from the said contracts as earned during the year under consideration was offered to tax by the assessee at the presumptive rate of 10% under Section 44BB of the Income-tax Act, 1961.

Reliance was placed on behalf of the assessee on the decision of Supreme Court in the case of ONGC Limited vs. CIT, wherein it was held that similar services provided by the assessee were specifically covered under the provision of Section 44BB of the Income Tax Act and, therefore, general provision of Section 44DA of the Income Tax Act could not be applied.

The Third Member observed that “The said services or facilities provided by the assessee actually are inextricably connected with prospecting for, or extraction or production of, mineral oils as held by the Supreme Court in the case of ONGC, under the similar facts and circumstances and the revenue received for the same accordingly is taxable under Section 44BB of the Income Tax Act.”

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