IN RE: BOURBON OFFSHORE ASIA PTE. LTD Vs. STATE

JUDGEMENT

(1.) THE applicant, Bourbon Offshore Asia Pte Ltd., (BOA), is a company formed and registered under the laws of Singapore and is a tax resident of Singapore. The applicant states that it offers a comprehensive range of highly productive and new generation innovative offshore service vessels to global oil and gas industries. The vessels assist and support offshore drilling and marine operations. The applicant has entered into a time charter vessels hiring agreement on 26 -4 -2006 for provisions of its offshore service vessels to Transocean Offshore International Ventures Ltd., (TOIVL) in India. TOIVL is providing various offshore drilling and support services to Oil and Natural Gas Corporation Ltd., (ONGC). For execution of the contract, TOIVL has entered into a uniform time charter vessel agreement with the applicant. Being a time charter agreement, the entire operation, navigation and management of the vessel provided on hire is under the exclusive command and control of the applicant. The vessel is operated and services are rendered as requested by TOIVL but are subject to exclusive rights of the applicant. The applicant submits that the offshore drilling activities are an integral part of exploration and prospecting activities for mineral oil. The entire process of offshore drilling is done from offshore service vessel equipped with various equipments. Therefore such offshore services vessels are the basic requirement for carrying out activity of offshore drilling operations.

(2.) THE applicant submits that section 44BB of the Income -tax Act, 1961 (Act) applies to non -residents who are engaged in the business of providing services or facilities which are in connection with or supplying plant and machinery on hire used, or to be used in the prospecting for or extraction or production of mineral oil. One of the very generally accepted meanings of "in connection with" is "relation between things one of which is bound up with or involved in another": or again having to do with. Therefore, "in connection with" any activity would mean that everything which is connected with any of the three activities, namely, prospecting for, extraction of or production of mineral oil would fall within its scope. The applicant is of the view that the facilities or services provided must be linked or related to the above three activities in such a way that it would not be possible to carry out such activities in isolation without the aid of services or facilities. The provision of service vessel by the applicant is thus an integral part of the entire process of offshore drilling activities and cannot be carried without the use of service vessel. It is contended that the services provided by the applicant are in connection with the activities of prospecting for mineral oil as envisaged under section 44BB of the Act. The applicant has relied on the ruling of this Authority in the case of Wavefield Inseis ASA, In re, [2010] 187 Taxman 62 wherein the income derived by provision of time charter seismic vessel is held to be computed under the computational mechanism of section 44BB of the Act and the effective rate at which the tax has to be withheld from the payments would be 4.223 per cent.

(3.) ADVANCE ruling is sought on the following questions raised by the applicant: