WESTERNGECO INTERNATIONAL LIMITED Vs. JAVED AKHTAR, DDIT (INTERNATIONAL TAXATION)

JUDGEMENT

(1.) THE applicant, WesternGeco International Ltd.(WGIL), is a company incorporated under the laws of British Virgin Islands and is a tax resident of British Virgin Islands. It is engaged in the business of acquisition and processing of 2D and 3D seismic data for companies engaged in the exploration and production of mineral oils in India. Applicant submits that the seismic data acquisition means the 2 generation and recording of seismic data relating to formation of sub -surface. The required data is collected on large storage tapes and then processed by specialist professionals with the help of specialized equipments to present the sub -surface data in a manner that can help geologist draw conclusions about existence of hydro -carbon in the areas. The applicant submits that it has entered into a contract with BHP Billiton Petroleum (International Exploration) Pty. Ltd. (BHP Billiton), a company incorporated under the laws of Australia. The contract relates to carrying out 2D marine seismic data acquisition and processing services in oil and gas blocks located some 350 km south -west of Mumbai and 300 km north -west of Cochin off -shore, the west coast of India.

(2.) APPLICANT submits that Section 44BB of the Income -tax Act, 1961 (Act) provides special provision for taxation of non -residents engaged in specified activities in the oil and gas sector. The revenues earned by the applicant under the seismic data acquisition and processing contract with BHP Billiton in India are taxable in accordance with Section 44BB of the Act. The applicant is of the view that in view of explanation to Section 9(1)(i) of the Act, in the case of a business of which all the operations are not carried out in India, the income that accrue or arise in India is only such part of the income as is reasonably attributable to the operations carried out in India. The mobilization revenues are primarily linked to the journey undertaken from the place of origin to the work site situated in Indian 3 territory and the demobilization revenues are linked journey undertaken by vessel from the work site situated in Indian territory to the site situated outside India. The mobilization/demobilization revenues taxable in the hands of the applicant in India should be restricted only to the revenues attributable to the distance travelled in the Indian territorial water as compared to the total distance travelled to / from India. Without prejudice, if the income is taxable under Section 44BB, the applicant submits that it should not be taxed as fees for technical services under the provisions of Section 115A and Section 44DA of the Act. The applicant has drawn attention to the rulings of this Authority in Geofizyka Torun Sp.zo. o AAR No. 813 of 2009; and in Seabird Exploration FZ LLC (AAR No. 815 of 2009), wherein it has been held that the services of data acquisition and processing are covered under the provisions of Section 44BB of the Act.

(3.) THE revenue contends that proviso to Section 44BB restricts the applicability of the substantive provisions of Section 44BB in relation to those persons who are either engaged in the business of prospecting for mineral oils or foreign companies who received fees for technical services from an Indian concern. The proviso would be rendered useless if it is held that the Section 44BB deals with all sorts of services, including technical or managerial. Instruction No. 1862 dated 22/10/1970 applies to those who are engaged in the drilling operations and not to those who carry out seismic surveys as no mining or like project is undertaken by such persons who carry out seismic surveys. The existence of a separate and specific provision for computing income by way of FTS or Royalties is not covered under Section 44BB in view of the clarification through amendment to Sections 44BB and 44DA w.e.f. 1.04.2011, as the intention of the legislature was to exclude the income in the nature of FTS or Royalty from the purview of Section 44BB as per the ratio laid down by the Hon'ble Supreme Court in the case of Sedco Forex International Drill, : 279 ITR 310. In the case of Foramer France, 317 ITR 18, the Hon'ble High Court of Uttrakhand has clearly laid down that services which are technical in nature are not covered under Section 44BB. The receipts on account of acquisition and processing of 2D and 3D seismic data are covered under Section 9)(1) (vii) of the Act as the receipts are to be examined under Section 5 and 9 of the Act. The presumptive sections are neither charging section nor do they elaborate the nature of income in the hands of the Assessee. The revenue contends that the 5 entire mobilization/demobilization revenues should be included in the 'gross receipts' for the purposes of taxation in view of the decisions in the cases of Atwood Occeanks Pacific Ltd. [2010 TII 12 HC], R&B Falcon Drilling [2009 TII 20 HC] ; Sundowner Offshore International Burmuda Ltd.[2009 -T11 -07]; etc.