The appellant PGS Exploration is a Norwegian Company (Foreign Company)engaged in the business of providing Geophysical services worldwide. These services include the services of acquiring and processing two dimensional and three-dimensional seismic data (both on land and offshore). The acquisition of seismic data is the primary method of exploring for hydrocarbon deposits. The two Indian Companies, M/s B.G. Exploration and Production India Limited and Reliance Industries Limited who had been granted exploration licenses engaged the services of the Assessee for acquiring and processing three-dimensional marine seismic data with respect to an offshore block awarded to the said companies.
The Assessee opted to be taxed on a presumptive basis under Section 44BB(1) of the Income Tax Act at the rate of 10% of the gross revenue. In conformity with the same, the assessee also applied to the Income Tax Authorities for authorizing TDS at lower rates. RIL also filed an application for deducting TDS at a lower rate on the basis that the tax on the income of the Assessee from the contracts in question was to be computed under Section 44BB of the Act. These applications were accepted and the concerned officers issued orders under Section 197/195 of the Act, authorizing the deduction of TDS at the rate of 4.223% of the gross amounts payable by the contracting oil companies (BG and RIL) to the Assessee for the financial year 2007-2008.
The Assessee also filed its return of income for the Previous Year 2007-2008 (AY 2008-09) on 30.09.2008 declaring a total income of `26,87,46,256/-. The said return was rejected by the Assessing Officer on the ground that its income was not liable to be taxed on a presumptive basis under Section 44BB(1) of the Act and held that the services provided by the Assessee were technical in nature and the consideration payable to the Assessee for rendering services in terms of the contracts in question was “fees for technical services” within the scope of Section 9(1)(vii) of the Act. Accordingly, the AO held that the tax on such income was to be computed under the provisions of Section 115A of the Act and not under Section 44BB(1) of the Act.
On dissatisfied by the Order, the appellants knocked the door of DRP, but the Order was held valid. On appeal, the Tribunal also rejected the contention of the appellant and that the services rendered by the appellants do not fall within the scope of “construction, assembly, mining or like the project” and, therefore, the consideration received for the said services was included within the ambit offers for technical services’. Further, the Tribunal decided to remit the matter to the AO for determining whether the Assessee had a PE in India and whether the consideration received by it was connected with that PE.
The Delhi High Court, while deciding the appeal, upheld the decision of the Tribunal and the Assessment order by holding a view that the consideration received by the Assessee from BG and RIL was fees for technical services. The Court further uphold the opinion of the Tribunal income of the appellant, in the nature of “fees for technical service” was liable to tax in India under section 44BB of the Act only if the appellant had Permanent Establishment (“PE”) in India in the relevant assessment year. The matter was, therefore, remanded to the Assessing Officer by the Court to assess the Assessee‟s income and the tax payable thereon by applying the provisions of Section 44BB of the Act.
Read the full text of the judgment below.
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