DIRECTOR OF INCOME TAX Vs. OHM LIMITED

JUDGEMENT

(1.) The short question which arises in this writ petition is whether the assessee, which is the respondent herein, falls to be assessed under section 44BB of the Income Tax Act, 1961 ('Act', for short) as claimed by it or under section 44DA of the Act as claimed by the petitioner which is the Revenue.

(2.) The respondent-assessee is a company incorporated under the laws of the United Kingdom and is a tax-resident of that country. It is engaged in the business of providing geophysical services to oil and gas exploration industry; it conducts electromagnetic survey, processing and interpretation of data. The data so collected through the survey is used in off shore oil industry. Two companies namely Petro Gas E & P, LLC and CGG Veritas Services SA awarded contracts to the assessee for procuring data, processing and interpreting the data in respect of an off shore exploration block in India. The respondent is paid for mobilisation as well as de-mobilisation of its vessels from the site area and for providing services in connection with the prospecting for extraction or production of mineral oils.

(3.) The assessee applied to the concerned authority under Section 197 of the Act for issuance of a certificate for receiving payments after deduction of tax at the lesser rate of 4.223% as per the provisions of section 44BB. It contended that Section 44BB was applicable to the revenues earned in respect of services in connection with the prospecting for extraction or production of mineral oils and not any of the other provisions of the Act. Under Section 44BB, 10% of the gross revenues are deemed to be profits of the business and the effective tax thereon would amount to 4.223% (of such profits). The concerned authority competent to issue the certificate under section 197 did not accept the assessee's contention and passed an order, directing the assessee to receive payments after suffering tax deduction at source at the rate of 10% (+ surcharge + education cess) in respect of all revenues received from Petro Gas and CGG Veritas.