HIGH COURT OF UTTARAKHAND

Commissioner of Income-tax

v.

ONGC as Representative assessee of Rolls Royce (P.) Ltd.

P. C. VERMA AND M. M. GHILDIYAL, JJ.

IT APPEAL NO. 86 OF 2007

September 20, 2007

Section 44D, read with sections 115A and 44BB of the Income-tax Act, 1961 - Foreign companies, computation of income by way of royalty, etc., in case of - Assessment year 2000-01 - Assessee non-resident company, rendered services for inspection of existing control system of three units of ONGC at SHP platform and for utilizing services of engineer for Y2K roll over time at offshore installation - Assessing Officer taxed fee received by assessee under section 44D, read with section 115A, on ground that service rendered by assessee was technical service - Commissioner (Appeals) upheld order of Assessing Officer - However, Tribunal set aside that order holding that it was a service rendered in connection with production of oil and, therefore, assessment was to be made under section 44BB - Whether since services rendered by assessee was a technical service which could not be rendered by anyone else who had no relevant technical expertise, fee received by assessee for such technical service was chargeable to tax under section 44D, read with section 115A - Held, yes

FACTS

The assessee, a non resident company, in terms of the contract with the ONGC rendered services for inspection of the existing control system of three units of RR Avon Gas Generator Driver Process Gas Compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at off shore installation. The Assessing Officer taxed the fee received by the assessee for said inspection under section 44D, read with section 115A, on the ground that service rendered by the assessee was technical service. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. However, the Tribunal upset the order of the Assessing Officer holding that it was a service rendered in connection with production of oil and, therefore, assessment was to be made under section 44BB.

On appeal, under section 260A:

HELD

The undisputed position of fact was that the inspection was of the control system of three units of RR Avon Gas Operator Driven Process Gas Compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at offshore installation were rendered by the engineer of non-resident company and the fee was paid in consideration thereof. Thus, the service was obviously a technical service within the meaning of Explanation 2 appended to clause (vii) to sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A and proviso appended to section 44BB (1) clearly excludes the application of section 44BB where section 42 or 44D or section 115A or section 293A apply. [Para 6]

In view of the admitted fact that the assessee had received fee as consideration for the services rendered which were technical in nature and which could not be rendered by anyone else who does not have the technical expertise of that RR Avon Gas Generatror Driven Process Gas Compressor or Y2K roll over time at offshore installation as he could not be able to inspect and give advice. Therefore, the advice given was purely technical in nature and, accordingly, the service rendered was a technical service squarely covered under Explanation 2 appended to clause (vii) to sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A. [Para 7]

Therefore, the judgment of the Tribunal was to be set aside and the orders of the Assessing Officer and the Commissioner (Appeals) were to be affirmed. [Para 8]