1. This appeal under section 260A of the Income-tax Act, 1961, has been filed against the order dated December 22, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench “D”, New Delhi (for short, “the ITAT”) in I.T.A No. 1638(A)/Del/2004, whereby the Income-tax Appellate Tribunal has allowed the appeal of the assessee and held that the amount paid to the non-resident company was in lieu of the service rendered by the nonresident company to ONGC, which is representing the assessee in this appeal and is assessable under section 44BB of the Income-tax Act and not under section 44D read with section 115A of the Income-tax Act. Dispute relates to the assessment year 2001-02.
2. The facts, in brief, are that an agreement was entered into between the non-resident company/assessee represented by ONGC and ONGC and in terms of the said contract, non-resident company rendered services for inspection of the existing control system of three units of RR avon gas generator driven process gas compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at offshore installation.
3. It is not in dispute that this offshore installation is within the water territory of India at offshore. The inspection was of the compressor which was being used at the SHP platform plant installed for extracting the oil by ONGC. ONGC had not disputed that the non-resident company was not required to inspect the plant and purpose of inspection could be only for the technical advice.
4. The Assessing Officer has taxed Rs. 10,53,310 at 15 per cent, as per the DTAA between India and Singapore under section 44D read with section 115A treating that service rendered by the non-resident company was technical service. The Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer. The Income-tax Appellate Tribunal has upset the order of the Assessing Officer and held that it was a service rendered in connection with the production of oil. Therefore, the assessment could be made under section 44BB of the Income-tax Act.
5. The question of law which arises to be answered by this court is as under:
“Whether the service rendered by inspecting the three units of control system of RR avon gas generator driven process gas compressor used in connection with the production of oil at SHP platform can be said to be a technical service or not?”
6. The undisputed facts of the case are that the non-resident company, M/s. Rolls Royce Pvt. Ltd., Singapore, represented by ONGC in terms of the contract between the ONGC, inspected the existing control system of three units of RR avon gas generator driven process gas compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at offshore installation in India. It is also not in dispute that the inspectors were well trained technical hands who inspected the plants and gave their advice to ONGC and received the payment as fee. Now, whether this activity falls under Explanation 2 to clause (vii) of sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A. Explanation 2 to section 9(1)(vii) of the Act reads as under:
“For the purposes of this clause, ‘fees for technical services’ means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration that would be income of the recipient chargeable under the head ‘Salaries’.”
7. In view of the undisputed position of the fact, as stated above, that the inspection was of the control system of three units of RR avon gas operator driven gas compressor at SHP platform and for utilizing services of engineer for Y2K roll over time at offshore installation were rendered by the engineers 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) of sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A and the proviso appended to section 44BB(1) clearly excludes the application of section 44BB where section 42 or section 44D or section 115A or section 293A apply. The Income-tax Appellate Tribunal relied on a judgment of the Income-tax Appellate Tribunal, Delhi “A” Bench in the case of Joint CIT v. ONGC as agent of M/s. Altair Filters Intl. Ltd., U.K, for holding that it was a service within the meaning of section 44BB of the Income-tax Act.
8. In view of the admitted fact that the company has 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 generator 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 it is held that the service rendered was a technical service squarely covered under Explanation 2 appended to clause (vii) of sub-section (1) of section 9 which has been adopted by reference under section 44D and section 115A of the Act.
9. In view of our foregoing discussion, the judgment of the Income-tax Appellate Tribunal is set aside and for the reasons recorded above, the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals) are affirmed. The question is answered in favour of the Revenue and against the assessee. There shall be no order as to costs.