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Saturday, July 4, 2015

“Whether the amounts paid by the ONGC to the non-resident assessees /foreign companies for providing various services in connection with prospecting, extraction or production of mineral oil is chargeable to tax as “fees for technical services” under Section 44D read with Explanation 2 to Section 9(1)(vii) of the Income Tax Act or will such payments be taxable on a presumptive basis under Section 44BB of the Act”?the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the non-resident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of Section 44BB and not Section 44D of the Act. On the basis of the said conclusion reached by us, we allow the appeals under consideration by setting aside the orders of the High Court passed in each of the cases before it and restoring the view taken by the learned Appellate Commissioner as affirmed by the learned Tribunal.

                                                                     NON-
REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL  NO. 731 OF 2007

OIL & NATURAL GAS CORPORATION LIMITED         ...APPELLANT (S)



                                   VERSUS

COMMISSIONER OF INCOME TAX & ANR.            ... RESPONDENT (S)

                                    WITH
CIVIL APPEAL NOs.729 OF 2007, 733 OF 2007,  736 OF 2007, 737  OF  2007,  738
OF 2007, 740 OF 2007, 741 OF 2007, 6008 OF  2007,  6016  OF  2007,  6023  OF
2007, 925 OF 2008, 1239 OF 2008, 1240 OF 2008, 1514 OF 2008, 1515  OF  2008,
1516 OF 2008, 1517 OF 2008, 1518 OF 2008, 1519 OF 2008, 1520 OF  2008,  1521
OF 2008, 1522 OF 2008, 1523 OF 2008, 1524 OF 2008, 1527  OF  2008,  1528  OF
2008, 1529 OF 2008, 1531 OF 2008, 1532 OF 2008, 1533 OF 2008, 1535 OF  2008,
2008 OF 2008, 2012 OF 2008, 4321 OF 2008, 7226 OF 2008, 7227 OF  2008,  7230
OF 2008, 2794 OF 2009, 2795 OF 2009, 2796 OF 2009, 2797  OF  2009,  1722  OF
2010 AND CIVIL APPEAL NO. 6174 OF 2010

                               J U D G M E N T
RANJAN GOGOI, J.

1.    The issue that arise for consideration in this  group  of  appeals  is
common and may be summarized as follows.

“Whether the  amounts  paid  by  the  ONGC  to  the  non-resident  assessees
/foreign  companies  for  providing  various  services  in  connection  with
prospecting, extraction or production of mineral oil is  chargeable  to  tax
as “fees for technical services” under Section 44D read with  Explanation  2
to Section 9(1)(vii) of the Income Tax Act or will such payments be  taxable
on a presumptive basis under Section 44BB of the Act”?

2.    The appellant-ONGC has been assessed in a representative  capacity  on
behalf of  the  different  foreign  companies  with  whom  it  had  executed
separate agreements for  services  to  be  rendered  by  such  companies  in
connection with prospecting, extraction or production  of  mineral  oils  by
ONGC.

3.    The primary/assessing authority took the  view  that  the  assessments
should be made under Section 44D of the Act and  not  Section  44BB  of  the
Income Tax Act (hereinafter  referred  to  as  the  ‘Act’).   The  Appellate
Commissioner and the Income Tax Appellate Tribunal disagreed with the  views
of the assessing authorities leading to the institution of separate  appeals
before the High Court of Uttrakhand in respect of each  of  the  assessments
made for the years in question.  The High  Court  considered  the  facts  of
Civil Appeal No. 731 of 2007 (Income Tax Appeal No. 239 of 2001  before  the
High Court) as the lead case and on the grounds and reasons assigned in  the
impugned order dated 15.12.2005, the High Court overturned  the  view  taken
by the  Appellate  Commissioner  and  the  learned  Tribunal  and  held  the
payments made to be liable for assessment under  Section  44D  of  the  Act.
Aggrieved, the ONGC has filed the present group of appeals.

4.    We have heard Shri Arvind P. Datar, learned senior  counsel  appearing
for the appellant and Shri Guru Krishna Kumar, learned  senior  counsel  for
the Revenue.

5.    As the facts of Civil Appeal No. 731 of 2007 corresponding  to  I.T.A.
No. 239 of 2001 has been considered in detail by  the  High  Court  and  the
view expressed in the said proceeding have been followed in  all  the  other
appeals before the High Court, it may be necessary to notice in  detail  the
said facts arising in the appeal in question.

6.    The  appellant-ONGC  and  a  non  resident/foreign  company  one  M/s.
Foramer France had entered into  an  agreement  by  which  the  non-resident
company had agreed to make available supervisory staff and personnel  having
experience and expertise  for operation  and  management  of  drilling  rigs
Sagar Jyoti and Sagar Pragati  for  the  assessment  year  1985-86  and  the
drilling rig Sagar Ratna for the assessment year 1986-87.   Faced  with  the
different views taken by the authorities under the Act, as mentioned  above,
the High Court proceeded to analyse the different clauses  of  the  contract
between the parties.  A consideration of such  analysis  made  by  the  High
Court would go to show that it had come to light before the High Court  that
the contract between the  parties  visualized  operation  of  the  oil  rigs
including drilling operations by the  personnel  made  available  under  the
contracts/agreements, which fact was further stated on affidavit before  the
High Court by an authorized official of the ONGC in the following terms.
“That under the said agreement, Foramer was required, through its  personnel
listed in Exhibit-A to the said  agreement,  to  carry  out  inter-alia  the
drilling operations specified in clause 4.3 to 4.10 of the said agreement.”

Despite the above, the High Court took the view  that  under  the  agreement
payment to M/s. Foramer France was required to be made at the rate  of  3450
USD per  day  and  that  the  contract  clearly  contemplated  rendering  of
technical   services   by    personnel   of   the   non-resident    company.
Specifically, taking the view that the contract did  not  mention  that  the
personnel of the non-resident company was also  carrying  out  the  work  of
drilling of wells and as  the  company  had  received   fees  for  rendering
service the payments made were liable to be taxed under  the  provisions  of
Section 44D of the Act.  As already noticed, in  the  rest  of  the  appeals
before the High Court the aforesaid  decision  dated  15.12.2005  passed  in
I.T.A. No. 239 of 2001 was followed on the basis that the facts in  all  the
appeals were similar to those involved in I.T.A. No. 239 of 2001.
7.    It will be convenient and  in  fact  necessary  for  the  purposes  of
present adjudication to take a careful note of the  provisions  of  Sections
44BB, 44D and also clause (vii) of Explanation 2  to  Section  9(1)  of  the
Income Tax Act,  1961 (hereinafter for short the ‘Act’).

“44BB. Special provision for computing profits and gains in connection  with
the business of exploration, etc., of mineral oils.-
(1)  Notwithstanding  anything  to  the   contrary   contained   in sections
28 to 41 and sections 43 and 43A, in the case of an assessee, being  a  non-
resident, engaged in the business of providing  services  or  facilities  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  oils,
a sum equal to ten per cent of the aggregate of  the  amounts  specified  in
sub-section (2) shall be  deemed  to  be  the  profits  and  gains  of  such
business chargeable to tax under the head "Profits and gains of business  or
profession" :

Provided that  this  sub-section  shall  not  apply  in  a  case  where  the
provisions  of section  42 or section  44D or    [section   44DA or] section
115A or section 293A apply for the purposes of computing  profits  or  gains
or any other income referred to in those sections.

(2)   The amounts referred to in sub-section (1)  shall  be  the  following,
namely:—

(a)   the amount paid or payable  (whether  in  or  out  of  India)  to  the
assessee or to any person on his behalf  on  account  of  the  provision  of
services  and  facilities  in  connection  with,  or  supply  of  plant  and
machinery on hire used, or to be used in the prospecting for, or  extraction
or production of, mineral oils in India; and

(b)   the amount received or deemed to be received in India by or on  behalf
of the assessee on account of the provision of services  and  facilities  in
connection with, or supply of plant and machinery on hire  used,  or  to  be
used in the prospecting for, or extraction or  production  of  mineral  oils
outside India.

 [(3) Notwithstanding anything contained in  sub-section  (1),  an  assessee
may claim lower profits and gains than the profits and  gains  specified  in
that sub-section, if he keeps and maintains such books of account and  other
documents as required under sub-section (2)  of section  44AA and  gets  his
accounts  audited  and  furnishes  a  report  of  such  audit  as   required
under section 44AB, and thereupon the Assessing  Officer  shall  proceed  to
make an assessment of the total income or loss of the  assessee  under  sub-
section (3) of section 143 and determine the sum payable by,  or  refundable
to, the assessee.]

Explanation.—For the purposes of this section,—

(i)    "plant"  includes  ships,   aircraft,   vehicles,   drilling   units,
scientific apparatus and  equipment  used  for  the  purposes  of  the  said
business;

(ii)  "mineral oil" includes petroleum and natural gas.]”

“44D. Special provision for computing income by way of royalties,  etc.,  in
the case of foreign companies.-

Notwithstanding anything to the contrary  contained  in sections  28 to 44C,
in the case of an assessee, being a foreign company,—

(a)   the deductions admissible under the said  sections  in  computing  the
income by way of royalty  or  fees  for  technical  services  received [from
Government or an Indian concern in pursuance of an  agreement  made  by  the
foreign company with Government or with the Indian concern] before  the  1st
day of April, 1976, shall not exceed in the aggregate  twenty  per  cent  of
the gross amount of such royalty or fees as reduced by so much of the  gross
amount of such royalty  as  consists  of  lump  sum  consideration  for  the
transfer outside India of, or the imparting of information outside India  in
respect of, any data, documentation, drawing or  specification  relating  to
any patent, invention, model, design, secret formula  or  process  or  trade
mark or similar property;

(b)   no deduction in respect of  any  expenditure  or  allowance  shall  be
allowed under any of the said sections in computing the  income  by  way  of
royalty or fees for technical  services  received  [from  Government  or  an
Indian concern in pursuance of an agreement  made  by  the  foreign  company
with Government or with the Indian concern] after the  31st  day  of  March,
1976  [but before the 1st day of April, 2003];

(c)   [***]

(d)   [***]

Explanation.—For the purposes of this section,—

(a)   "fees for technical services" shall  have  the  same  meaning  as  in
[Explanation 2] to clause (vii) of sub-section (1) of section 9;

(b)   "foreign company" shall have the same meaning as in section 80B;

"royalty" shall have the same meaning as in Explanation 2 to clause (vi)  of
sub-section (1) of section 9;

(d)   royalty received [from Government or an Indian  concern  in  pursuance
of an agreement made by a  foreign  company  with  Government  or  with  the
Indian concern] after the 31st day of March, 1976, shall be deemed  to  have
been received in pursuance of an  agreement  made  before  the  1st  day  of
April, 1976, if such agreement is deemed, for the purposes  of  the  proviso
to clause (vi) of sub-section (1) of section 9, to  have  been  made  before
the 1st day of April, 1976.]”

“9. (1) (vii) income by way of fees for technical services payable by—

(a)   the Government ; or
(b)   a person who is a resident, except  where  the  fees  are  payable  in
respect of services utilised in a business or profession carried on by  such
person outside India or for the purposes of making  or  earning  any  income
from any source outside India; or
(c)   a person who is a non-resident, where the fees are payable in  respect
of services utilised in a business or profession carried on by  such  person
in India or for the purposes of  making  or  earning  any  income  from  any
source in India :

[Provided that nothing contained in this clause shall apply in  relation  to
any income by way of fees for technical services payable in pursuance of  an
agreement made before the 1st day  of  April,  1976,  and  approved  by  the
Central Government.]

[Explanation 1.—For the purposes of  the  foregoing  proviso,  an  agreement
made on or after the 1st day of April, 1976, shall be deemed  to  have  been
made before that date if the agreement is made in accordance with  proposals
approved by the Central Government before that date.]

[Explanation 2.—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  which  would  be
income of the recipient chargeable under the head "Salaries".]

(2) Notwithstanding anything  contained  in  sub-section  (1),  any  pension
payable outside India to a person residing permanently outside  India  shall
not be deemed to accrue or arise in India, if the pension is  payable  to  a
person referred to in article 314 of the Constitution or to  a  person  who,
having been appointed before the 15th day of August, 1947, to be a Judge  of
the Federal Court or of a High Court within the meaning  of  the  Government
of India Act, 1935, continues to serve on or after the commencement  of  the
Constitution as a Judge in India.

 [Explanation.—For the removal of doubts, it is  hereby  declared  that  for
the purposes of this section, income of a non-resident shall  be  deemed  to
accrue or arise in India under clause (v) or clause (vi) or clause (vii)  of
sub-section (1) and shall be included  in  the  total  income  of  the  non-
resident, whether or not,—
(i) the non-resident has a  residence  or  place  of  business  or  business
connection in India; or
(ii) the non-resident has rendered services in India.]”

8.    A careful reading of the aforesaid provisions of the Act goes to  show
that under Section 44BB(1) in case of a non-resident providing  services  or
facilities in connection with or supplying plant and machinery  used  or  to
be used in prospecting, extraction or production of mineral oils the  profit
and gains from such business chargeable to tax is to be calculated at a  sum
equal to 10% of the aggregate of the amounts paid or payable  to  such  non-
resident assessee as mentioned in Sub-section  (2).    On  the  other  hand,
Section 44D contemplates that if the income of a foreign company with  which
the government or  an  Indian  concern  had  an  agreement  executed  before
1.4.1976 or on any date thereafter the computation of income would  be  made
as contemplated  under  the  aforesaid  Section  44D.   Explanation  (a)  to
Section  44D  however  specifies  that  “fees  for  technical  services”  as
mentioned in Section 44D would have the same meaning as in Explanation 2  to
Clause (vii) of Section 9(1).  The said explanation as quoted above  defines
“fees for technical services”  to mean consideration for  rendering  of  any
managerial, technical or consultancy services.  However, the later  part  of
the  explanation  excludes  from  consideration  for  the  purposes  of  the
expression i.e. “fees for  technical  services”  any  payment  received  for
construction, assembly, mining or like project undertaken by  the  recipient
or consideration which would be chargeable under the head “salaries”.   Fees
for technical services, therefore, by virtue of  the  aforesaid  explanation
will not include payments made in connection with a mining project.
9.    Before the High Court, a Circular No. 1862 dated 22.10.1990  having  a
bearing on the subject  was  placed  for  consideration  by  the  appellant-
assessee.  The aforesaid instruction may be conveniently  reproduced  herein
below.
“Subject: Definition of “fees for  technical  services”  in  Explanation  to
Section 9(1) (vii) of the Income Tax Act, 1961  whether prospecting  for  or
extraction  of  production  of  mineral   oil   are   “mining”   operations-
clarification regarding.

The  expression  “fees  for  technical  services”  has   been   defined   in
Explanation 2 to Section 9(1) (vii) of the Income Tax Act, 1961  as under:

“Explanation 2.—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  which  would  be
income of the recipient chargeable under the head "Salaries".

2. The question whether prospecting for, or  extraction  or  production  of,
mineral oil can be  termed  as  ‘mining  operations,  was  referred  to  the
Attorney General of India for his opinion. The Attorney General  has  opined
that such operations are  mining  operations  and  the  expressions  ‘mining
project’ or ‘like projects’ occurring in Explanation 2 to Section 9(1)  (ii)
of the Income Tax Act would cover rendering of services  like  imparting  of
training  and  carrying  out  drilling   operations   for   exploration   or
exploitation of oil and natural gas.

3. In view of the above opinion, the consideration for  such  services  will
not  be  treated  as  fees  for  technical  services  for  the  purpose   of
Explanation 2 to Section 9(1) (vii) of the Income-tax Act,  1961.   Payments
for  such  services  to  a  foreign  company,  therefore,  will  be   income
chargeable to tax under the provisions of section 44BB   of  the  Income-tax
Act, 1961 and not under the special provision for the taxation of  fees  for
technical services contained in section 115A read with section  44D  of  the
Income-tax Act, 1961.

4. A copy of the statement of the case dated 16.3.1990  (without  annexures)
and a copy of the Attorney General’s opinion dated 13.5.90 are enclosed.

5. These instructions may brought to the notice of all the officers in  your
region.
[F.No.500/6/89-FTD dt.22.10.90 from CBDT]”

10.   Before us the opinion of the learned Attorney General has been  placed
by the learned counsel for the appellants at great length  to  contend  that
the views expressed by the learned Attorney which had been accepted  by  the
CBDT were based on an exhaustive consideration  of  the  provisions  of  the
Mines Act, 1952 and the Mines  and  Minerals  (Regulation  and  Development)
Act, 1957 read with the relevant Entries in the Union and the State List  in
the 7th Schedule to the  Constitution  of  India.   It  is  urged  that  the
eventual test is one  of  pith  and  substance  of  the  agreement,  namely,
whether the  works  contemplated  or  services  to  be  rendered  under  the
agreement  is  directly  and  inextricably  linked  with  the   prospecting,
extraction or production of mineral oil.  It is submitted on behalf  of  the
appellants that the agreements in question satisfy the above test for  which
purpose the appellants have categorized  the  different  contracts  under  8
heads which may be conveniently set out at this stage hereinbelow.
Carrying out seismic surveys and drilling for oil and gas



2.    Services starting/re-starting/enhancing  production  of  oil  and  gas
from wells


3.    Services for prospecting for exploration of oil and or gas


4.    Planning and supervision of repair of wells


Repair, Inspection or Equipment  used  in  the  exploration,  extraction  or
production of oil and gas


6.    Imparting Training


Consultancy in regard to exploration of oil and gas


8.     Supply,  Installation,  etc.  of  software  used  for  oil  and   gas
exploration”



11.    It  is  also  urged  on   behalf   of   the   appellants   that   the
instruction/Circular dated 22.10.1990 issued by the CBDT was binding on  the
primary authority on the ratio  of  the  decision  of  this  Court  in  K.P.
Varghese Vs. Income Tax Officer,  Ernakulam  and  Others[1].   It  has  been
further pointed on behalf of the appellants that even under  the  provisions
of Section 3D of the Oil Fields (Regulation  and  Development)  Act  1948  a
mining lease means a lease  granted  for  the  purposes  of  searching  for,
winning,  working,  getting,  making  merchandisable,   carrying   away   or
disposing of mineral oils or for the purpose connected therewith and such  a
lease includes an exploring or prospecting lease.  Reference has  also  been
made to the Petroleum and Natural Gas Rules, 1959 framed under Section 5  of
the aforesaid Act.  Under Rule 4 of the said Rules no  person  can  prospect
for petroleum except pursuant  to  a  Petroleum  Exploration  License  (PEL)
granted under  the  Rules  and  no  person  can  mine  petroleum  except  in
pursuance of a Petroleum Mining License (PML)  granted under the Rules.   It
is pointed out that under Rule 7 of the Rules of  1959  a  petroleum  mining
license   (PML)  entitles  the  licensee  to  carry  out  construction   and
maintenance in and  on  such  land,  works,  buildings,  plants,  waterways,
roads, pipelines etc. as may be necessary for full  enjoyment  of  the  PML.
On the said basis it is argued that  rendering  any  service  in  connection
with prospecting and extraction is an integral part of mining and  that  the
expression “mining” in the Explanation 2 to Section 9(1) of the  Income  Tax
Act, in the absence of any definition under the Income Tax Act,  has  to  be
understood  as  per  the  provisions  of  the  Oil  Fields  (Regulation  and
Development) Act, 1948 read with the Petroleum and Natural Gas Rules, 1959.

12.   Opposing the contentions advanced on behalf of  the  appellants,  Shri
Gurukrishna Kumar, learned senior counsel   for the Revenue has  urged  that
the opinion of the Attorney General relied upon and the  CBDT  Circular  has
no relevance to the present case inasmuch as  the  agreements  between  ONGC
and the non-resident companies made it abundantly clear that what  is   paid
to the non-resident  company  are  fees  for  technical  services  rendered.
Though  such  services  may  have  some  connection  with  the  prospecting,
extraction or production of mineral oil, the  primary  service  rendered  by
the non-resident companies on  the  basis  of  the  agreements  is  not  for
prospecting, extraction or production of mineral oil but  various  ancillary
services like training of personnel etc. which may have  a  somewhat  remote
connection with the business of prospecting, exploration  or  production  of
mineral oils.  Learned counsel for the revenue has even  suggested  that  if
it is held that the High Court ought to  have  examined  each  agreement  or
contract to find out its real purpose and intent the revenue would  have  no
objection if the matters are remanded for a complete exercise to be made  on
the above basis.

13.   The Income Tax  Act  does  not  define  the   expressions  “mines”  or
“minerals”.  The said expressions are found defined  and  explained  in  the
Mines Act, 1952 and the Oil Fields (Development and  Regulation)  Act  1948.
While construing the somewhat pari  materia  expressions  appearing  in  the
Mines and Minerals (Development and Regulation) Act 1957 regard must be  had
to the provisions of Entries 53 and 54 of List I and Entry 22 of List II  of
the 7th Schedule to the Constitution to understand the exclusion of  mineral
oils from the definition of minerals  in  Section  3(a)  of  the  1957  Act.
Regard must also be had to the fact that mineral oils is separately  defined
in Section 3(b) of the 1957 Act to include  natural  gas  and  petroleum  in
respect of which Parliament has exclusive jurisdiction  under  Entry  53  of
List I of the 7th Schedule and had enacted an earlier legislation  i.e.  Oil
Fields (Regulation and Development) Act, 1948.   Reading  Section  2(j)  and
2(jj) of the Mines Act,  1952  which  define  mines  and  minerals  and  the
provisions  of  the  Oil  Fields  (Regulation  and  Development)  Act,  1948
specifically relating  to  prospecting  and  exploration  of  mineral  oils,
exhaustively referred to earlier,  it  is  abundantly  clear  that  drilling
operations for the purpose of production of petroleum would  clearly  amount
to a mining activity  or  a  mining  operation.   Viewed  thus,  it  is  the
proximity of the works contemplated under an agreement, executed with a non-
resident assessee or a foreign  company,  with  mining  activity  or  mining
operations that would be crucial  for  the  determination  of  the  question
whether the payments made  under  such  an  agreement  to  the  non-resident
assessee or the foreign  company is to be assessed under  Section   44BB  or
Section 44D of the Act.  The test of pith and  substance  of  the  agreement
commends to us as reasonable for acceptance.  Equally important is the  fact
that the CBDT had accepted the said test and had in fact issued  a  circular
as far back as 22.10.1990 to the  effect  that  mining  operations  and  the
expressions “mining projects” or “like projects” occurring in Explanation  2
to Section 9(1) of the Act would cover rendering of service  like  imparting
of training and carrying out drilling  operations  for  exploration  of  and
extraction of oil and  natural  gas  and  hence  payments  made  under  such
agreement to a non-resident/foreign  company  would  be  chargeable  to  tax
under the provisions of Section 44BB and not Section 44D of  the  Act.    We
do not see how any other  view  can  be  taken  if  the  works  or  services
mentioned  under  a  particular  agreement   is   directly   associated   or
inextricably  connected  with  prospecting,  extraction  or  production   of
mineral oil.  Keeping in mind the above provision, we have looked into  each
of the contracts involved in the present group of cases and  find  that  the
brief description of the works covered under each of the said  contracts  as
culled out by the appellants and placed before the Court  is  correct.   The
said details are set out below.

|S. No. |Civil   |Work covered under the contract              |
|       |Appeal  |                                             |
|       |No.     |                                             |
|       |4321    |Drilling of exploration wells and carrying   |
|       |        |out seismic surveys for exploratory drilling.|
|       |740     |Drilling, furnishing personnel for manning,  |
|       |        |maintenance and operation of drilling rig and|
|       |        |training of personnel.                       |
|       |731     |Drilling, furnishing personnel for manning,  |
|       |        |maintenance and operation of drilling rig and|
|       |        |training of personnel.                       |
|       |        |                                             |
|       |1722    |Furnishing supervisory staff with expertise  |
|       |        |in operation and management of Drilling unit.|
|       |729     |Capping including subduing of well, fire     |
|       |        |fighting.                                    |
|       |738     |Capping including subduing of well, fire     |
|       |        |fighting.                                    |
|       |1528    |Analysis of data to prepare job design,      |
|       |        |procedure for execution and details regarding|
|       |        |monitoring.                                  |
|       |1532    |Study for selection of enhanced Oil Recovery |
|       |        |processes and conceptual design of Pilot     |
|       |        |Tests.                                       |
|       |1520    |Engineering and technical support to ONGC in |
|       |        |implementation of Cyclic Steam Stimulation in|
|       |        |Heavy Oil Wells.                             |
|       |2794    |Assessment and processing of seismic data    |
|       |        |along with engineering and technical support |
|       |        |in implementation of Cyclic Steam            |
|       |        |Stimulation.                                 |
|       |1524    |Conducting reservoir stimulation studies in  |
|       |        |association with personnel of ONGC.          |
|       |1535    |Laboratory testing under simulated reservoir |
|       |        |conditions.                                  |
|       |1514    |Consultancy for optimal exploitation of      |
|       |        |hydrocarbon resources.                       |
|       |2797    |Consultancy for all aspects of Coal Bed      |
|       |        |Methane.                                     |
|       |6174    |Analysis of data of wells to prepare a job   |
|       |        |design.                                      |
|       |        |                                             |
|       |1517    |Geological study of the area and analysis of |
|       |        |seismic information reports to design 2      |
|       |        |dimensional seismic surveys.                 |
|       |7226    |Opinion on hydrocarbon resources and         |
|       |        |foreseeable potential.                       |
|       |7227    |Opinion on hydrocarbon resources and         |
|       |        |foreseeable potential.                       |
|       |7230    |Opinion on hydrocarbon resources and         |
|       |        |foreseeable potential.                       |
|       |6016    |Opinion on hydrocarbon resources and         |
|       |        |foreseeable potential.                       |
|       |6008    |Evaluation of ultimate resource potential and|
|       |        |presentations outside India in connection    |
|       |        |with promotional activities for Joint Venture|
|       |        |Exploration program.                         |
|       |1531    |Review of sub-surface well data, provide     |
|       |        |repair plan of wells  and supervise repairs. |
|       |733     |Repair of gas turbine, gas control system and|
|       |        |inspection of gas turbine and generator.     |
|       |741     |Repair and inspection of turbines.           |
|       |737     |Repair, inspection and overhauling of        |
|       |        |turbines.                                    |
|       |736     |Inspection, engine performance evaluation,   |
|       |        |instrument calibration and inspection of far |
|       |        |turbines.                                    |
|       |1522    |Replacement of choke and kill consoles on    |
|       |        |drilling rigs.                               |
|       |1521    |Inspection of gas generators.                |
|       |1515    |Inspection of rigs.                          |
|       |2012    |Inspection of generator.                     |
|       |1240    |Inspection of existing control system and    |
|       |        |deputing engineer to attend to any problem   |
|       |        |arising in the machines.                     |
|       |1529    |Inspection of drilling rig and verification  |
|       |        |of reliability of control systems in the     |
|       |        |drilling rig.                                |
|       |2008    |Expert advice on the device to clean insides |
|       |        |of a pipeline.                               |
|       |2795    |Feasibility study of rig to assess its       |
|       |        |remaining useful life and to carry out       |
|       |        |structural alterations.                      |
|       |925     |Engineering analysis of rig.                 |
|       |1519    |Imparting training on cased hold production  |
|       |        |log evaluation and analysis.                 |
|       |1533    |Training on well control.                    |
|       |1518    |Training on implementation of Six Sigma      |
|       |        |concepts.                                    |
|       |1516    |Training on implementation of Six Sigma      |
|       |        |concepts.                                    |
|       |6023    |Training on Drilling project management.     |
|       |2796    |Training in Safety Rating System and         |
|       |        |assistance in development and audit of Safety|
|       |        |Management System.                           |
|       |1239    |To develop technical specification for 3D    |
|       |        |Seismic API modules of work and to prepare   |
|       |        |bid packages.                                |
|       |1527    |Supply supervision and installation of       |
|       |        |software which is used for analysis of flow  |
|       |        |rate of mineral oil to determine reservoir   |
|       |        |conditions.                                  |
|       |1523    |Supply, installation and familiarization of  |
|       |        |software for processing seismic data.        |

      The above facts would indicate that the pith and substance of each  of
the  contracts/agreements  is  inextricably  connected   with   prospecting,
extraction or production of mineral oil.  The dominant purpose  of  each  of
such agreement is for prospecting, extraction or production of mineral  oils
though there may be certain ancillary  works  contemplated  thereunder.   If
that be so, we will have no hesitation in holding that the payments made  by
ONGC and received by the non-resident assessees or foreign  companies  under
the said contracts is more appropriately assessable under the provisions  of
Section 44BB and not Section 44D of the Act.   On  the  basis  of  the  said
conclusion reached by us,  we  allow  the  appeals  under  consideration  by
setting aside the orders of the High Court  passed  in  each  of  the  cases
before  it  and  restoring  the  view  taken  by   the   learned   Appellate
Commissioner as affirmed by the learned Tribunal.

14.   Consequently, all the appeals are allowed with  no  order  as  to  the
costs.
                                                          …….…………………………...J.
                                               [RANJAN GOGOI]


                                                            …………………………….……J.
                                           [PINAKI CHANDRA GHOSE]

NEW DELHI;
JULY 01, 2015.

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[1]    (1981) 4 SCC 173

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