DEPUTY COMMISSIONER OF INCOME TAX Vs. SCHLUMBERGER SEACO INC
LAWS(IT)-1994-2-6
INCOME TAX APPELLATE TRIBUNAL
Decided on February 28,1994

Appellant
VERSUS
Respondents

JUDGEMENT

R.V. Easwar, Judicial Member - (1.) THE appeals are by the Revenue. THE assessee is a non-resident company. In respect of the assessment years 1983-84, 1984-85 and 1986-87, the appeals arise out of the orders passed by the ITO under Section 154 of the I.T. Act. In respect of the assessment year 1987-88 the appeal arises out of the assessment made under Section 143(3) of the I.T. Act.
(2.) The assessee entered into contracts with ONGC and Oil India Ltd. (OIL). These contracts related to certain services to be rendered by the assessee in respect of on-shore explanatory wells owned by ONGC and OIL located in the eastern and central region of India. The contract with ONGC was made on 21-2-1985. The contract with OIL was made on 26-11-1987 to take effect from 1-1-1986. The assessments for the assessment years 1983-84, 1984-85 and 1986-87 were made prior to the introduction of Section 44BB of the I.T. Act by the Finance Act, 1987 which made the said section applicable with retrospective effect from 1-4-1983, i.e., from the assessment year 1983-84 onwards. In the assessments, apparently the income of the assessee had been computed applying the normal provisions of the Income-tax Act applicable for income from business. The assessee, pursuant to the introduction of Section 44BB, moved applications before the ITO under Section 154 of the Act praying for rectification of the assessments by applying the provisions of Section 44BB. The applications were rejected by the ITO by orders dated 30-3-1990. On the same day, the assessment for the assessment year 1987-88 had been completed under Section 143(3) of the Act. In the course of that assessment, the assessee had claimed that the provisions of Section 44BB were applicable to the computation of its income. The ITO for reasons stated in the assessment order for the assessment year 1987-88, had rejected the assessee's claim. He applied the provisions of Section 115A of the Act read with Section 44D(b) of the Act. While rejecting the assessee's request for applying the provisions of Section 44BB to the computation of its income for the assessment years 1983-84, 1984-85 and 1986-87, the ITO relied on the reasons given by him in the assessment order for the assessment year 1987-88. The CIT (A) to whom the appeals are preferred by the assessee, accepted the assessee's contention and directed the computation of the income for all the years under Section 44BB of the Act.
(3.) THE Department is in appeal before us questioning the correctness of the conclusion of the CIT (A) for all the years. Mr. Rajesh, the Ld. D.R. submitted that the provisions of Section 115A read with Section 44D were applicable and therefore the proviso to Sub-section (1) of Section 44BB came into play. THE assessee's case was, therefore, according to him, taken out of the sweep of Sub-section (1) of Section 44BB. He pointed out that the assessee was rendering certain services to ONGC and OIL under the contracts and therefore the fees received by the assessee for such services should be treated as fees for technical services within the meaning of Section 9(1)(vii), Explanation 2. THE case of the assessee, according to Mr. Rajesh, is therefore covered by the provisions of Section 115A, the Explanation to which refers to the provisions of Explanation 2 to Section 9(1)(vii). As against this contention, Mr. Dastur, the Ld. Counsel for the assessee, strongly urged that the conclusions of the CIT (A) both on the facts as well as on the interpretation of the statutory provisions were unassailable. He took us through the relevant contracts, copies of which were submitted before us and pointed out that the assessee was engaged in a work in India for exploration of oil. According to him, the income derived by the assessee for carrying out such work was not fees for technical services within the meaning of Explanation 2 to Section 9(1)(vii). He pointed out that even if it is considered as fees for technical services within the meaning of Explanation 2 to Section 9(1)(vii). THE exclusionary part of the said Explanation took out the case from the sweep of the Explanation. He further drew our attention to various Tribunal's orders where similar contracts have been interpreted to give rise to income of the nature specified in Section 44BB. THE opinion of the Attorney General on this question was also relied upon by him. Mr. Dastur also drew our attention to the Circular issued by the CBDT in F. No. 500/6/89-FTD, dated 22-10-1990 in support of the assessee's claim. In respect of the assessment years 1983-84, 1984-85 and 1986-87 Mr. Dastur submitted that non-application of the provisions of Section 44BB to these assessment years constituted a mistake apparent from the record and therefore the assessments ought to have been rectified as directed by the CIT(A). He referred to the following decisions in this connection : 1. M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co. Ltd. [1958] 34 ITR 143 (SC). 2. ITO v. Asok Textiles Ltd. [1961] 41 ITR 732 (SC). 3. India Woollen Textile Mills (P.) Ltd. v. CIT [1978] 111 ITR 205 (Punj. & Har.). 4. ITO v. Sri Varadaraja Textiles (P.) Ltd. [1984] 9 ITD 469 (Mad.). According to Mr. Dastur, the provision was introduced by the Finance Act, 1987 with retrospective effect from 1-4-1983 and the non-consideration of Section 44BB to these assessment years constituted an error apparent from the record. Mr. Dastur submitted that at any rate, after the opinion of the Attorney General which was also followed by the CBDT in its Circular there can be no debate on the question and therefore the CIT (A) was right in directing the ITO to apply the provisions of Section 44BB in computing the income for these years.;


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